500 Financial Accounting and Analysis

501: Unrelated Business Income

Fiscal Operations Manual
Section 500: Financial Accounting and Analysis
Effective: 01/01/2003
Revised: 02/22/2005

 

The Revenue Act of 1950 established the “Unrelated Business Income Tax” (UBIT) that applies to tax-exempt organizations.  The UBIT was established for two reasons: 1) To give the IRS a procedure by which it could penalize a tax-exempt organization that engaged in commercial business activities without having to revoke its exempt status; and 2) to put tax-exempt organizations that engage in business activities on a level playing field with for-profit companies that engage in the same business activity and pay taxes on the income they earn.

Three elements must exist in order for an activity engaged by a college or university to be treated as an "unrelated business income" activity. 

  1. A trade or business
  2. Regularly carried on
  3. Not substantially related to the conduct of the school’s educational or scientific research purposes

A trade or business is conducted with a profit motive.  Revenues in excess of expenses constitute taxable income where goods are sold or services rendered that are not related to the educational/research mission of the institution.

"Regularly carried on" means performed in the same manner or time frame as it would be in the commercial sector.  Thus, the activity may be seasonal and still subject to UBIT.

"Substantially related" means that the activity contributes importantly to the exempt purpose.  Bookstore sales to students/faculty, advertising sales by the school newspaper, etc. are examples of exempt activities.

Examples of College/University Activities that Could be Subject to UBIT:

  • Dormitory rentals to the general public
  • "Testing" activities which are not research and is not done by volunteers
  • Advertising income not related to the college newspaper
  • Corporate sponsorship payments – where the payor receives substantial return benefit other than acknowledgement of the name, logo or product lines of the payor
  • Travel tours
  • Participation in partnerships
  • Use of recreational facilities by the public
  • Professional entertainment events
  • Summer sports camps
  • Concession sales
  • Conferences, meetings, and training programs
  • Athletic events/television and broadcast rights
  • Exclusivity contracts (e.g. "pouring rights")

It should be noted that the University pays UBIT only on the profit (residual income after expenses) and the tax is assessed in the following year.

How does OSU Determine UBIT?

  • Rates applied by OUS are:
  • 0-$50K profit @ 15%
  • $50-$75K profit @ 25%
  • $75-100K profit  @ 34%
  • $100-335 K profit @ 39%

These are IRS corporate tax rates and are subject to change.

How OSU Departments can Minimize Tax Exposure

  • Research activities are clearly part of OSU’s mission.  Therefore, bona fide research activities are exempt from UBIT.  In addition, all governmentally sponsored research is exempt.  However, testing activities where income is derived from private sources is generally subject to UBIT.  When reviewed by the IRS, anything that is called “testing” is automatically looked at as UBIT.

    Testing activities may qualify as research when carried on in the public interest.  Meaning, the results of the research must be published.  One way to minimize the UBIT would be to file the results in the OSU library.  Another way would be to use the data (in published form) in a classroom setting.  Also, testing services may be exempt where no alternative source exists within a “reasonable distance”.  Documenting the lack of other testing sources may be another way to minimize UBIT.  If the argument is made that the student needs to do testing as part of his/her curricula, then the student cannot be paid for the work.  (This includes GRA or GTA appointments.)  In that case, there would be no tax.

    Commercial testing usually involves 1) ordinary and routine testing, 2) repetitive work, 3) performance by scientifically unsophisticated employees, and 4) testing for quality control or certification purposes.

  • Sponsorships are exempt from UBIT but are qualified by IRS guidelines.  A sponsorship is a “flat payment to a tax exempt entity which allows the exempt organization to recognize the sponsor, display the sponsor’s logo, acknowledge the sponsor by name, etc.  It may not include 1) any quality comparisons with similar businesses, 2) any call to action (i.e. to buy from the sponsor), or 3) any price comparisons.  If there are violations of the “qualified sponsorship” then it becomes advertising and subject to taxes.

    Keep qualified sponsorship agreements separate from advertising agreements.  If the donating entity will receive benefits other than simple recognition and a ‘thank you’ it will be an advertising agreement.  Don’t mix the two.  Also, if a sponsor will be receiving any ‘in-kind’ consideration such as sky box rights, free game tickets, etc., the fair market value of those items counts as advertising income to OSU.  Keep these items separate along with any related expenses.

  • Royalties are fixed payments either on a per unit basis for rights to use intangibles such as trademarks or ‘flat’ payments not subject to revenue amounts generated.  Bona fide royalties are tax exempt.  Any agreement linking income for OSU to revenues/profits generated by another agency are likely to be regarded as taxable income.  Use separate agreements to keep royalty income separate from profit sharing arrangements.
  • Document all expenses related to UBIT subject income and keep Business Affairs informed of any change in status regarding your operation.

502: Lease Reporting

Fiscal Operations Manual
Section 500: Financial Accounting and Analysis
Effective: 01/01/2003
Revised: 08/15/2013

Year-end information regarding capital leases and operating leases is to be provided to the Office of Business Affairs by the dates specified in the Year-End Close Instructions so OSU can comply with their responsibilities to the OUS Controller’s Division per OUS Fiscal Policy Manual 05.281 Accounting for Leases.

For financial accounting and reporting purposes, the lease is a "capital lease" if:

A. the fair market value of the property at the inception of the lease meets or exceeds the capitalization threshold of $5,000,

B. the lease is non-cancelable, and

C. a lease/purchase or capital lease has at least one of the following characteristics:

  • The lease transfers ownership of the property to OSU by the end of the lease term;
  • The lease contains a  bargainpurchase option;
  • The lease  term is equal to  75 percent or more of the useful life of the leased equipment/property
  • The total of all lease payments (excluding insurance and maintenance costs and taxes) is greater than or equal to 90 percent of the fair market value of the leased equipment/property. 

If a lease does not meet the above criteria, it should be treated as an “operating lease”.

The Real Property Office facilitates the sale, acquisition, and lease of University property and manages the drafting and legal processing of real property related documents.  All Lease/Purchase agreements must be processed by a PaCS University Contract Officer.

For further information on equipment leasing/purchase see PRO 204: Lease-Purchase in the Property Management Manual.

503: Department of Administrative Services (DAS) Assessments

Fiscal Operations Manual
Section 500: Financial Accounting and Analysis
Effective: 01/01/2003
Revised: 08/26/2010

The State Department of Administrative Services (DAS) assesses fees to the University for the following:

  • DAS Central Government Services  - Based on total payroll (including OPE) for the first year of the prior biennium for Service Departments and Auxiliary Enterprises.
  • DAS Purchasing  - Based on prior year expenses in 2xxxx, 40101, 40111, and 6xxxx account codes.
  • DAS Tort Liability  - Based on prior year total payroll (not including OPE) & Claim history at DAS.
  • DAS Property Insurance  - Based on prior year insured values of Buildings, Fixed Assets, and Improvements Other than Buildings.
  • Secretary of State’s Audit Division – Based on the percentage of expenses for each auxiliary or service center fund in relation to the total amount of auxiliary or service center expenditures..
  • State Treasury Banking  - Monthly charge based on prior month banking transactions.
  • State Geographical Information System  - Assessed by DAS, redistributed by OUS based on enrollment numbers.
  • Central Government Services Assessment -  Assessed at .22% of actual revenue in auxiliaries and statewides.

Fees are assessed to Statewides, Service Centers, Auxiliaries, and the General Fund. The General Fund picks up the assessment for Continuing Education (eCampus and Summer Session) and Designated Operations.

504: OSU Assessments

Fiscal Operations Manual
Section 500: Financial Accounting and Analysis
Effective: 01/01/2003
Revised: 3/21/2013

 

An administrative assessment is made to recover overhead costs incurred by the institution central services on behalf of funds which are not directly supported by either State of Oregon Educational and General appropriation or sponsored grants and contracts.  Central administrative services benefit the entire institution and are not easily assignable to any one unit.  Examples include, but are not limited to,

  1. efforts of the President, Provost, and other administrative staff
  2. budget reviews, reporting to the Oregon State Board of Higher Education (OSBHE) and OUS Chancellor’s Office
  3. processing payroll, purchase orders, and vendor invoices
  4. collection of receivables, depositing/recording income
  5. administering the general safety and welfare of OSU’s physical space
  • OSBHE requires auxiliary enterprise activities to be self-supporting, generating sufficient revenues to cover operating expenses including the allocable portion of administrative overhead. The assessment is based on direct expenditures of the prior fiscal year. It is calculated and posted by Business Affairs at least quarterly. Depreciation expense, OSU assessments, and transfers are not included in the calculation.

    Reference:
  • An administrative assessment is charged to State-wide Public Service (SWPS) operations.  SWPS includes Agricultural Experiment Station (AES) operations, Forest Research Lab (FRL) operations, and Extension operations (exclusive of Extension County pass-through funds). The assessment is based on direct expenditures and is negotiated with the Associate Vice President of Finance and Administration. The Assessment is posted by Business Affairs.
  • An administrative assessment is charged to Designated Operation fund direct expenditures.  Banner charges the assessment as each transaction occurs.  There is no assessment on transfers.  See referenced policies for exceptions.

    Reference:
  • An administrative fee is assessed on Cash gifts or donations made directly to the university.  This fee is consistent with those made by OSU’s affiliated foundations:  OSU Foundation and Agricultural Research Foundation.  The fee is calculated and posted by Business Affairs/Office of Post Award Administration (OPAA) quarterly.  

Specialized Service Facility (SSF) cost shall consist of both direct costs and allocable share of overhead costs, per OMB Circular A-21 section J47.   This is considered full-costing.  Overhead cost includes use of the building and general operations & maintenance cost associated with the space occupied by the SSF.  The charges are posted by Business Affairs monthly.  The current SSF at OSU are:  Printing/Mailing, Telecommunications, Motor Pool, and Laboratory Animal Resource Center.

  1. Building Use Overhead is based on building depreciation for the space the SSF occupies. This assessment credit is placed in an 8xxxxx plant reserve fund to be used for building-related renovations. Request for use of the reserve funds is submitted to the Vice President for Finance and Administration.
  2. Operation and Maintenance assessment is based on the most current Facilities & Administrative Rate calculations for the specialized service facilities. The calculation takes into consideration any utility cost or other O&M directly charged to the SSF and reduces the O&M assessment accordingly so there is no duplication of those costs in the fees charged to users. This assessment credit is posted to the E&G fund and is distributed as part of the budgeting process.

505: How to Determine Fund, Account, Budget Balances

Fiscal Operations Manual
Section 500: Financial Accounting and Analysis
Effective: 01/01/2003
Revised: 08/15/2013

 

Cash and Fund Balance

Finding a cash balance or fund balance (sometimes referred to as an account balance) is appropriate for self-support funds.  This would include 05xxxx (designated operations funds), 09xxxx (service center funds), 1xxxxx (auxiliary funds), 4xxxxx (endowments), Mxxxxx (gifts/scholarships), FSxxxx (gifts/scholarships-OSUF), and FAxxxx (gifts-ARF).  For General Fund indexes or other budgeted funds and grants, the budget balance is most important. 

To find your fund balance (cash plus receivables, etc.), go to FIS Banner form FGITBSR and query on your fund with the current fiscal year indicated.  Your calculated fund balance is given in the Current Fund Balance field at the lower right-hand corner of the screen. To find your cash balance, go to FGITBSR and query on A0901 Cash on Hand.

 Budget Balance

This is appropriate for General Fund indexes (fund = 001100) and other budgeted funds.  Grants will have an expense budget which will also be discussed below.

To find your budget balance go to FIS form FGIBDST and query on your index for the current fiscal year (for grants see below). Usually, budgeted amounts will only be in certain general account codes, not distributed to all the account codes in which you have had transactions. FGIBSUM might also be helpful as it gives budget balances for the major budget categories and the net available balance.

For grants, go to FRIGITD and query on your grant. Refer to the Grants, Contracts and Gift Accounting Manual  for further information.

Charges (or Credits) to Index

Go to FIS form FGITRND.  Find the transaction and its document number and drill down to the document itself.

If the document is a journal voucher with the ordinary J prefix or an invoice with the usual I prefix, you can find the name of the person who input the transaction (the originating user) by going to FOIAPPH or FOIAPHT and running a query on the document number.  This should allow you to identify the source of the transaction.

If the document begins with two letters, the transaction was sent electronically to FIS.  The source of the transaction is identified by these letters, e.g. VP = Printing and Mailing.  For a complete list of document types see FIS 1100 Banner Processes.

506: Tax Exempt Status

Fiscal Operations Manual
Section 500: Financial Accounting and Analysis
Effective: 01/01/2003
Revised: 03/24/2009

 

The Oregon University System (OUS) is an agency of the State of Oregon.  The system is administered by the State Board of Higher Education in accordance with Oregon Revised Statutes 351.010 and 352.002.  Additional information on this subject can be found in the OUS Tax Exempt Status document within the OUS Fiscal Policy Manual.

The tax-exempt status of the OUS is based on Internal Revenue Code, Title 26, Section 115.

507: Relationship Between OSU and OSU Foundation

Fiscal Operations Manual
Section 500: Financial Accounting and Analysis
Effective: 01/01/2003
Revised: 01/23/2009

507 OSU and OSU Foundation Relationship

The Oregon State University Foundation (OSUF) is a private, non-profit corporation affiliated with the University under IRS tax code 501(c)3.  The Foundation receives gifts of cash, securities, real and personal property, deferred gifts (such as bequests), life insurance, and life income agreements to support the University’s programs.  It is a comprehensive organization that handles all aspects of fundraising for OSU.
                             
All fundraising and investment activities of the Foundation are limited to benefiting Oregon State University.  The Foundation assets and earnings are distributed to colleges, departments and programs of the University per donor directions or, if funds are unrestricted, per the direction of the Foundation's volunteer Board of Governors in response to priority requests from the President of the University.

507-01 Payments to Vendors or Contractors, Employee Awards and Gifts

Fiscal Operations Manual
Section 500: Financial Accounting and Analysis
Effective: 01/01/2003
Revised: 5/28/2013

 

Generally, all costs associated with fulfillment and administration of OSU’s mission (instruction, research, and public service) should be paid at OSU through FIS Banner, not directly by the Foundation.

The cost for these payments should be recorded on:

  • OSUF pass-through funds (FSxxxx),
  • Endowment earnings (438xxx or FExxxx), or
  • Plant construction funds (8xxxxx).

See 507-03 for further detail on indexes associated with these funds.

Payments will be made to vendors and contractors who provide goods and services directly to the University in conformity with the accounting policies of the University.

OSU payments should include (but are not limited to):

  • personnel recruitment costs (including hosting)
  • personnel moving expenses
  • professional meetings & conferences
  • professional association membership dues
  • university-sponsored conferences
  • departmental/unit retreat expenses
  • hosting official guests (see FIS 410-05)
  • personal service invoices/contracts (including speaker honorariums)
  • supplies, books, and other instructional/research expenses
  • printing costs for instruction, research, public service
  • minor or capital equipment purchases (office equipment & furniture, lab & scientific equipment)
  • building remodel or construction costs
  • building & grounds maintenance expenses
  • custodial & utility costs
  • travel expenses
  • employee awards (all cash or non-cash >$400) [Gift certificates are considered the same as cash and must go through OSU. See FIS 410-27 Gift Cards or Certificates for additional information.]
  • student recruitment and marketing costs
  • student scholarships
  • all international payments or wire transfers [OSUF cannot process these]

Payments to vendors and reimbursements to OSU employees should be made directly by OSU Foundation check when the expense is for:

  • alumni and donor relation expenses (including newsletters, glossy publications)
  • fundraising expenses (displays, balloons, etc.)
  • hosting for fundraising and alumni/donor activities
  • promotional activities (theater tickets, rodeo tickets, green fees)
  • give-away promotional items (t-shirts, hats, mugs, pens)
  • employee recognition receptions
  • departmental graduation events

Payments which must NOT be made through OSU (FIS Banner) include:

  • hosting over OSU $ limits
  • gratuities over OSU’s authorized 15%
  • alcoholic beverages (except conferences where this cost is included in registration fee)
  • flowers (except those used for instructional purposes)
  • greeting cards, for any purpose
  • donations of any kind
  • extra activities which may be in conjunction with a departmental retreat or other event (i.e. float/boat trip, trail ride, golf green fees, theater or museum tickets, sporting events, etc.)
  • professional licenses (except those allowed by OUS)

Non-cash employee awards less than $400 can be processed through either OSU or the Foundation. As a reminder, gift certificates are considered the same as cash and must go through OSU FIS Banner.

Related FAQs

507-02 Scholarships or Fellowships to Students

Fiscal Operations Manual
Section 500: Financial Accounting and Analysis
Effective: 01/01/2003
Revised: 01/23/2009

 

All distributions (scholarships, fellowships or awards) to enrolled students shall be made through the OSU Business Office and coordinated with the OSU Financial Aid Office to ensure that a student’s eligibility for other financial aid or awards is not jeopardized.

For scholarships, the Scholarship-Fellowship-Award Payment Authorization form is completed by the department identifying the foundation account that will fund the awards and the individual student recipients.  The Payment Authorization Form is forwarded to the OSU Foundation which verifies that there are funds to make the requested payments.  After OSUF’s funding verification, the form is forwarded to OSU Office of Financial Aid and Scholarships for verification of the student’s enrollment and eligibility.  Once verified by OSU Financial Aid, the scholarship payment is posted to the student’s OSU account.

These payments will be recorded on FSxxxx indexes when funding is from the OSU Foundation. All scholarships must be on FSxxxx indexes with program code of 82001 Scholarships & Fellowships. Only expenses applicable to account codes 51xxx and 52xxx should be debited to these FS indexes.

At a minimum, scholarship funds should be reconciled with the Financial Aid Office and OSUF on a quarterly basis.  The Scholarships-Fellowship-Awards Payment Authorization form is located at the OSUF website.

507-03 Reimbursements

Fiscal Operations Manual
Section 500: Financial Accounting and Analysis
Effective: 01/01/2003
Revised: 01/23/2009

 

OSU funds which can receive Foundation reimbursements are:

  • FSxxxx OSUF funds
  • 438xxx Endowment earnings funds
  • FExxxx Endowment earnings funds
  • 8095xx Construction funds
  • 9xxxxx Agency funds (includes student groups)

Use the specific OSU index for payment which best records the activity/function being supported.

  • Administration (index generally ends in “D”) – all costs connected with the administrative operations of a department, unit or Dean’s office. Program code 01800, 30600, or 61000.
  • Instruction/Departmental Research (index generally ends in “N”) – all costs connected with instructional or research activities of the department; including faculty travel to conferences. Program code 01100 or 01200.
  • Development (index ends in “V”) – costs connected with fundraising or promotional advertising which are not paid directly by the Foundation (including charges from internal OSU units: OSU Catering for graduation/alumni events or OSU Printing for holiday greetings) or donor hosting costs included in an employee travel reimbursement. Program code 30600.
  • Scholarships (index generally ends in “0” (zero) or “H”). All scholarships must be on FSxxxx indexes with program code of 82001 Scholarships & Fellowships. Only expenses applicable to account codes 51xxx and 52xxx should be debited to these FS indexes.  All other non-scholarship expenses should be charged to another index.

OSUF direct payment is preferred for donor fundraising and alumni relations costs rather than processing that expense at OSU through the “V” indexes.

507-04 OSU Foundation Procedures for an OSU Reimbursement Request

Fiscal Operations Manual
Section 500: Financial Accounting and Analysis
Effective: 01/01/2003
Revised: 12/09/2010

 

Non-Scholarship Expense
A completed OSU Index Reimbursement Request is required for the OSU Foundation (OSUF) to process payment to OSU. This form is available through the online OSUF Reimbursement System.

The online OSUF Reimbursement System is designed for units and Business Centers to create reimbursement requests, route the requests to authorized signers for approval, and then forward the request to the OSU Foundation for reimbursement.

All units are required to use the online system to process non-scholarship expense reimbursement requests.

OSUF also requires that supporting expenditure documentation be scanned and then retained by the unit for a year and made available for audit purposes.  Such documentation includes the vendor’s invoice and any receipts to verify that OSU has approved the payment of the expense to be reimbursed.

Scholarship Expense
Scholarship reimbursements must be completed through the online OSUF Reimbursement System.

508: Accounting for Grants and Contracts

Fiscal Operations Manual
Section 500: Financial Accounting and Analysis
Effective: 01/01/2003

 

Information on this subject is contained in the Grant, Contract and Gift Accounting (GCG) Policy & Procedure Manual.

508-01: Payment of Audit Disallowance

Fiscal Operations Manual
Section 500: Financial Accounting and Analysis
Effective: 07/01/1989
Revised: 10/15/2013

Oregon State University is required to provide funding organizations the necessary proof that the provided funds were expended for ordinary and necessary project expenses.  Normally, this proof is made available for review by funding organizations for three years after the project is terminated.

OSU is required to refund to funding organizations those project costs that have been found to be unallowable charges against such projects.  These costs for the purpose of this policy are defined as “costs disallowed by audit” and do not include costs disallowed for other reasons such as costs being outside of the project’s time period.  The term “audit” only applies to the examination of source documents by the funding organization or their representative.

OSU is restricted in its sources of funds and ability to fund project costs disallowed by audit.  This policy provides for a structured method of accumulating funds to provide assistance to units suffering audit disallowances.

A disallowance fund has been established and will be maintained at a level specified annually by the Vice President for Finance and Administration.  Funding will be provided by allocating a portion of the Institution’s Facilities and Administrative (F & A) recovery (a.k.a. indirect cost recoveries).  To maintain the required funding level each fiscal year, a portion of the total indirect costs recovered will be transferred into the  disallowance fund before return of overhead is distributed. 

Because the fund is derived from F & A charges, it is understood that audit disallowances on projects not receiving full indirect cost recovery will not be covered to the same extent as audit disallowances on projects recovering full indirect costs.

It is the intent of OSU to apply a maximum relief from the fund of 50% of the audit disallowances on any one disbursement that is or has received full indirect cost recovery.  The unit to which the disbursement was assigned will fund the remaining 50%.  It is understood that the percent of participation will fluctuate as the indirect cost recovery rate varies from full recovery.

Costs in the disallowance fund will be considered University Cost Sharing because the cost was incurred for the purpose of completing the sponsored activity.  As the expense is placed in the disallowance fund, the fund will be replenished up to the maximum specified by the V.P. for Finance & Administration from the F & A Clearing Fund.

The 50% that is charged to the unit will also be coded as Cost Sharing.  The cost overrun index of the department will be used. This will then automatically transfer revenue/budget from a general fund source to cover the expenses.

509: Relationship Between OSU and the Agricultural Research Foundation

Fiscal Operations Manual
Section 500: Financial Accounting and Analysis
Effective: 08/31/2008
Revised: 10/25/2012

The Agricultural Research Foundation is a private, non-profit corporation affiliated with Oregon State University (OSU) under IRS tax code 501(c) 3. Since 1934, the Agricultural Research Foundation (ARF) has proved to be a successful partner with the College of Agricultural Sciences in securing funding to solve current agricultural problems. ARF is the custodian of privately and publicly donated funds used to support scientific experimentation, research, and educational training activities for the benefit of the agricultural industry.

509-01 Revenues to the Agricultural Research Foundation

Fiscal Operations Manual
Section 500: Financial Accounting and Analysis
Effective: 08/31/2008
Revised: 10/25/2012

ARF accepts gifts from corporations, foundations, or private individuals. ARF accepts funding for sponsored research projects from commodity commissions, grower group committees, councils, and associations.

Potential funding sources should be discussed with the ARF Executive Director as only ARF personnel should accept donations on behalf of ARF.

Gifts
Gifts, by definition, do not commit OSU to any obligations and are sent directly to ARF for processing.  An OSU employee must not agree to provide any goods, services or other remuneration in exchange for a gift.

Student Scholarships
The OSU Foundation is the recognized OSU-affiliated organization for most endowed student scholarships. Upon donor request, and with ARF approval, endowments for student scholarships may be established through ARF.

Facility/Capital Contributions
Funding from ARF projects may be needed to support facility/building remodel projects. These expenditures are pre-approved by ARF and processed through the appropriate FAxxxx indexes. Contributions for facility/building projects, including major capital campaigns, should be referred to the OSU Foundation.

Revenue not classified as contributions or donations
Revenue received from an OSU activity, or use of OSU facilities, shall not be deposited in an ARF account. These funds must be deposited into the appropriate OSU fund/index in which the costs were incurred.

When OSU employees provide services to a client, such as testing or assistance in product development, the client shall directly pay OSU for such services.  OSU employees shall not accept payment for such services directly or indirectly through ARF.

An OSU employee or department/unit may not deposit revenue into ARF when generated from OSU sponsored workshops, conferences, seminars or similar activities (examples: registrations or ticket sales). To account for these types of revenues and their associated expenses within OSU refer to FIS 1403-03 Designated Operations.

An OSU employee or department/unit may not deposit into ARF revenue generated from OSU sponsored attendee-paid recognition events such as retirement dinners and award luncheons. Refer to FIS 102-09 Attendee-paid Recognition Events.

Summary: Revenue to ARF shall be donations or contributions which support scientific experimentation, research, and educational training activities for the benefit of the agricultural and natural resource industries in collaboration with OSU. Checks payable to OSU shall not be deposited directly into ARF. If a check is made payable to OSU, but intended for ARF, the check must first be sent to ARF with supporting documentation (all requests must be accompanied by documents clearly demonstrating ARF is the intended recipient). ARF will deposit through the OSU Business Affairs Cashier’s Office and the Cashier’s Office will issue a check payable to the Agricultural Research Foundation.

Contact ARF for answers to questions concerning this process.

509-02 Payments from Agricultural Research Foundation to OSU

Fiscal Operations Manual
Section 500: Financial Accounting and Analysis
Effective: 08/31/2008
Revised: 11/9/2012

FAxxxx indexes are established by the OSU Office of Post Award Administration (OPAA) for the receipt of revenue from ARF projects for the support of specific research contracts and are administered in the same manner as all OSU grants/contracts.  All research work plans are approved by the Office of Sponsored Programs (OSP).

OPAA establishes one FAxxxx gift fund per department. The FAxxxx gift fund is specific to a department/unit and is not to be shared by multiple units. Activity codes should be used to identify transactions for all gifts. These are interest-bearing funds and must maintain a positive or zero cash balance.

ARF payments to OSU should not be deposited in other OSU funds or indexes without express permission from both ARF and Business Affairs.

 

509-03 Reimbursable and Non-Reimbursable Expenses

Fiscal Operations Manual
Section 500: Financial Accounting and Analysis
Effective: 08/31/2008
Revised: 10/25/2012

An OSU employee must not use State funds or other department/unit deficits. OSU resources to fulfill a FAxxxx contract. Likewise, ARF funds must not be used to fulfill State or other department/unit deficits. An OSU employee may not redirect funds from the fulfillment of a FAxxxx contract to a different research purpose without first obtaining permission from ARF. FAxxxx contract to a different research purpose without first obtaining permission from ARF. FAxxxx contracts follow OSU policy, including those for cost overrun and cost transfers. See OSU Gift, Grant, and Contract manual.

FAxxxx gift indexes may only be used to pay for expenses incurred to fulfill OSU’s research or educational training mission. Expenses outside the scope of these programs are not reimbursable. Although ARF, with limited exceptions, follows OSU guidelines and recommendations concerning legitimate research and university expenses, other requirements may be imposed by ARF regarding the payment of expenses. Contact ARF regarding allowable expenses.

 

509-04 Payments to Employees, Vendors or Contractors

Fiscal Operations Manual
Section 500: Financial Accounting and Analysis
Effective: 08/31/2008
Revised: 10/25/2012

Generally, costs that are consistent with OSU’s fiscal policy should be paid through the OSU accounting system on established FAxxxx, not directly by ARF.

The following OSU expenses can only be paid through FAxxxx indexes and cannot be paid directly by ARF:

  • Salary/benefits of OSU employees, including students.
  • Other personnel related costs which are tax-reportable, including but not limited to: moving expenses.
  • OSU internal fees (processed by journal voucher), including but not limited to: testing services, university supplies, printing services, communications services, university-sponsored conference registration
  • Employee travel reimbursements  [account codes 394xx – 397xx]

Capital equipment purchases equal-to or greater-than $5,000 per item, including vehicles.  [account codes 401xx – 40201]

Use the following for specific OSU index payments which best record the activity/function being supported:

  1. Contract indexes are for costs pre-approved by ARF and the prime sponsor toward support of a research project. Contract funds have a budget, end date, and use program codes 15003 Sponsored Research On-Campus and 15503 Sponsored Research Off-Campus.
  2. Administration indexes (generally ends in “D”) are reimbursed by ARF gift funds for costs connected with the administrative operations of a unit and use program codes 01800 Departmental Academic Support or 30600 Academic Administration.
  3. Instruction/department research indexes (generally ends in “C”, “E”, or “N”) are reimbursed by ARF gift funds for costs connected with programmaticactivities of the department and use program codes 01100 Regular Instruction/Dept Research or 01200 Departmental Research.

The expenses below can only be processed on FAxxxx giftfunds/indexes.

  • Employee awards equal-to or greater-than $400. Gift certificates are considered the same as cash and are processed by using account codes 10108, 10417, 10507, 20168.Building and/or grounds maintenance expenses  [account codes 23502, 23503, 23511, 23512, 23522]
  • Building remodel or construction costs [account codes 404xx – 407xx.  Note: these costs can only be placed on an 8xxxxx plant fund.]
  • Communication, custodial, utilities, other operations or maintenance costs associated with OSU-owned or operated facilities [account codes 220xx, 230xx, 233xx, 2353x]

509-05 Scholarships or Fellowships to Students

Fiscal Operations Manual
Section 500: Financial Accounting and Analysis
Effective: 08/31/2008

To assure student’s eligibility for financial aid is not jeopardized, and financial aid is accurately reported, all scholarship and fellowship funding supported by ARF shall be sent to OSU and the individual student account is credited.

510: Facilities and Administrative Rate

Fiscal Operations Manual
Section 500: Financial Accounting and Analysis
Effective: 01/01/2003
Revised: 04/15/2013

The Facilities and Administrative rate (commonly referred to as indirect cost rate or F&A Rate) is based on the latest update of OMB (Office of Management and Budget) Circular A-21. The F&A Cost Proposal is prepared by OSU Business Affairs' Financial Accounting & Analysis Unit. Negotiations are completed by the VP for Finance and Administration with staff from the US Department of Health and Human Services (DHHS), Division of Cost Allocation (DCA). DHHS-DCA is OSU's cognizant agency responsible for negotiating and approving rates for OSU on behalf of all Federal agencies. Negotiated rates are usually established for a 3-4 year period.

The Modified Total Direct Cost (MTDC) method of calculating the Facilities and Administrative rate is the method required for use by OSU. The process is as follows:

  • Establish the total costs incurred for the institution for the base period.
  • Establish F&A cost pools consisting of expenditures (exclusive of capital items and other costs specifically identified as unallowable).
    • General administrative and general expenses (exclusive of costs of student administration and services, student activities, student aid, and scholarships).
    • Operation and maintenance of university-owned facilities and depreciation after appropriate adjustment for costs applicable to other institutional activities.
    • Library
    • Departmental administration expenses.
    • Sponsored project administration.
    • Building depreciation
    • Equipment depreciation
    • Interest on bonds
    • Student Services Administration
  • Establish a MTDC distribution base: (1) that consists of all the institution's instruction, research, other sponsored activities, and other instructional activities.
  • Calculate the rate by dividing the MTDC base: (1) into each of the F&A cost pools (2) and adding the results together.
  • Establish the F&A cost rate, determined by dividing the amount in the F&A cost pool by the amount of the modified total direct cost base. This rate is then audited by DHHS and further refined (negotiated) as final.

The current F & A Rate Agreement can be found at the OSU Research – Office of Sponsored Programs website or under Business Affairs, Financial Accounting & Analysis

Related FAQs

511: e-Signature

511: e-Signature

Fiscal Operations Manual
Section 500: Financial Accounting and Analysis
Effective: 06/30/2008
Revised: 10/15/2013

 

The Electronic Signatures Act (Public Law No: 106-229) went into effect on October 1, 2000 and gives electronic contracts the same weight as those executed on paper. The act has some specific exemptions or preemptions.  Although the act enables documents to be signed electronically, the option to do so lies solely with the consumer.

The act specifically avoids stipulating any 'approved' form of electronic signature, instead leaving the method open to interpretation by the marketplace.  Any numbers of methods are acceptable under the act.  Methods include simply pressing an I Accept or I Approve button, digital certificates, smart cards, and biometrics.

E-signatures may be implemented using various methodologies depending on the risks associated with the transaction.  Examples of transaction risks include: fraud, non-repudiation, and financial loss.  The quality and security of the e-signature method should be commensurate with the risk and needed assurance of the authenticity of the signer.  Authentication is a way to ensure that the user who attempts to perform the function of an electronic signature is in fact who they say they are and is authorized to “sign”.

The intent of this policy is to allow for e-signature use at OSU by means of methods that are practical, secure, and balance risk and cost. It is not the intent of this policy to eliminate all risk but rather to provide a process that gives parties assurance that appropriate analysis was completed prior to implementation of e-signature, and that the level of user authentication used is reasonable for the type of transaction conducted.  The E-Authentication Guidance for Federal Agencies, OMB 04-04 defines four levels of assurance, Levels 1 to 4, in terms of the consequences of authentication errors and misuse of credentials. The guidance defines the required level of authentication assurance in terms of the likely consequences of an authentication error.  The e-Authentication Risk and Requirements Assessment (eRA) Tool is the risk and assurance level evaluation tool to be used at OSU.  See FIS Exhibit 003-15 e-Signature Authentication Assurance Levels.

Definitions

Authentication - To establish as genuine and to verify the identity of the person providing an electronic signature.

Credential - An object that is verified when presented to the verifier in an authentic transaction

Electronic Record -A contract or other record created, generated, sent, communicated, received, or stored by electronic means.

Electronic Signature or e-Signature - An electronic identifier that is created by a computer and is intended by the party using it to have the same intent, affect and authority as the use of a manual (either written or facsimile) signature.

Evaluation of Risk - analysis performed by the Unit to determine risks associated with using an e-signature and to determine the quality and security of the e-signature method required.  An evaluation will be made using the E-Authentication Guidance for Federal Agencies, OMB 04-04 for reference and guidance.  The e-RA (Risk Assessment) Tool will assist Units determine the level of risk.  The reports resulting from the eRA assessment shall be included as part of the official record for this e-signature implementation and submitted with the proposal to the records custodian.

Record Custodian – the individual responsible for compliance with all legal obligations related to information and, in that capacity, have final authority for the utilization, access, and release of data under their jurisdiction. In some instances, there are multiple custodians for various sets of data.

Transaction - A discrete event between a user and a system that supports a business or programmatic purpose.

Unit - an OSU organization conducting business by means of an e-signature; such as a College, Department, Auxiliary, or Administrative Division.

User Authentication - verifying the user’s unique credentials such as username and password, or a digital certificate.  This may require validation against specific OSU held information. 

Acceptance of E-Signatures on Documents - An e-signature may be accepted in all situations if requirement of a signature/approval is stated or implied. This policy does not supersede situations where laws specifically require a written signature.  This policy cannot limit the right or option to conduct the transaction on paper or in non-electronic form and the right to have documents provided or made available on paper at no charge.  The e-signature must be protected by reasonable security measures.

Use of E-Signatures on Documents – The decision to use an electronic signature should be weighed against the risks identified with the transactions. In addition, specifications for recording, documenting, and/or auditing the e-signature shall also be determined by the Unit and approved by the University.  The lowest cost, least complex method acceptable for the risk is generally preferable.  The National Institute of Standards and Technology (NIST) Electronic Authentication Guidelines: 800-63 can be useful in making this determination.

Units that propose e-signature methods that are at a higher or lower level of assurance than indicated in the risk assessment process shall:

  • Describe the reason for variance.
  • Identify the potential risk of using a tool from a lower (or higher) assurance level than the risk assessment identifies.
  • Identify the steps that will be taken to mitigate the risk or justify why a higher assurance level method is appropriate.
  • Obtain the signed approval of the Unit director. The signed document shall be included as part of the official record for this e-signature implementation.

Security and access to OSU-specific information is determined by a “record custodian.”   Any University transaction enabled by e-signatures must be evaluated by the Unit in conjunction with the applicable records custodian, using the eRA tool.  (This includes any existing implied or explicit e-signatures in use prior to the adoption of this policy.)  For risk assessment and review purposes, similar types of transactions may be grouped together under one agreement.  Implemented e-signatures will be reviewed periodically for appropriateness, and continued applicability.

Once the method of e-signatures is determined, obtain the signed approval of the Unit director. The signed document shall be included as part of the official record for this e-signature implementation. Units will seek approval to implement an e-signature from the applicable Records Custodian, using the Proposal for Use of e-Signature form (see FIS Exhibit 003-16).  It is the Records Custodian’s responsibility to ensure that the proposed e-signature and method meet the requirements of this policy.  In determining whether to approve an e-signature method, consideration will be given to the systems and procedures associated with using that electronic signature, and whether the use of the electronic signature is at least as reliable as the existing method being used. 

Should it be deemed necessary by the Records Custodian, he/she will seek approval from University Legal Counsel and the appropriate information technology office or officer, such as the Chief Information Security Officer (CISO).

The implementation process will likely differ for each transaction and for each Unit, as it is dependent on many factors such as technical environment, appropriate assurance level, and the nature of the transaction.

Recordkeeping - A formal record of the risk assessment evaluation, e-signature method selection, and justification will be maintained by the Unit.  At such time as the University has implemented a technology security plan and infrastructure, a copy would also be filed at the office of the CISO.

Security - Software and/or hardware that is required for e-signatures, such as Public Key Infrastructure (PKI) certificates, “fobs”, or “dongles”, will be provided by the Unit.  The Unit will also ensure that appropriate controls and monitoring of the software/hardware are in place.

Periodic Review - A review of each e-signature implementation will be conducted periodically, but no less than every three years, by the Unit.  This will include an evaluation of the e-signature use to determine whether any applicable legal, business, or data requirements have changed.  A determination will be made as to the continued appropriateness of the risk assessment and e-signature implementation method.

A record of this review will be documented and filed as part of the official record for this e-signature implementation maintained by the Unit.  If as a result of the periodic review the risk level changes, a new risk assessment must be completed, including review and approval.

Various Federal rules and regulations establish the authority for use of electronic signatures. 

The Electronic Signatures in Global and National Commerce Act enacted on June 30, 2000 (S761, HR 1320 IH, commonly known as the ESIGN) established the validity of electronic records and signatures.

The Uniform Electronic Transactions Act (UETA) provides a legal framework for electronic transactions.  It gives electronic signatures and records the same validity and enforceability as manual signatures and paper-based transactions.  UETA was adopted by Oregon in 2001 and created legal recognition for most electronic transactions and parallels the legal recognition for paper transactions conducted in Oregon. (Uniform Electronic Transactions Act Chapter 84 (HB 2112) and OAR 125-600-0000.)

Additional Information:

Family Educational Rights and Privacy Act (FERPA): 34 CFE Part 99; Final Rule. These final regulations provide general guidelines for accepting “signed and dated written consent” under FERPA in electronic format.

OSU Acceptable Use of University Information Policy

Standards for Electronic Signatures in Electronic Student Loan Transactions

512: Use of Foreign Banks

Fiscal Operations Manual
Section 500: Financial Accounting and Analysis
Effective: 01/01/2003
Revised: 12/09/2010

Foreign programs frequently present special challenges.  International vendors often require immediate payment for goods and services in local currency.  The solution has been to provide funds to foreign personnel in advance.  The program director is then responsible for the funds.

Occasionally, providing an advance to a foreign program includes depositing funds in a foreign bank.  Approval must be obtained in advance from OSU Office of Business Affairs, the OUS Controller’s Division and the State Treasurer.

Authorization should be requested by letter to the Director of Business Affairs for approval and forwarding to the OUS Controller’s Division.  The request should include the following:

  • A brief description of the need to use a foreign bank
  • The source of funds and the degree of liability assumed by the University
  • A statement of whether the government insures funds deposited in the foreign bank, or whether such protection can be obtained
  • A summary of reasonable and prudent measures that will be taken to protect the funds
  • The amount to be deposited
  • An estimate of the average balance
  • For further information on the use of foreign banks, see OUS Fiscal Policy Manual Section 105.200: Foreign Programs and Payments (specifically .170 Foreign Programs and Payments)

513: Accounting for Agency Funds

Fiscal Operations Manual
Section 500: Financial Accounting and Analysis
Effective: 01/01/2003
Revised: 08/26/2010

 

Funds 9xxxxx are Agency Funds.  These funds are established for outside entities affiliated with and residing at OSU to facilitate ease of use of OSU services, such as direct charging from telecommunications, printing/mailing services, or OSU Bookstore.  Examples include: student campus organizations, OSU Alumni Association, and National Marine Fisheries Service Ground Fish Group.  The balance in this fund is owned by the agency, not OSU.  Expenditures are not reported in OSU’s financial statements.  These funds cannot be used to make salary payments.  Employees of the agency are not OSU employees.

See FIS 1101 FOAPAL Elements for additional information.

514: Education & General (E&G) and Statewide Public Service (SWPS) Budgeted Operations

Fiscal Operations Manual
Section 1403: Financial Accounting and Analysis
Effective: 07/01/2007
Revised: 12/30/2013

 

The 0xxxxx series of funds (Fund Type 11) are Education and General Funds (E&G) and Statewide Public Service (SWPS) funds that are subject to expenditure limitations and are funded by a combination of State General funds and other funds (limited) revenue. 

Funds 03xxxx are known as Statewide Public Service funds.  Agriculture Experiment Stations, Extension Service, and Forest Research Lab are separately appropriated by the State.  The funding sources are State General funds and other funds (limited) revenue including Federal USDA appropriations. These funds are restricted as to their use and are not to be expended for instruction costs of university registered students.

Each fund has many indexes which join the fund, organization code (department) and program code (function) together.

Procedure - E&G and SWPS funds are allocated to colleges and units through the budget process.  Annual expenditures of these funds should not exceed the budget. External and internal revenue is estimated during the budget process and is posted as available for expenditure. 

Expenditures - All costs for carrying out the activity or function should be placed on that index.  It is important to be aware of the Program Code (function) on each index.   Some are specific for ‘administration’ and some for ‘instruction’.  In the case of Agriculture Experiment Station SWPS funds, many indexes have Program Codes restricted to research.   

Sometimes an Activity Code is necessary to further define the expense or revenue to a particular activity. This is optional.

For E&G funds, institutional administrative overhead is funded through the budget process. 

For SWPS, an institutional overhead is applied to all expenditures and posted as account code 28204 Administrative & Support Service Charge.  See FIS 504 OSU Assessments. SWPS funds are also subject to State of Oregon Department of Administrative Services (DAS) Assessments FIS 503. These are posted as 280xx account codes. 

Recharging costs incurred in E &G or SWPS funds - When a department/unit wants to recharge E&G or SWPS costs internally within the University and to others external to OUS; the activity (service) being recharged must meet the criteria of a Departmental Cost Center as defined in the “Recharge Activities” policy FIS 519.  If the criterion is not met, then Designated Operations, Service Center, or Auxiliary Enterprise funds must be established in order to recharge for the service.

Fees should be developed to cover the direct costs associated with the activity. There are limitations. Fees charged to internal customers (OSU and other OUS institutions) may not include unallowable costs, depreciation or capital equipment purchases, building space, building utilities, operations or maintenance costs, land space, or departmental administrative costs.

Fees must be published in either the OSU Internal or External Fee Book, as appropriate, before they may be charged.  

See “Recharge Activities” for greater detail in calculating fees and documentation of customer usage. This is critical!       

Revenue - All cash from recharge activities deposited in E&G or SWPS funds is to carry an income Account Code (06xxx).  Cash received as a gift is not to be deposited in these funds; see FIS 102-05: Gift, Grant, and Contract Income. 

Use internal sales reimbursements Account Code (79xxx) for non-cash recharge activities.  These are completed by Journal Voucher. See FIS 1107: Journal Vouchers.

Record retention - For external (cash) transactions, all documentation including fee, calculation, billing, and receipts should be maintained for three (3) years.

For internal or Journal Voucher transactions, documentation of fee, calculation, and billing must be maintained for eight (8) years because these may involve charges to federal grants or contracts.

References

OAR 580-040-0010

515: Designated Operations

Fiscal Operations Manual
Section 500: Financial Accounting and Analysis
Effective: 10/01/1997
Revised: 1/15/2014

 

The 05xxxx series of funds (Fund Type 12) are used to account for self-sustaining activities related to community education, testing, and other public services. 

These are identified as Designated Operations:

  1. Non-credit Instruction (field trips and international education) - the university collects funds from students for their individual travel, housing, and other related expenses which are not part of the direct cost of instruction.
  2. Community Education (non-credit workshops, conferences, and seminars) - there is generally a registration fee for these.
  3. Testing services (a testing activity that performs work primarily for customers external to the university) - fees charged for these activities must be formally approved by the State after a public hearing held each fiscal year.
  4. Public Service (non-instructional services for the general public or outside groups) - fees are charged for the service.

Designated operating funds are accounted for in the Other Funds Non-Limited category of the OUS legislative budget.

A Designated Operation fund is established when approximately 80% or greater of a self-support activity is funded from external sources (outside OSU).  A Service Center fund should be used when the majority of the recharge activity is internal to the university.

Expenditures

All costs for carrying out the self-support activity should be placed on the Designated Operation fund. This includes labor, OPE, supplies, minor equipment and travel, as applicable.   Purchase of capital equipment should be made in the departmental Education & General (E&G) funds.

Designated Operations are subject to a university administrative overhead applied to all expenditures.  There is no overhead charge on transfers (see “Fund balances” below).  The administrative overhead charge is posted as account code 70003 and is automatically calculated by Banner.  Do not use account code 70003 on individual JVs.

Designated Operations are subject to State of Oregon Department of Administrative Services (DAS) assessments.  These are covered by the university E&G budget funds and are not posted to the individual designated operation funds.

Departmental Administrative effort may be incurred for promoting, supporting, or accounting for these activities.  Up to 15 % of revenue for the current fiscal year may be recovered by the Business Center for these administrative costs.  Justification for the percentage charged must be included in the text of the charging journal voucher and backup must be available in the unit for review by Business Affairs and/or auditors.

The journal voucher entry is:

Dr. Designated Ops 05xxxx fund Index       use Account Code 28201
                                                             (Admin. Service Charge)

Cr. Department E&G 001100 fund Index    use Account Code 79390
                                                              (Admin. Service Internal Sales)

Types of costs that can be considered in the calculation of the administrative effort above:

Business Center or Unit clerical activities- brochure and workshop material preparation, workshop registrations, travel/lodging arrangements for speakers or attendees, and handling workshop logistics (locations, refreshments, equipment).

Business Center or Unit accounting activities - billing of service and testing activities, depositing of receipts, preparation of personal services contracts, payment of vendor invoices, balancing and reconciliation of funds.

Developing fees

Fees should be developed to cover all costs associated with the self-support activity and posted on the fund. There may be multiple services and fees associated with one fund.  Fees to Internal customers (OSU and other OUS institutions) may not include unallowable costs, capital equipment purchases or depreciation, building space, or building operations/maintenance costs. 

Before they may be charged, the fees must be published in the OSU External Fee Book and/or Internal Fee Book.   See “Recharge Activities” FIS 519 for greater detail in calculating fees and documentation of customer usage.  

Customer base

The percentage of external vs. internal revenue (customers) should be reviewed annually to see if a Designated Operation fund is still appropriate.   Internal sales (09xxx account codes) should be no greater than 20% of total revenue.  Contact Business Affairs, if a change occurs.

Revenue

All cash received from recharge activities of a Designated Operation is to be deposited with a 06xxx income account code.  Cash received as a gift cannot be deposited in these funds; see FIS 102-05: Gift Income

Internal (non-cash) transactions must use 09xxx internal sales Account Codes as the credit on the journal voucher processing the recharge activity.  See FIS 1107 JV Processing.

Carry forwards

Funds may be carried forward from one fiscal year to the next fiscal year for continuation of the designated operation program.  Fund balances exceeding $25,000 or 20% of the annual revenue will be reviewed with the unit as to the planned future uses for the funds.

Fund balances

Fund balances above those needed for the future functions of the Designated Operation are transferred to the Education and General (E&G) Fund -Index ZARR70.  The responsible Business Center of the Designated Operating fund completes the journal voucher.  The Business Center then e-mails a request to the Office of Budget and Fiscal Planning for expenditure budget to the appropriate E&G operating index for expenditure. 

The journal voucher entry is:

Dr. Designated Ops 05xxxx fund Index         use Account Code 92005
                                                         (Transfer out - between FTYP Lvl 2)

Cr. Index ZARR70                                       use Account Code 91005
                                                          (Transfer in - between FTYP Lvl 2  )

Covering fiscal year-end deficits

Any overdrafts (deficit fund balance), as determined after posting receivables and outstanding payables, must be eliminated before year-end closing by transferring of adequate funding by the responsible department from E&G funds or gift funds.

The journal voucher entry is:

Dr. Unit funded Index                                   use Account Code 92255
                                                        (Tfr Out-from FT11 Budgeted Ops)

Cr. Designated Operation Index                    use Account Code 91255
                                                            (Tfr In-from FT11 Budgeted Ops)

Closing a Designated Operation fund

When closing a Designated Operation fund, all the accrual account codes (Axxxx and Bxxxx) must be $0 and there can be no encumbrances.  The cash balance is then transferred to the E&G Fund - Index ZARR70.  The responsible Business Center of the Designated Operating fund completes the journal voucher.  The Business Center then e-mails a request to the Office of Budget and Fiscal Planning for expenditure budget to the appropriate E&G operating index.   

The journal voucher entry is:

Dr. Index associated with the Designated Ops 05xxxx fund          use Account Code 92005
                                                                                        (Transfer out - between FTYP Lvl 2)

Cr. Index ZARR70                                                                    use Account Code 91005
                                                                                        (Transfer in – between FTYP Lvl 2)

Record retention

For external (cash) transactions - documentation of fee, calculation, billing, and receipts should be maintained for three (3) years.

For internal (journal voucher) transactions - documentation of fee, calculation, and billing must be maintained for eight (8) years because these may involve charges to federal grants or contracts.

References

OUS Policy 05.712: Designated Operationsin the OUS Fiscal Policy Manual
FIS 518 Sales of Goods and Services

516: Service Center Operations

Fiscal Operations Manual
Section 500: Financial Accounting and Analysis
Effective: 07/01/1995
Revised: 1/15/2014

The 09xxxx series of funds (Fund Type 13) are used to account for self-sustaining Service Center activities.  They are not supported by E&G budget funds.  The primary function of a Service Center is to provide services for units or others within the institution, including grants/contracts.  Services can be provided to external customers as long as they are less than 20% of total revenue.  External customers may include non-OSU entities that are physically located on campus, other State of Oregon agencies, and other tax-supported Oregon entities, such as counties or cities. 

Service Center operation funds are accounted for in the Other Funds Non-limited category in the OUS State Legislative Budget.

A Service Center:

  1. is self-supporting.
  2. is responsible for its own equipment depreciation
  3. maintains a reserve for equipment replacement
  4. may be assessed for building usage, utilities, operations/maintenance
OSU service centers include, but are not limited to:
Telecommunications
Lab Animal Resource Center
Forestry Quantitative Science LAN Service
Chemistry Stores
Printing and Mailing
Campus ID Center
Research Animal Isolation lab
Motor Pool
Desktop Support
Surplus Property


Expenditures

All costs related to the operation of the Service Centers should be recorded in the fund.  This includes salaries & OPE (including unit administrative costs), supplies, minor equipment, travel, equipment depreciation, and any building utilities/operations & maintenance charges.

Service Centers who purchase goods for resale must reconcile their inventories at least annually and make the necessary adjusting entries.

Capital equipment is recorded as an asset of the Service Center, not an operating expense.  Only the annual equipment depreciation is recorded as an expense and can be used in the fee calculation.

Service Centers are subject to State of Oregon Department of Administrative Services (DAS) Assessments FIS 503.  These are posted as 280xx account codes. 

Some Service Centers are charged for use of building space. These are explained in FIS 504 OSU Assessment.

Developing Fees or Rates

Rates must be based on allowable actual costs of the Service Center.  The cost can include annual equipment depreciation, but cannot include the cost of a new piece of capital equipment. Rates to internal customers (OSU and other OUS institutions) may not include unallowable costs, such as marketing or advertising.

All revenues received by Service Centers are for reimbursement of the actual cost of operations.  If a Business Center elects to recover administrative costs that support Service Centers, those costs must be paid by the Service Center on that fund. Adequate documentation of time & effort must exist to support the transaction.

The Service Center may add a service fee to non-university users.

A class of users (students) may receive service at a reduced fee, if the reduction is subsidized from another source. The subsidy must be posted in the Service Center as account code 09398 Support for Designated Operations/Service Departments.

See FIS 519 Recharge Activities policy for specific information of allowable costs, unallowable costs, and determining the rates.

All users of a Service Center will pay at least the same determined fee for like services and the rates must be published in the OSU Internal Fee Book If any services are going to be offered on a per-service basis to external customers, the rates must also be listed in the External Fee Book.

Customer Base

All potential units of use and users of the service(s) must be considered when establishing the fee(s). Per OMB Circular A-21, the fee must be designed to recover only the aggregate costs of the services and can not discriminate against federally-supported activities or the institution, including usage for internal purposes. 

Revenue

Use internal sales Account Code (09xxx) for non-cash activities in a Service Center.  These are completed by Journal Voucher. See FIS 1107 Journal Vouchers.

All cash deposited in Service Center fund is to carry an income account code 06xxx.  Cash received as a gift is not to be deposited in these funds; see FIS 102-05: Gift Income.

Multiple Services in One Cost Center

A Service Center may provide more than one service and make a surplus on some services and a loss on others.  If a loss results in one activity and a surplus results in another activity, the surplus may be used to offset the loss so long as the mix of users is the same for the activity that gains as for the one that loses.

Excess Cash

Excess of income over expenses resulting in a positive balance cannot exceed 60 days of working capital.  Working capital is defined as:  current assets minus current liabilities.   For federal compliance purposes, the 60-day upper limit is calculated as the average operating expenses for the last year of operation multiplied by .1667 (60 days divided by 360 days).

Excess balances will be reduced in one (or both) of the following ways:

  • A reduction of next year’s rates
  • A refund to users

Deficit

If the fund balance at year-end is in a deficit position, funding is necessary and a journal voucher should be processed.

Dr         Departmental index                            use account code 92255
                                                         (Tfr Out-from FT 11 Budgeted Ops)

Cr        Service Center index                             use account code 91255
                                                              (Tfr In-from FT11 Budgeted Ops)

Keep in mind that a deficit in working capital means that expenses exceeded revenue and it may be necessary to request an increase in rates.

The amount recorded on the official books of record as of fiscal year-end (close of period 14; June 30) of each year will be the amount used for the determination of the working capital limits. Therefore, it is important that all accounts receivable and accounts payable, as determined in accordance with Generally Accepted Accounting Principles (GAAP), be posted in Banner before the close of the fiscal year.

Contributed Capital – transfer of funds from responsible department

Any transfer of funds made to a Service Center will be accounted for as contributed capital.  If fees cannot be set at a rate sufficient to recover operating costs, the unit may not directly pay Service Center costs from other sources. 

Examples of contributed capital include a subsidy to cover an operating deficit; transfer of beginning funds at inception of the Service Center; transfer or conversion of a storeroom inventory to a Service Center; or the purchase or transfer of equipment to a Service Center. Documentation related to the transaction that identifies the source, amount, date, reason, and authorization for the contribution must be retained for audit.

Contact the Associate Director of Business Affairs – Financial Accounting & Analysis unit for assistance with contributed capital matters.

Returning Funds - to responsible department from a service center

Any surplus amounts returned to units by Service Centers must be a return of previously contributed capital or a part of excess earnings being refunded as current year billing adjustments to all customers.

Inventory - may be a necessary component of service centers

If a Service Center normally deals in inventoried (stockroom) items such as parts or chemicals, an inventory (Balance Sheet) account code must be used to properly identify the value of inventory at fiscal year-end.   Physical inventories must be taken and the value adjusted annually. 

Funding Equipment Replacement Reserve (Depreciation)

Each Service Center is responsible to develop a business plan that includes setting aside funds for equipment replacement.  Each Service Center will have a capital asset replacement plan. The plan must set a target for funding levels and include dollar amounts for contributions to the reserve fund.  This plan must be submitted to the Director of Business Affairs and approved by the Vice President for Finance and Administration at the beginning of each fiscal year.

Both operating and reserve funds for Service Centers are non-interest bearing funds.  Oregon Revised Statutes make no provision for these funds to be interest bearing.

Cash will be moved from the Equipment Reserve back to the operating fund when a funded asset is removed from inventory and replaced with a similarly functioning item causing the Reserve to be over funded.  Do not use the Reserve fund to process purchases.  Purchases can only be made using the operating fund/index. 

Cash is moved between the operating fund and reserve by use of Exxxx and Fxxxx account codes. 

Reference: IMD 6.350.

Record Retention

A Service Center must adequately document its activities and maintain records to support expenditures, billings, and revenues.  At a minimum, the following records must be retained by the Service Centers for no less than eight years because of possible charges to grants or contracts:

  1. Work papers showing how the charge-out rates (fees) were calculated.
  2. Records that identify all users, the services provided to each user, and amount billed.

Termination of Service Center Status

When a Service Center expands its customer base so the income from non-university users (external) exceeds 20% of the Service Center's annual income for two consecutive years, the status of the service department will change to a Designated Operating Fund. A new fund will be established for the activity. Equipment reserve funds will be moved back into the Service Center operating fund; then the cash balance of the operating fund will be transferred to the institution's Current Education & General Fund Balance.

The transaction will be:

Dr        Service Center Index                            Account code 92005
                                                               (Tfr Out-Between FTYP Lvl 2)

Cr        ZARR70 E&G Fund Index                       Account code 91005
                                                                   (Tfr In-Between FTYP Lvl 2)

The Business Center then notifies the Office of Budget and Fiscal Planning of this transaction and desired index for E&G fund budget increase.

Reporting to OUS Controller’s Division

Working Capital
The Service Center Working Capital, as reflected in the official accounting records (FIS Banner), will be monitored and analyzed on an annual basis at fiscal year-end.

OSU Business Affairs will prepare and retain a report listing of all Service Center funds reconciled to the general ledger, computation of compliance to working capital limits, notation of plans for eliminating excesses or deficiencies, and notation of any exceptions to policy.  Information for this report will be requested from each active Service Center.  Only the OSU Vice President for Finance and Administration can authorize exceptions to the 60-day working capital maximum.   

Equipment Reserves
The Service Center manager will annually prepare and submit a Management Plan to the Director of Business Affairs for approval by OSU’s Vice President for Finance and Administration or designee. The plan shows a five-year forecast for the Service Center’s equipment repair or replacement needs and includes an analysis of the annual earnings necessary to accumulate the funds required to execute the plan.  The plan does not go forth to the OUS Controller’s Division; however, it must be retained at OSU Business Affairs for audit purposes.

References

OUS Fiscal Policy 05.713
OARS 580-040-0010
DHHS-Division of Cost Allocation, FAQ’s
DHHS Facilities & Administrative Rate Audit Guide (Specialized Service Facilities)

517: Auxiliary Enterprises

Fiscal Operations Manual
Section 500: Financial Accounting and Analysis
Effective: 04/01/2002
Revised: 1/15/2014

 

The 1xxxxx series of funds (Fund Type 2x) are used to account for self-supporting activities of auxiliary enterprises. An auxiliary enterprise exists to furnish goods or services to students, faculty, or staff as individuals and charges a fee directly related to the cost of the goods or services. Auxiliaries may also furnish services incidentally to the general public.

An auxiliary enterprise:

  1. is self-supporting.
  2. is responsible for its own equipment depreciation.
  3. maintains a reserve for equipment replacement.
  4. is responsible for its own buildings, including utilities and maintenance.
  5. maintains a reserve for major building renovations.

Auxiliary funds are accounted for in the Other Funds Non-Limited category of the OUS legislative budget.

OSU auxiliaries include:

University Housing and Dining
Student Centers, including the Memorial Union & Dixon Recreation Center
Intercollegiate Athletics
Student Health Services
Parking
Hatfield Marine Science Center Bookstore
LaSells Stewart Center
Conference Services
Agriculture Experiment Station housing rentals

Expenditures

All costs related to the operation of the auxiliary enterprise activity should be recorded in the fund.  This includes salaries & OPE (including unit administrative costs), supplies, minor equipment, travel, equipment depreciation, building utilities/operations & maintenance, and building depreciation.

Auxiliaries who purchase goods for resale must reconcile their inventories at least annually and make the necessary adjusting entries.

Capital equipment is recorded as an asset of the auxiliary, not an operating expense. Only the annual depreciation is recorded as an expense. 

Auxiliary enterprises are subject to an institutional administrative overhead on all expenditures, exclusive of transfers and depreciation.  See OSU Assessments – FIS 504 and OUS Auxiliary Enterprise Indirect Cost Allocation Policy 15.105.  The administrative overhead charge is posted as account code 28204 General Admin Overhead Charge.   

Auxiliary enterprises are also subject to State of Oregon Department of Administrative Services (DAS) assessments FIS 503.  These costs are posted as 280xx account codes. 

Developing Fees

Fees should be developed to cover all costs of the auxiliary enterprise. There may be multiple services and fees associated with one fund. Fees to Internal customers (OSU and other OUS institutions) may not include unallowable costs such as marketing or advertising.

Auxiliaries are the only units that may charge internally for ‘rental of buildings or land’. 

The exception: Intercollegiate Athletics can not charge academic or administrative units for use of their facilities because OSU E&G funds pay for a portion of the costs.  See IMD 8.016(3) Proportionate Financing of Joint Use Facilities

The fees must be published in either the OSU External Fee Book or Internal Fee Book, as appropriate, before they may be charged.  See FIS 519 "Recharge Activities” for greater detail in calculating fees.

Revenue

All cash deposited in Auxiliary funds is to carry an income Account Code (06XXX).  Cash received as a gift is not to be deposited in these funds. See FIS 102-05: Gift Income.

Use internal sales Account Code (09XXX) for non-cash activities.  When both sides of the transaction are Auxiliary funds use 79XXX as the credit account code. These are completed by Journal Voucher. See FIS 1107 Journal Vouchers.

Deficits

Any auxiliary enterprise with a current deficit must present an action plan at fiscal year-end to the Vice President for Finance and Administration for elimination of the deficit. 

Equipment Reserves

Auxiliary Enterprises, as self-sustaining organizations, must also set aside funds for equipment replacement. The auxiliaries must develop a business plan which includes a Capital Asset Replacement Plan. This plan is submitted to the Director of Business Affairs and approved by the Vice President for Finance and Administration at the beginning of each fiscal year. The plan sets a target for funding levels and includes dollar amounts for contributions to the reserve fund.

The amount in the equipment reserve can not be greater than the equipment accumulated depreciation of the auxiliary.  Equipment Reserve funds for Auxiliary Enterprises are interest-bearing funds. The interest earnings should be considered when creating the schedule for funding the reserves.

All purchases are made from the operating fund.  When purchasing an equipment replacement, cash is moved from reserves to the operating fund by use of Exxxx or Fxxxx account codes.  An auxiliary can not expend out of reserve funds themselves.

Building Reserves

Building Repair reserve funds are required so self-supporting organizations set aside sufficient funds to adequately maintain their “owned” buildings.  The Building Repair Reserve funding level requirement calls for an assessment by Auxiliary personnel of the “owned” buildings condition and age.  Each Auxiliary must review its particular building repair needs and prepare a business plan for building repair projects in the same manner as for capital equipment replacement.  The plan sets target funding levels for upcoming years.  This plan must be submitted to the Director of Business Affairs and approved by the Vice President for Finance and Administration at the beginning of each fiscal year.

The amount in Building Reserves is not related to accumulated depreciation.

Reserve funds for building repairs for Auxiliary Enterprises are interest-bearing funds.  The interest earnings should be considered when creating the schedule for funding the reserves.

When the Building Repair Reserve Fund is funded with cash according to the schedule in the business plan, the transaction will be a fund deduction (account code F0002) to the Operating Fund and a fund addition (account code E0002) to the Building Reserve Fund.

Building Repair Reserve Funds cannot be used to fund new construction or capitalized projects; only major maintenance and repairs such as roof or plumbing replacements.  To use building repair reserves, the cash must be moved to a plant repair fund 8XXXXX.  Units can not expend out of reserve funds themselves.

Record Retention

For external (cash) transactions, documentation of fee, calculation, billing, and receipts should be maintained for three (3) years.

For internal (journal voucher) transactions, documentation of fee, calculation, and billing must be maintained for eight (8) years because these may involve charges to federal grants or contracts.

Additional References

OUS Policy 15.001: Auxiliary Enterprise in the OUS Fiscal Policy Manual.

FIS 700 Reserves and Investment Management.

518: Sales of Goods and Services

Fiscal Operations Manual
Section 500: Financial Accounting and Anaylsis
Effective: 11/01/1989
Revised: 1/15/2014

 

This policy establishes guidelines and a process under which the sales of goods and services for University fees may be approved; it establishes a mechanism for the review of such sales. Instruction, research, and public service activities central to the mission and obligations of the university are excluded from this policy.

Excluded are activities which charge for instruction in regular, summer school, extension, evening, and continuing education; services provided in the practicum aspects of university instructional and research programs; services mandated by state statutes; sales of residual products of research programs; services for fees in its extracurricular or residential life programs, including residence halls, food services, alumni, athletic and recreational programs, conferences and workshops, and the performing arts programs.

Background Information

Oregon's Land, Sea, Space, and Sun Grant University, Oregon State University's mission and obligations include teaching, research, and service to many constituencies. Funding for OSU's diverse activities is derived from federal, state, other governmental/public agencies, and private sources. Competition for public funding at all levels of government and the continuing goal of making the most effective use of limited resources have created an environment in which some university components are encouraged to become self-supporting. Self-support is accomplished through direct compensation for goods and services.

Conflict may result when university enterprises are deemed to be in competition with private entrepreneurs. These conflicts must be reduced or eliminated through a process which is sensitive to the need for entrepreneurial activity by both parties, because both parties are fulfilling crucial societal and economic roles.

Tax implications, for both income and property taxes, are frequently found in these areas of conflict. Legislative goals of discouraging "unfair competition" and increasing tax revenues have resulted in close scrutiny to determine what is and is not an "unrelated business activity," and subject to Unrelated Business Income Tax (UBIT).

Oregon State University may engage in the direct sale of goods and services to individuals, groups, or external agencies for fees only when those services or goods are directly and substantially related to the mission of the university, which includes teaching, research, and public service. Charges for such goods and services shall be determined taking into account their full cost, including university overhead when applicable, as well as the prices of such items in the marketplace.

When the question of whether or not any particular education-related business activity should be provided by Oregon State University, a determination shall be made as to whether the activity is currently and adequately provided by private businesses. If the services of private businesses are considered adequate but the activity is nevertheless deemed important to be provided by the university, the reasons and justification for the activity shall be stated in writing and submitted by the President or his designee to the Vice Chancellor for Finance and Administration for the Oregon University System (OUS) or their designee, in accordance with applicable policies of the State Board of Higher Education. (Required by OUS "Education-related Business Activity" IMD 6.500).

State Board policy allows system institutions to promote and market in off-campus public media only those services and events which are of interest to the general public, such as cultural presentations, intercollegiate athletic contests, and educational programs.

When entering into contractual arrangements with third parties to provide goods and services in fulfillment of obligations of the university, the intent and spirit of the policies expressed herein shall, to the extent practicable, be incorporated in the terms and conditions of such contracts. All contracts must have official university signature. Signature authority is limited to those on the approved list.

Criteria

There are three distinct categories of relevant transactions which occur at the university:

  1. Internal university interdepartmental transactions for goods and services necessary for the mission of the university;
  2. Sales of goods and services to faculty, staff, and students which are for the convenience of and in support of the broad mission of the university; and
  3. Sales to persons or organizations external to the university.

Transactions in category one are characterized as within the "campus community;" transactions in category two are characterized as within the "university community;" and in category three as the "external community." The unique nature of each of these kinds of transactions makes it appropriate to use different criteria in evaluating requests for each type of sales program.

Campus Community, Non-cash Transactions

Internal non-cash transactions of official university business between units, departments, and offices, necessary to meet the teaching, research, and service mission of the university, shall be governed by the university regulations on budget, accounting, and auditing which apply to such transactions.

Criteria for Sales to the University Community

Each of the following criteria shall be used in assessing the validity of providing goods and services for charge to students, faculty, and staff.

  1. The good or service is substantially and directly related to the university's instructional, research, or public service mission;
  2. Provision of the good or service on campus represents a special convenience to and supports the campus community or facilitates the extracurricular, public service, or residential life of the campus community;
  3. The price or fee for the good or service is established at such a level as to account for the full cost, including university overhead as applicable;
  4. Procedures are in place for ensuring that goods or services are provided only to members of the university community.

Criteria for Sales to the External Community

The University shall not engage in any sales activities solely for the purpose of raising revenue to support an educational, service, or research activity if the goods or services sold are not directly and substantially related to the educational, research or service program or activity. Each of the following criteria shall be used in assessing the validity of providing goods or services to the external community:

  1. The good or service represents a resource which is directly related to a unit's educational, research, or service mission, which is not commonly available or otherwise easily accessible, and for which there is a demand from the external community.
  2. The price or fee of the good or service is established to account for the full costs of the goods or services, including university overhead as applicable. The price of such items in the private marketplace shall be taken into account in establishing the price or fee. Fees to external community can not be less than those charged to campus (internal) customers.

Review and Approval Procedures

Except in instances requiring the approval of the Vice Chancellor of OUS or his/her designee, approval for the direct sale of any goods or services covered by this policy shall be vested in the OSU Vice President of Finance and Administration.

Before any sales of goods or services may be implemented, the unit proposing the sale shall provide to the Internal/External Fee Committee (I/EFC) [appointed by the Vice President of Finance and Administration] a request setting forth all pertinent information about the sales plan as set forth in OSU Recharge Activities policy FIS 1403-01. Each category of goods or services sold is considered individually. All new categories of sales shall be justified. The I/EFC will notify the department/unit and respective Dean or VP the results of the review. If the proposal is approved, the sales fee will be posted in the appropriate fee schedule. State Board policy requires the adoption of a fee schedule as part of this process. This adoption is required before any fee can be charged to the external community.

Oversight

The Vice President of Finance and Administration is designated as the officer who shall :

  1. Resolve matters concerning the internal application of this policy. It is the role of the Office of Budget and Fiscal Planning to review requests from Deans/Executive Administrators to establish revenue budgets. Should the Budget Office believe that the request is inconsistent with this policy, it shall refer the matter to the VP for Finance and Administration for final decision.
  2. Address questions from members of the external community about specific sales programs
  3. Review proposed sales of goods or services to other governmental agencies when they involve university-wide considerations.


Additional Information

Recharge Activities policy FIS 519
External Revenue policy FIS 100
Internal Revenue policy FIS 200
OARS 580-040-0010

519: Recharge Activities (Internal & External)

Fiscal Operations Manual
Section 500: Financial Accounting and Analysis
Effective: 07/01/1999
Revised: 1/15/2014

 

Purpose

  1. To provide guidelines for requesting, reviewing and approving existing, new or revised fees for all university units who provide goods or services to other units, sponsored projects, or external sources.
  2. To provide standards to achieve compliance with government regulations and Oregon University System policy for fairly assessing and recovering the costs from each benefiting user.
  3. To ensure consistency in the accounting and application of all recharge activities; conforming to Generally Accepted Accounting Principles (GAAP).

Background Information

As a research intensive university, OSU is subject to many federal regulations including those which affect how the university accounts for recharge activities.  OMB Circular A-21 Cost Principles for Educational Institutions established principles for determining costs applicable to grants, contracts, and other agreements.  It provides guidance of what will be considered an acceptable direct or indirect charge to a Federal agreement, what are unallowable costs, and the proper method for preparing the University’s facilities and administrative (F & A) costs proposal. 

OMB Circular A-21 also requires additional criteria:

  1. Adherence to four Cost Accounting Standards, including CAS 502 “Consistency in allocating costs incurred for the same purpose by educational institutions”.
  2. Preparation and approval of a Disclosure Statement (DS-2) for the university’s practices and policies, including recharge operation activities.


Procedure

Recharge activities consist of all operations which provide services or supplies to others and charge a fee for the recovery of the cost incurred.   These may include charges to users external to the university community.   Fees may not be established solely for the purpose of generating discretionary departmental income.  Academic and administrative units may engage in the direct sale of goods and services only when those goods or services are directly and substantially related to the mission of the University.  See FIS 518 “Sales of Goods and Services” for definitions of internal vs. external customers and sales as related to the mission of the University.

This policy contains these sections:

  1. The Fee
  2. Fee Book
  3. Internal vs. External Sales
  4. Record Retention
  5. Financial Accounting Structure
  6. Fee Calculations
  7. Responsibilities

1.  The FEE
The fee, or billing rate, is per unit of activity and charged to recover some or all of the costs associated with producing the goods or providing services.  It is recommended that the number of different billing rates be kept to a minimum.  Try to avoid establishing fees for small services that are insignificant in terms of the total operation.  The record keeping that would be necessary to justify the charges generally far exceed any benefit that would be gained.   

The following key rules must be considered when developing an internal or external fee:

  • All users of the service must be accounted for. 
  • Fees must be consistently charged for the service rendered.
  • If a fee is not charged to a class of customers or charged at a reduced rate (i.e. student projects), then this amount must be imputed during the annual fee calculation.   This exception of not charging the full fee is only allowed if the service is recorded in the appropriate E&G index, such as “instruction”.  See “Financial Accounting Structure” section below for details.
  • Any subsidization of a service should be approved by the college dean or appropriate VP.  See “Fee Calculation” section below for details.
  • Administrative support costs [such as accounting, purchasing, general computer support, business center support], and building/land operations, maintenance, utility costs cannot be charged (or included in a fee) as a direct charge to grants/contracts.
  • Internal fees can-not include charges for use of OSU buildings, land, or infrastructure unless those facilities are owned/operated by a self-support Auxiliary Enterprise and the charge is from that auxiliary. 
  • Grants, contracts, and SWPS projects cannot be charged a higher fee than any other internal or external user.   Charges to these activities may be made only when there is a direct relationship to the project.
  • Fees to external customers may not be less than for those of internal customers; although external fees may be greater and market pricing may be considered in setting the fee.
  • All requests for new fees must be approved by the Internal/External Fee Committee before they can be applied.  
  • The fee in effect at the time of service is what is charged. 

2.  FEE BOOK
Recharge activities require approval and annual posting of the fee in the appropriate university fee book. Fees are updated each spring for use during the next fiscal year.  All fees are reviewed by the university Internal/External Fee Committee (I/EFC).  Fees which are charged to external customers must go through an annual public hearing process.  External fees can not be added or adjusted mid-fiscal year. Internal fees can be adjusted mid-fiscal year with I/E Fee Committee approval and justification, such as for a new service or increase cost of a supply.

3.  INTERNAL vs. EXTERNAL SALES
Internal sales are non-cash transactions for goods and services necessary to meet the mission of the university. These may be between departments and units; or charges to externally funded grants/contracts or state-wide public service projects.  Internal sales are processed using journal vouchers.  These should be processed monthly (at a minimum quarterly) by the unit providing the service.   See Journal Vouchers FIS 1107.

External sales are cash transactions for goods and services sold to students, faculty, staff, and the public.   The good or service is substantially and directly related to the university’s instructional, research, or public service mission.   Transactions involving 9xxxxx Agency funds are considered transactions with external customers even though processed with a journal voucher.

This policy does not apply to sales of residual products from research projects (such as wheat, potatoes, sheep, etc.), tickets for theater and athletic events, workshop registration fees, or instructional class lab fees for supplies.

See exhibits FIS-Ex003-07 “Internal vs. External Revenue” and
FIS-Ex003-12 “External Funding Approval Matrix” for further information.

4. RECORD RETENTION
For those units who have internal University sales, documentation is to be maintained for eight(8) years. External sale documentation should be kept for three(3) years.   Documentation includes:

  • Work papers showing how the fee was calculated; including job descriptions of employees whose salary is in the fee.
  • Record of all customers/users of the service, even if not charged.
  • Billing records that identify the service provided; amount charged and received.

5.  FINANCIAL ACCOUNTING STRUCTURE
The financial accounting for recharge activities is determined by the customer-base and dollar amount or volume of activity.   Some recharge, such as departmental charges for use of the fax and copy machines, are managed in the departmental index.  Other activities require a separation into other fund sources (i.e. 05xxxx Designed Operation funds, 09xxxx Service Center funds, and 1xxxxx Auxiliary Enterprise funds).  The recovery (income) from the recharge activity must be recorded in the same Index and fund as the costs.   Recharge activities can-not be operated out of gift, OSU Foundation, Agricultural Research Foundation (ARF), or grant/contract funds.

To determine the appropriate financial structure, review the following definitions.  A decision matrix is provided at: FIS-Ex003-06 “Recharge Activity Accounting Structure”

Additional information: FIS-Ex003-08 “Self-sustaining Activity.”

Redistribution of expense
A redistribution is where all or part of the cost is moved from the purchasing index to another index of an original expense paid to an outside vendor.   Generally these purchases for goods or services are made in bulk for greater buying leverage.  The Banner document code processing the original expense is referenced in the redistribution journal voucher.  The account code for debit and credit are identical to match the original expense transaction.   Since this is a redistribution of actual expenses, there is no fee listed in the university internal fee book.  This is not a recharge activity. 

Department allocation of operating expense
Costs for departmental copiers and fax machines are in this category.  The fee and documentation is approved at the College/VP level (business manager).  The fee must be reasonable and is merely to recover the cost of supplies (paper, toner) and equipment rental; no salary.  The fee is not required to be in the university internal fee book, however, a record of all users and charges must be retained in the unit for five years.  Example:  photocopier charges at five( 5) cents/copy.

Departmental Cost Center (DCC)
The activity being recharged is integral to the instructional or departmental research function of the unit as identified by the Index’s Program Code and Ed & General fund 001100 or State-wide Public Service 03xxxx funds.  Services are provided to other units of the university or direct charged to projects, grants, or contracts.  The majority of the recharge is from internal sales. There should be minimal external cash revenue. 

All costs to be recovered must be contained in an identifiable Index for review of fee structure. It may be necessary to use Activity codes to further separate the costs.  The fee may include all direct costs, including labor.  Expenses that can NOT be included in the fee: facility (buildings/land) utilities, operations, maintenance; capitalized equipment purchases or replacements; equipment depreciation; business center support costs; department overhead or university indirect costs.   The fee must be approved by the university Internal/External Fee Committee (I/EFC) and listed in the university internal fee book.  See “Fee Calculation” section below for details.

Reference: FIS 514: Education & General (E&G) and Statewide Public Service (SWPS) Budgeted Operations

Designated Operation (DO)
A Designated Operation is a self-sustaining activity related to instruction and public service where 80% or greater of the revenue is derived from external sources. 

The following activities are included:
  Non-credit instruction portion of field trips and international education
  Community Education (non-credit conferences, workshops, seminars)
  Public Service (testing services)

A separate 05xxxx fund and index is established for the activity.  All costs and revenues of the service are recorded in this fund.  Costs include direct costs, departmental administrative costs (up to 15% as allowed by policy and documentation) and university overhead [currently 8%].   Facility, capital equipment purchases, or depreciation can not be included in the calculation of the fee.  OUS carry-forward rules apply.  

With the exception of workshop registrations, the fee must be listed in the university external fee.   If any services will be provided to internal customers, the fee will also be listed in the university internal fee book. See Designated Operations policy FIS 515 for details.

Service Center (SC)
A Service Center is a self-sustained activity which provides goods or services to the academic university community.  No more than 20% of revenue may be from external sales.

A separate 09xxxx fund and index(s) is established for these activities.  All costs and revenues of the service are recorded in this fund. Costs include direct costs, equipment depreciation, building maintenance, administrative costs of the service center unit, and university overhead (if charged). Capital equipment purchases and facility costs not direct charged to the service center can not be included in the fee calculations. OUS restrictions on working capital and reserve funds apply.  The fee will be listed in the university internal fee book.   If any services will be provided to external customers, the fee will also be listed in the university external fee book. See Service Center Operations policy FIS 516 for details.

Auxiliary Enterprise (AUX)
An Auxiliary enterprise is a self-sustaining unit which provides goods or services primarily to students, faculty, and staff as individuals.  It charges a fee directly related to, although not necessarily equal to, the cost of the goods or services.   The general public may be served incidentally by auxiliary enterprises.

A separate 1xxxxx fund and index(s) is established for these activities.  Expenditures include direct costs, equipment and building depreciation, administrative costs of the auxiliary unit, operations and maintenance, and university overhead.   OUS restrictions on reserve funds apply.  The fees will be part of Academic fee books and/or listed in the university external/internal fee books, as appropriate. See Auxiliary Enterprise policy FIS 517 for details.

Account Codes commonly used for recharge activities
External cash revenue – 06xxxx sales and services
Internal Journal Voucher income credit – 09xxx internal sales
            [use on 05xxxx DO, 09xxxx SC, and 1xxxxx AUX funds only]
Internal Journal Voucher income credit – 79xxx internal reimbursement
            [use on E&G and SWPS funds]
Internal Journal Voucher expense debit –
            24617 lab testing services
            24602 photocopies
            21008 animal care
            24503 data processing service

6. FEE CALCULATION

    a.   INTERNAL FEE
Regardless of the financial accounting structure (Ed & General, State-wide Public Service, Designated Operations, Service Centers, Auxiliaries), all internal recharge fees must be calculated using (1) actual allowable costs only, (2) measurable units of goods or services, (3) 100% of expected customer usage, (4) adjustment for prior year over/under recovery.

            Billing Rate (Fee) = Budgeted operating costs +/- prior year adjustment
                                             Expected units of activity (customer base)

Allowable costs

  1. Salaries and fringe benefits (OPE) of personnel directly related to the activity.
  2. Materials and supplies required to complete the activity.
  3. Minor equipment purchase cost, <$5,000 per item.  [capitalized equipment purchases are not allowed, see below]
  4. Equipment repairs and maintenance contracts, if the equipment is exclusively used for the recharge activity.
  5. Equipment depreciation – allowed only when activity is recorded under a service center or auxiliary fund and for only the amount posted to the fund.
  6. Facility costs (space, utilities, building operations & maintenance) - allowed only when activity is recorded under a service center or auxiliary fund and cost is posted to the fund.
  7. Departmental administration costs – allowed only when activity is recorded under a designated operation, service center, or auxiliary fund and cost is posted to the fund.

See exhibit FIS-Ex003-09 “Recharge Allowable Cost Matrix” for additional detail.

Unallowable costs
These costs must NOT be included in any internal fee calculation, even if recorded on a designated operation, service center, or auxiliary fund.

  • Advertising costs except for recruitment of personnel, procurement of supplies and services, and disposal of scrap or surplus material.
  • Alcoholic beverages
  • Alumni and fund raising activities
  • Public relations/marketing costs, such as merchandise distribution (pens, hats, t-shirts)
  • Bad debt expense; fines/penalties
  • Equipment purchases >$5,000 (These costs are capitalized and depreciated)
  • Commencement and convocation costs
  • Provision for contingencies
  • Value of donated services
  • Lobbying costs
  • Goods or services for personal use
  • Interest expense
  • Costs of meetings and conferences (except when the primary purpose is the dissemination of technical information)
  • Membership in any civic or community organization; social, athletic or  country club
  • Losses on the disposition of equipment
  • Scholarships and student aid costs

Measurable units of goods or services
Fee must be calculated using the same unit of service upon which the charge will be based.   Documentation of unit per customer is required for charges and must be retained for audits by the responsible unit.   Examples of acceptable units of measure are: hour of machine time, hour of labor, days, procedure or test, mileage.  

Customer base –expected units of activity
All users (customers) must be included in the fee calculation, including those provided services free of charge or at discounted rates.  A class of users (students) may receive service at a reduced fee if the reduction is subsidized from another source.  A fee can not be waived for an individual customer.  Any reduced fee or non-charge (free) service must be imputed for the full cost during the annual fee calculation.  Any subsidization of a service must be approved by the college dean or VP and shown in the fund/index of the activity.    

Two Excel formats are presented to assist in fee calculations:

FIS-Ex003-10 “Recharge Fee Calculation-Short Form” is provided for those projects/fees which contain only variable costs, such as supplies and labor.

FIS-Ex003-11 “Recharge Fee Calculation-Long Form” is provided for those fees which contain both variable and fixed costs.  Fixed costs could include equipment maintenance contracts, equipment depreciation, service center administration.

    b.  EXTERNAL FEE

Fees to external customers may not be less than for those of internal customers, although they may be greater.  They should be set to recover at least the cost of providing the goods or services being sold.  Fees to external customers may include all allowable costs shown above plus: advertising costs, public relations/marketing costs, meetings and conference expense, interest expense, depreciation on equipment purchases or replacements >$5,000, and an amount to recover Unrelated Business Income Tax (UBIT).   Auxiliary enterprises may also recover bad debt and building-related costs.   The fee should also take into account the prices of such items or services in the marketplace.

Contact the PaCS office if the external customer requires an agreement with university signatures.  PaCS has a standard Fee Book Service Agreement template available.

7.  RESPONSIBILITIES
This section outlines the responsibilities of the unit, College/VP, university, Internal/External Fee Committee (I/EFC), and Finance & Administration/Business Affairs.

Department/Unit

  • Business Center will coordinate with the unit to submit information for fee book preparation according to instructions received from Finance & Administration (F&A).
  • Business Center will coordinate with the unit for proposed new fee-based activity and supplemental fee calculation information.
  • Business Center will complete FOAPAL Form to request new Fund and Index, if needed.
  • Business Center will work with units on annual review of fee rates and adjust them, if necessary, to eliminate surpluses or deficits.  Submit rates for fee book preparation according to instructions received from Finance & Administration (F&A). Fees must be approved and in OSU's fee book(s) before they can be charged.
  • Business Center will review current fees for elimination, either because the service is no longer being performed or the cost is being handled in another manner (such as budget change). Notify Business Affairs through the on-line fee process to delete fee.
  • Participate in the biennial study of recharge activities performed by Business Affairs, the business center, and college/unit business manager.  This review includes most recent fee calculation, unit of measure, documentation of users (customers), internal charge journal vouchers, and external customer revenue recognition.
  • Business Center will ensure that all expenses and revenues connected with a fee activity are properly recorded into the Index/Fund of that activity.
  • Responsible unit will retain records to document for eight (8) years for all internal sales and three (3) years for all external sales.
  • Work papers showing how the fee was calculated; including job descriptions of employees whose salary is in the fee.
  • Record of all customers/users of the service, even if not charged.
  • Billing records that identify the service provided; amount charged and received.

College or VP

  • Review department or unit request for all proposed new fee-based activities as it relates to the mission of the university and the customers to be served.
  • Identify how any deficits and unallowable costs, if any, will be covered.
  • Approve annual fee requests before they are submitted to F&A.
  • Approve internal department reallocation rates which are not submitted to the university fee book, such as photocopier charges.
  • Coordinate all recharge activity studies with the department/unit and Business Affairs.

Internal/External Fee Committee (I/EFC)

  • Review all requests for proposed new fee-based activity.
  • Is the activity part of the mission of the university?
  • Can fees be charged for this activity consistent with university policy and government regulations?
  • Are the fees calculated with only allowable costs, all estimated users, and verifiable measurable units?
  • Review request for revised fees.
  • Work with the Office of the General Counsel to ensure the External Fee book is presented for public review and hearing as required by State of Oregon.
  • Assist in identifying enhancements for the on-line fee system.

F&A – Business Affairs

  • Conduct biennial studies of all recharge fee activities; concentrating on internal fees charged directly or indirectly to projects, grants, and contracts.  This review includes:
  • Most recent fee calculation
  • Annual expenditures
  • Unit or measure
  • Documentation of all users (customers)
  • Internal charge journal vouchers
  • External customer revenue recognition
  • Coordinate study activities with and through the business center.
  • Work with the business center to correct any inconsistencies.
  • Recommend appropriate financial accounting structure when necessary.

Additional References: