Updated 12/18/2014
HARVARD UNIVERSITY
Academic Service Center Procedures
Manual
2
Table of Contents
Introduction 4
Definition of an Academic Service Center 4
Compliance - why we care 4
Purpose and Audience 4
School/tub Level Officials 5
Chapter 1: Creation of Academic Service Centers 6
Do I Need to Create a New Service Center? 6
Considerations 6
Chapter 2: Budgeting for Service Centers 8
Unallowable Costs 8
Subsidies and Subsidized Rates 9
Chapter 3: Rate Development 10
Breakeven Expectation 10
Budgeted/Projected Level of Activity (Billable Units) 10
Surpluses or Deficits 11
Pricing of Multiple Services 11
Alternative/Discount Rates 12
Chapter 4: Account Set-Up 13
New Service Centers 13
Service Center Support Accounts 13
Chapter 5: Billing 14
Rate Consistency 14
Internal Users 14
Recording Internal Revenue 14
External Users 15
Recording External Revenue 15
Unrelated Business Income Tax 15
Sales Tax 16
Chapter 6: Monitoring Performance 18
Initial Budget Approval Process 18
Annual Rate Approval Process 18
Annual Financial Operating Reports 18
3
Monthly Review and Analysis 19
Mid-year Rate Review 19
Chapter 7: Documentation, Audit Compliance and Post-Operation Requirements 21
Record Keeping and Retention 21
Audits 21
Dissolution of a Service Center 21
Appendices 23
Appendix I: Details on Specific Types of Expenses 23
Appendix II: Glossary 25
Appendix III: Service Center Object Codes - Examples 28
Appendix V: Consolidated and Non-consolidated School/tubs List 29
Appendix VI: School/tub Specific Requirements 31
Exhibits 32
Exhibit A: New Service Center Request Form 32
Exhibit B: Annual Rate Documentation Form 33
Exhibit C: Annual Financial Operating Report Example 34
Exhibit D: External Rate Calculation Example 35
Exhibit E: Internal Users Rate Calculation Example #1 36
4
Introduction
Welcome to the Academic Service Center Procedures Manual. The purpose of this manual is to
provide guidance, financial and administrative support for school/tub, department managers and
other staff working in or overseeing service centers. This procedures manual is meant to
accompany the revised Academic Service Center Policy (effective July 1, 2012). The major
changes to the policy include the following:
• Definitions and categories of academic service centers
• Clarification of roles and responsibilities at the Department and School/tub levels
• The separation of academic and central service units (i.e. UIS, UOS)
• Annual submission of the Harvard University Service Center Rate Documentation form
• The threshold for allowable gain/loss for carry-forward increased from 10% to 15%
Definition of an Academic Service Center
A Harvard University academic service center is an operation that charges for goods or services
in direct support of the research or academic mission of the University. Academic service
centers recover their costs through fees charged to users, including federally sponsored projects,
based on established billing rates and actual usage of service.
There are two types of service centers covered by this policy: academic service centers and
specialized service facilities. There is a glossary of terms at the end of the manual.
Compliance - why we care
As a recipient of federal funding, the University must comply with OMB Uniform
Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (2
C.F.R. §200) (“Uniform Guidance”). The Uniform Guidance requires that service units charge
according to actual usage at non-discriminatory rates calculated to recover no more than the
actual costs of the service provided (§200.468). Non-compliance could harm the University's
reputation and reflect negatively on future award proposals, and could also lead to repayments or
fines to the government. In addition, academic service centers, as prescribed by the Uniform
Guidance Audit Requirements (§200.500), are reviewed and tested as part of the annual single
audit.
Purpose and Audience
The aim of this manual is to provide guidance on establishing, maintaining, and accounting for
academic service centers in accordance with Harvard University policy and federal regulations
The intended audience is faculty, students and staff in a Harvard University school/tub or unit
involved in the operation of an academic service center. The policy applies to Academic Service
Centers that meet at least one of the following criteria:
(1) Total operating expenses of $100,000 or more per year, or
(2) Charges to federally funded awards of $75,000 or more per year.
5
Academic Service Centers that do not meet the threshold must be able to demonstrate their
exemption with financial detail from the most recent fiscal year and are subject to school-level
review at any time. This review may include, but is not limited to, evidence of strong financial
oversight and continuous compliance monitoring. Specialized service facilities, defined by
§200.468 of the Uniform Guidance, must recover all costs, including the allocable portion of
F&A costs (utilities, operations and maintenance, building depreciation, and interest) through
charges or subsidies. Harvard defines specialized service facilities as specialized service centers
“SSCs” that have $1,000,000 or more in annual direct operating expenses or involve the use of highly
complex or specialized facilities.
School/tub Level Officials
If you have any questions related to academic service centers, please contact the following
subject matter experts:
FAS Nuala McGowan (nmc[email protected])
HMS Nadège Volcy White ([email protected])
SPH Kristie Froman ([email protected])
SEAS Carleen Brunelli (cabrunell[email protected]vard.edu)
For information on other schools/tubs, please contact the Office for Sponsored Programs –
6
Chapter 1: Creation of Academic Service Centers
Do I Need to Create a New Service Center?
Prior to establishing a new service center, please see below for helpful questions in determining
whether an Academic Service Center should be established:
1. Is this service available elsewhere on campus?
2. Is the need for this service short-term or long-term?
3. Is this service provided for, or subsidized by, a federal award?
4. What portion of users will be internal vs. external?
Are You a Service Center?
Harvard’s Review and Approval Process for New Service Centers.
Local
Managing
Unit (Dept)
Determine the
need to
establish a
service center
No
Can the service
needs be met
elsewhere?
Yes
Review Service
Center Request
Form
No
Is it a long-
term need?
>12 mo.
Work with dept. /
Service Center
personnel to set up
new service center
account
Notify department of
new service center
account coding string
Start
End
Yes
Complete the Service
Center Request Form and
submit to your local
school level official for
review and approval
End
Approved?
No
Notify
department of
approval
Yes
Send a copy of
approval to local
school financial
office
Begin
service
center
operations
School
level
official
School
financial
office
Considerations
If a new service center is deemed necessary, the following items should be considered:
Helpful links
• Service Center Request Form, Exhibit A
• School/tub-level Officials, Page 4
• School/tub-level Financial Office
•
Harvard University Academic Service Center Policy
7
• Service Center Name
• Initiating department or unit and who is responsible for the service center
• Description of goods or services to be offered
• Funding resources needed at the initial stage of creation, especially if the services require
acquiring major pieces of equipment
• Number of employees needed and their job descriptions/qualifications and percent of
time devoted to the service center
• Long-term viability plan
• Budget for the first fiscal year (and breakeven period if longer than one year)
• Estimated usage/utilization or demand (e.g. billable hours, number of units)
• Rate calculations
• Plan for tracking usage and billing
Key Points:
• The Service Center Request Form should be completed and sent to approvers at the
school/tub level for review and approval.
• Service center approval will be determined at school/tub-level.
• When new service centers are approved, new Harvard general ledger account codes are
set up by local school/tub level financial office.
8
Chapter 2: Budgeting for Service Centers
Service centers must create annual budgets that include anticipated revenues and expenses.
(See Chapter 3: Rate Development)
Revenue Budget
The revenue budget should be based on the estimated volume of goods or services sold times the
applicable rates. Considerations should include prior year performance, prior year subsidy
levels, and future needs of internal and external users when estimating revenue and usage levels.
Service centers derive revenue from the following sources:
• Internal customers – Expense object codes (expense offsets)
• External customers – Income object codes
• Subsidies – Subvention object codes (expense offsets)
Allowable Direct Costs
The expense budget should include all costs for operating the academic service center including
administrative expenses directly associated with operations of the facility. Expense categories
include:
• Salaries and fringe benefits
• Materials and supplies
• Maintenance and repair, including equipment maintenance agreements
• Equipment depreciation
• Rentals and leases, including equipment leases
• Travel & conferences
• Purchased services/professional fees
Unallowable Costs
Unallowable costs must be excluded from the budget (as well as the internal user rate
calculation) and may not be charged to the service center operating account(s). Examples of
unallowable costs are listed below. For a complete list refer to Subpart E of the OMB Uniform
Guidance and the University’s policy on expenses ineligible for federal reimbursement.
• Alcoholic beverages
• Airfare in excess of “coach”*
Donations*
• Bad debt or uncollected billings
• Capital Equipment Purchase (only
depreciation expense is allowable)
• Donations and contributions
• Entertainment
• Fines or penalties
• Gifts
• Internal Interest
• Memberships
• Object code 8450 (unallowable costs)
• Salaries over the NIH cap
• Sales tax
*For details see the Harvard University Travel Policy
9
Carryforward of Prior Year Gain/Loss
The cumulative gain or loss from prior years (up to the allowable annual 15% threshold) will be
included in the budget and rate calculations.
Subsidies and Subsidized Rates
Subsidies occur when service center expenses are paid from an account outside of the service
center’s operating account. The total service center budgeted expenses should reflect the full
unsubsidized cost of providing the services.
Subsidies can be applied in the following ways:
• Lump sum subsidies should be included in the budget. Rates can be set so all users are
charged based on the reduced cost of the services. The aggregate subsidy will be
recorded as an expense offset in a subvention object code (8921) if the funding is from an
unrestricted source. Service centers can subsidize specific groups of internal customers
(e.g. junior faculty, students, or members of a lab) or specific services by offering
discounted rates. The subsidy/discount for these users will be recorded as expense offsets
in the subvention object code either individually or in aggregate. This will ensure that the
costs associated with subsidized users does not get passed on to other users. All rate
calculations are done at a gross level with the discount/subsidy applied after the rates are
calculated.
• Year end deficits over the 15% threshold must be subsidized/written-off from appropriate
funds outside the service center (e.g. service center support funds, school/tub unrestricted
funds, or applicable restricted funding sources). The subsidy/write-off is recorded as an
expense offset in a subvention object code if the funding is from an unrestricted source.
Support from Grants or Restricted Funds
Grants and restricted funds (e.g. endowment or restricted gift funds) cannot provide lump sum
subsidies to service centers. The applicable expenses must be charged directly on the award or
fund in the general ledger. The amounts should be included in the budget and will be reflected in
the applicable rate calculations if the support is not a lump sum subsidy.
Key Points:
• Budget should be based on anticipated volume of services and the related expenses
• Subsidies from unrestricted funding sources must be recorded in object code 8921.
• Unallowable expenses can ONLY be recorded in an unrestricted account. For more
information on support funds, see page 11
10
Chapter 3: Rate Development
A service center rate is the cost per unit of goods or services sold set to recover the expenses of
the service center and achieve a breakeven financial position. The use of an appropriate billable
unit is essential to ensuring that users are charged only their fair share of the actual costs of
operating the service center.
Rates are based on budgeted projections of operating expenses, including a carryforward
surplus/deficit, divided by projected levels of activity or revenue.
Budgeted Expenses +/- Cumulative Carryforward Surplus/Deficit
Budgeted/Projected Level of Sales of Goods/Services (Billable Units)
For example, a microscope costs approximately $100,000 per year to operate and has an
estimated usage (activity level) of 1,500 hours during the year. The resulting hourly rate would
be calculated as $100,000/1500 hours = $66.67 per hour. A researcher using the microscope for 4
hours would then be charged $266.68, or 4 x $66.67.
Pricing that is contingent upon types or levels of usage should be developed for each discrete
type of service (see Alternative Rates below).
Breakeven Expectation
The break-even period is a reasonable period of time over which cumulative revenue for a
service or product equals cumulative expenses. Service center billing rates should be calculated
to recover the aggregate cost of a service/product over a defined period (normally one year).
Some service centers require a long breakeven period due to startup costs or volume fluctuations.
Budgeted/Projected Level of Activity (Billable Units)
A billable unit is the measurement used to identify the specific goods and/or services provided
by a service center.
Examples of billable units include:
• Labor hours
• Machine hours
• Unit cost
• Number of samples
• Tests performed
• Any other unit of measurement appropriate to the type of activity
11
Surpluses or Deficits
It is not possible to predict what rate(s) will achieve an annual breakeven financial position. The
cumulative allowable threshold of +/- 15% allows for reasonable variances in volume or
expenses. It will sometimes be necessary to adjust rates mid-year or at other times during the
annual cycle.
Monthly and mid-year reviews of service center accounts should be performed as well as a year-
end review to determine compliance with the annual surplus/deficit requirement.
• If there is an operating surplus in excess of 15% at midyear, the budget should be
reviewed to determine whether a rate reduction is necessary. If there is an operating
deficit in excess of 15% at midyear and the service center is not subsidized, the budget
should be reviewed to determine whether a rate increase is necessary
• If a cumulative operating deficit in excess of 15% exists at year-end the deficit must be
subsidized/written off with funds from outside the service center (support funds,
unrestricted funds or applicable restricted funds) via a transfer into the service center
account using the subvention object codes.
• If a cumulative operating surplus in excess of 15% exists at year-end, the surplus must be
included in future rate calculations.
All rate changes must be documented and dated for audit purposes. For more information on
surplus and deficit consideration, see Chapter 2: Budgeting for Service Centers.
Pricing of Multiple Services
Service centers offering multiple services should calculate appropriate rates for each service.
The goal is to create a billing rate that does not cross-subsidize between services or user groups.
Blending the costs and revenues of various services is not allowed if the component costs of each
service is different because blending the costs would result in the lower cost service users
subsidizing the higher cost service users. For example:
Service A – Tech assisted
Sorting
Service B – Self- Service
Sorting
costs
Service unit = 1 hour
$cost /hour
Senior Tech compensation
$60
0
Supplies
$10
$10
Service Contract
$15
$15
Total costs per service unit
$85
$25
In this example, the fees for Service A and B could not be blended to arrive at a fee of $55/hour
for both services because the costs associated with Service A are different from those associated
with Service B; one requires the skill of a senior tech and the other does not. The users of
12
Service B cannot be charged more than $25/hour in order to decrease costs for the users of
Service A; i.e., the fees for Service B may not cross subsidize the fees for Service A.
Alternative/Discount Rates
A service center may develop alternative discount rates for special use circumstances (e.g.
volume discounts or off hours use). Discounted rates should reflect the lower cost for providing
the services. These alternative rates must be available to all internal users.
Key Points:
• Service center unit rates are formulated to recover operating costs (such as salaries, fringe
benefits, material and depreciation) and achieve breakeven
• A service center rate is the cost per unit of services or goods sold set to recover the
expenses
• A service center must break even or recover costs based on actual usage within the
approved breakeven period
• One type of service within a service center cannot cross-subsidize another service
13
Chapter 4: Account Set-Up
Each service center should have unique general ledger account information to ensure that both
periodic and annual accounting is easy to record, track and monitor.
New Service Centers
In order to obtain a unique Harvard general ledger account, new service centers must first be
approved by the school/tub-level financial office. After approval, the finance office coordinates
the establishment of new Harvard general ledger accounts.
Unique activities or subactivities can be established for each category of service. The service
center must maintain sufficient general ledger accounts or alternative documentation to
substantiate that there are no cross-subsidies between services.
Service Center Support Accounts
Service center support accounts, also called support funds, can be established and used to record
the following:
• Capital purchases (equipment over $5,000)
• Offset entries for depreciation charged to service centers (entries are sent from school/tub
financial offices to the OFAA – Office of Fixed Asset Accounting)
• Cost unallowable for federal reimbursement (For examples of unallowable costs, please
see page 8)
• Bad debt
• Add on charges to external customers
• Funds borrowed by the service center for startup that must be returned once the service
center is beyond the initial break-even phase
If a service center support account does not exist, the alternative is to charge these expenses to
unrestricted accounts.
Funds in a service center support fund can only be used in support of the associated service
center. Transfers are allowed to reimburse school/tubs for F&A charges or to repay borrowed
funds.
Key Points:
• New service centers cannot operate without prior approval and account-set up by the
school/tub finance office.
• New Harvard general ledger accounts should be sufficient to provide for operational
management of the facility and tracking the required financial information.
• Service center support funds are accounts that are used to record transactions associated
with the service center but are not part of the annual financial calculations.
14
Chapter 5: Billing
Billing must be based upon measured and documented utilization. Service centers must maintain
a published price list of all services or products available. All billing must be processed on a
timely basis (recommended monthly) at established service center rates. Please see the
University Internal Billing Policy for additional information. Information necessary to bill
customers should be obtained when orders are placed.
The costs of a service/product should be charged to customers based on:
1. Actual consumption or use of the service/product multiplied by the billing unit
2. A schedule of consistent billing rates
Rate Consistency
Rates can be set based on hours, units, clock time, or any other metric that is the closest
approximation for utilization of resources to produce the good or service. Rates established by
service centers must be non-discriminatory, and all users of the facility must be billed for
services. Non-discriminatory means all internal users must be charged at same rate(s) for the
same level of services or products purchased. (Note that subsidies are applied to the full rates,
see chapter 2). External users may be charged a higher billing rate than internal users to
recover F&A costs, other related expenses or to subsidize internal users.
Internal Users
Internal users pay for services/products using Harvard’s general ledger coding. Internal users
include consolidating school/tub.
Note: Having a Harvard appointment does not identify an individual as an internal customer.
Grants and programs not on the Harvard campus and not administered through Harvard
University are considered external users.
Recording Internal Revenue
Revenue from internal users should be recorded using an intra or inter-school/tub expense credit
object code within the same super object code range as the debit. For example, an internal
billing journal for lab services recharge will be prepared using 8100 for the object code debit and
8109 or 8110 for the object code credit. For a list of other object codes, see Appendix III.
Service centers should maintain annual documentation that segregates total revenue charged to
sponsored accounts (federal and non-federal), instruction, and other uses. If a service center
does not have a material amount of non-sponsored customers or revenues then this
documentation is not required.
15
External Users
External users are those from outside Harvard University, including non-consolidating
school/tubs, users from affiliated hospitals and other collaborating institutions, the public, for
profit corporations and any member of the faculty or staff acting in a personal capacity. An
allocable share of the University’s F&A costs for the service center operation may be charged to
external users as well as add-on fees to cover incremental expenses or to subsidize internal users
(e.g. bad debt or billing and collection expenses relating to external users). Service centers can
also charge commercial customers an incremental support charge above the rate charged to
customers from other academic institutions.
See the full list of consolidated and non-consolidated school/tubs in Appendix V.
See Exhibits D and E for F&A add-on calculations.
Recording External Revenue
External revenues are charges paid by any user outside Harvard University. External revenues
are recorded in revenue object codes, i.e. 5400. If add-on amounts are charged, these fees should
be recorded either in unique revenue object codes or as revenue in the associated support fund.
External user income should be recorded as follows:
• The base fees for goods and services should be recorded as income in the service center
using object code 5400 (or other applicable revenue code)
• F&A charges should be recorded or transferred to the school/tub level org in the 8924
object code series
• Add-on revenues can be recorded in the service center or in the service center support
fund using object codes 5770 (or other appropriate revenue code)
It is not necessary to itemize the add-on fees for external users on the invoice, however,
the service center must maintain supporting documentation that identifies the
components of the rates charged.
Unrelated Business Income Tax
If external users are charged a rate that is higher than the aggregate cost of the goods and
services provided, the Service Center may have a liability for unrelated business income tax
(UBIT).
For more information about UBIT, please contact the Tax Reporting Office.
Amy Esposito, Associate Director, Tax Reporting
16
Sales Tax
Sales of goods to external users are generally subject to sales tax. Services are not subject to
sales tax. Sales tax, equivalent to the sales tax rate times the sale price, should be collected from
the customer. Rates are based on the state in which the goods are picked up or delivered.
Harvard University currently collects and remits sales tax on items picked up in or delivered to
addresses in Massachusetts (6.25%), California (7.25% and up), and Illinois (6.25%). Harvard
University is not responsible for collecting sales tax on items delivered to states other than
Massachusetts, California, and Illinois.
Below is a chart of the sales tax exemptions that are most likely to apply to Service Centers.
This is not a complete list of exemptions.
Massachusetts
California
Illinois
Sales to tax-exempt
organizations
Exempt with
proper
documentation
(Forms ST-2 and
ST-5)
No general
exemption
Exempt with
proper
documentation
(Illinois “E”
number)
Personal and professional
services
Exempt
Exempt
Exempt
Items purchased for resale
Exempt with
certification
Exempt with
certification
Exempt with
certification
Casual and isolated sales
(infrequent and
nonrecurring)
Exempt
Exempt
Exempt
Sales shipped to another
state
Exempt
Exempt
Exempt
Shipping and warrantees (if
separately stated)
Exempt
Exempt
Exempt
Clothing
Exempt
Taxable
Taxable
Food (except prepared
meals)
Exempt
Exempt
Reduced rate
Periodicals such as
newspapers and magazines
Exempt
Exempt
Exempt
Other University
publications
Exempt
Taxable
Taxable
Proceeds from taxable sales should be deposited into the University’s Taxable Sales bank
account. Deposit forms can be obtained from the Cash Management Office by contacting
extension 6-0853.
For more information about sales tax, please contact the Tax Reporting Office.
17
Amy Esposito, Associate Director, Tax Reporting
Key Points:
• Rates must be established and published for internal and external (if applicable) users. All
internal users must be billed the same rate (unless subsidized).
• If a service center offers any discounted rates (eg. volume discount) that rate must be
available to all internal users.
• External users can be charged a higher rate.
• Advance billing is not allowed.
• Billing cannot occur until goods or services have been rendered
18
Chapter 6: Monitoring Performance
It is recommended that ongoing service center operation cycles align with the Harvard fiscal
year: July 1
st
-June 30
th
although the starting dates of a new service center may vary. New
service centers must have their budget proposed rate(s) approved in advance of operation. All
service centers must have their rates approved annually by the school/tub level financial officer.
Please refer to school/tub- level contact information on page 4.
Initial Budget Approval Process
Initial budgets and rate proposals should be submitted as early as possible. School/tub level financial
officers will review budgets and proposals and once approved request the new accounts. (Contact
your school/tub financial office for request deadlines and turnaround times). The service center
should not commence operations until the rates are approved.
Annual Rate Approval Process
Annual rate proposal information should be submitted by the school/tub specific deadlines and
include the following:
• Annual financial operating report for the previous year. (See the Annual Financial
Operating Reports section below)
• Revenue and expense budget incorporating the cumulative surplus/deficit from the year
just ended, if applicable.
• Proposed rate structure for the current year. If rates are based upon calculations previously
approved by the school/tub or school/tub financial officers and there have been no changes
in methodology, only a listing of proposed rates is required.
• Description of any changes in methods from those previously approved by the school/tub
or school/tub financial officers. If there have been any changes in methods used in
calculating rates, a new rate proposal may be requested by the school/tub or school/tub
financial officer.
The school/tub financial officer will review and approve all rate proposals, including those that
are based upon previously approved rate structures and will notify departments when completed.
Rate proposals normally will be reviewed by the school/tub or school/tub financial officers in the
order received.
Annual Financial Operating Reports
An annual financial operating report is required as part of the annual rate approval process.
The operating report is used to determine that service centers are operating at or near
breakeven and that expenses are allowable and properly allocated to service center accounts.
19
Exhibit 6-1 shows a format that may be used when preparing annual financial operating reports.
While departments are free to select alternative formats, the following key elements should be
contained in all reports submitted to your school/tub financial officers for rate review purposes:
• All financial operating reports should state the name of the service center, responsible
department, account coding , support fund account number (if any), and contact person's
name, email, and telephone number.
• Statement of the time-period for which the report is being prepared (normally, this period
will coincide with the University's fiscal year from July 1 to June 30).
• Breakdown of revenues by source. At a minimum, the breakdown should include revenues
from external and internal billings.
• Breakdown of expenditures by cost categories. This section of the report should include at
least the type of expenses shown on Exhibit 6-1.
• Total revenues expenses and net surplus/deficit from operations.
• The amount of any subsidies and grant support.
• Any questions regarding the preparation of annual financial operating reports may be
addressed to school/tub financial officers.
Monthly Review and Analysis
In addition to the annual rate approval, service center managers are expected to monitor and
evaluate their service center’s activity each month, in order to:
• Determine accuracy of billings and expenses charged (including ensuring that
appropriate and approved rates were charged).
• Identify and remove any unallowable costs charged to the service center.
• Monitor receivables for bad debt and remove accounts when deemed uncollectable.
The school/tub financial officer may perform a cursory review of service center income and
expense on an as needed basis for monitoring and compliance.
Mid-year Rate Review
A mid-year review of service center operations should be conducted by the local-level managing
unit based upon the first six months of fiscal year operations. If needed rates can be reviewed
and adjusted on a more frequent basis. Service centers with an exceptional (+/- 15%) operating
surplus/deficit at midyear review may need to adjust rates to be charged during the second half
of the fiscal year. This midyear review will help to ensure that the service centers will meet the
breakeven expectation.
(See chapter 3: Rate Development)
If required by the school/tub a request to change a service center rates should be made as soon
20
as it appears that the service center will not breakeven at year-end using the previously
approved rate. Such requests should be routed to the school/tub or financial officer for review
and approval before the new rate is used.
Key Points
• Service centers must have their rates approved prior to operations, on an annual basis,
and when there are significant changes to rate calculation methodology.
• Mid-year rate reviews help the service center meet the breakeven requirements.
• Each school/tub may have specific deadlines for rate and other necessary approvals.
Exhibit 6-1: Annual Financial Operating Report Example
<Service Center Name>
Operating Report
<Fiscal Year>
Income:
External Billings $ __________
Internal Billings $ __________
Total Income $ __________
Expenses:
Salaries $ __________
Fringe Benefits $ __________
Materials & Supplies $ __________
Maintenance and Repair $ __________
Equipment Depreciation $ __________
Rentals and Leases $ __________
Travel & Conferences $ __________
Purchased services/professional fees $ __________
Other $ __________
Total Expenses $ __________
Net Operating Surplus/Deficit $ __________
Subsidy (if applicable) $ __________
Operating Account Number: _______________________________________________________
Support Fund Account Number (if any): ______________________________________________
Contact Person: _________________________ Position / Title: _______________________
Email: ________________________________ Address/Telephone: __________________
Date submitted: _________________________
21
Chapter 7: Documentation, Audit Compliance and Post-Operation Requirements
Record Keeping and Retention
Documentation for revenues and expenses must be retained in accordance with the University
General Records Schedule, generally four years after the fiscal year end close.
The service center managing unit is also responsible for maintaining complete documentation
related to operations including:
• Rate calculation and rate approval forms
• Annual budgets
• Annual financial statements
• Financial backup information including evidence of mid-year review, lists of employees,
equipment used by the service center with allocation of associated depreciation data and
volume/utilization data.
• Documentation of rate changes with dates for audit purposes
• Copies of bills/invoices with supporting documentation (e.g. order forms, correspondences,
calculations)
Audits
The annual singleaudit performed by an external audit firm includes a review of service center activity.
Also, Risk Management & Audit Services may periodically perform audits of service center activities.
Audits may require department participation. In such cases, the department employee designated as
having responsibility for a service center will be contacted as far in advance as possible by the school/tub
or school/tub financial officer. An appropriate school/tub financial staff member will assist service center
personnel in identifying any documents selected for audit that cannot be located.
Dissolution of a Service Center
A service center may be closed if it is deemed to be no longer necessary and/or viable. School/tub level
approval may be necessary to close a service center. Other close-out procedures include:
• The service center must work with the school/tub finance office to close all accounts.
• The department responsible for the service center is also responsible for any charges that occur
after the service center is closed. After closing the service center, the department should run a
quarterly detail listing to ensure proper account close-out.
• The closed service center must be removed from the current service center list.
22
Key Points
• Records must be maintained in accordance with the University General Records Schedule.
• Documentation of rate changes and other financial information must be maintained for audit
purposes.
23
Appendices
Appendix I: Details on Specific Types of Expenses
Capital Equipment is defined as an item with a purchase price of $5,000 or more and a useful life of at
least one year. The purchase cost of capital equipment cannot be charged as an operating expense
federal guidelines do not allow the purchase cost of capital equipment to be recovered through service
center rates or to be included in the calculation of the annual surplus or deficit. The purchase price of
capital equipment should be charged to the service center support fund or to any other appropriate
source of funding outside the service center. The associated depreciation is an allowable expense of
service centers. Equipment costing less than $5,000 is allowable and must be treated as an operating
expense when calculating billing rates.
Depreciation of capital equipment, external interest, or capital lease costs can be included in annual
expenses and recovered through the service center rates. Depreciation entries must be calculated by
your school/tub’s finance office and sent to the OFAA (Office of Fixed Asset Accounting) for upload.
Calculating depreciation – depreciation of capital assets charged to service centers is based on the
straight-line method over the useful life of the asset. Such treatment ensures that users pay only for
depreciation expenses associated with the usage in a given year.
• Useful lives -- Service center equipment is depreciated using the useful lives outlined in the
accounting procedures for Capitalization and Depreciation of Property, Plant, and
Equipment. In certain circumstances, service units with "specialized" equipment, or
equipment that is unusual in the nature of its depletion or use, may need to estimate a more
accurate useful life. Deviation from standard useful lives requires review and approval by
the school/tub financial officer.
• Federally-funded equipment
-- Depreciation of equipment purchased by the federal
government, whether or not title has reverted to the University, cannot be included in the user
rates. Where the University has specifically agreed to "cost share" equipment in a federal
award, depreciation of the University-funded portion is also unallowable in the rates.
• Debt-funded equipment -- Federal regulations do not allow for principal payments on debt to
be recovered through service center rates.
Lease, Rental and Service Contracts and other professional services are allowable and should be
included in the rate calculation for the fiscal year in which they were incurred. The only exception is
that capital leases cannot be charged directly to service centers. (If you have a question regarding the
classification of a lease contact your school/tub’s finance office).
Materials, services, and supplies needed to operate the service center are allowable and should be
included in the rate calculation. These expenses must be included in the financial analysis for the fiscal
year in which they are used. If excess materials or supplies are purchased during the fiscal year, the
service center must not include these costs in the current year’s financial analysis. Amounts can be
recorded as prepaid or if there are significant supplies or materials, a year-end inventory of assets should
be completed and the amount booked as part of the year end closing process.
24
Salaries, wages, and fringe benefits for direct personnel and administrative staff whose efforts are
directly related to the service center’s activity or management should be included in the rate calculation.
If an individual works on more than one activity, the costs associated with that individual must be
allocated to the activities based on the proportional benefit. Likewise, administrative costs benefiting
more than one service center activity must also be allocated. Effort reporting, a time study, or another
equivalent method may be used to determine the appropriate allocation.
25
Appendix II: Glossary
Uniform Guidance (J.47.) – guidance set forth by the Office of Management and Budget (OMB) that
identifies the f administrative requirements, cost principles, and audit requirements related to specialized
service facilities.
Academic Service Centers - Units within Harvard departments or centers that charge for goods or services that
directly support the research or academic mission of the University and recover costs through charges to internal
and external users.
Billable Unit – A measure of the goods or services provided by a service center that serves as the basis
for the calculation of its rates. Examples include machine or labor hours, number of orders, number of
samples, etc.
Breakeven – The point where revenues equal expenses; where there is no surplus or deficit.
Carry Forward – The balance of previous year-end surpluses or deficits that become the opening
balance in the next fiscal year. The cumulative carry forward amount can be comprised of balances
from multiple years. The carry forward balance is included in the current year calculation of rates and
the breakeven analysis.
Central Service Units - Separate operating units that are generally not part of academic tubs and provide services
to the entire University community. Examples of central service units include University Dining Services,
Harvard University Information Technology, and Harvard Real Estate Services. Central service units are not
covered under this policy.
Deficit – An amount by which a center’s expenses exceed its revenues.
Direct Costs - Costs that can be identified specifically with a particular activity; or that can be directly
assigned to such activities relatively easily with a high degree of accuracy. Examples include:
• Salaries and wages, and fringe benefits of employees performing the service
• Cost of materials consumed performing the service
Depreciation – A method of apportioning the cost of property and equipment over the estimated useful
lives of the asset.
Expenses – Costs incurred to operate a service center, whether paid or accrued, that benefit only the
fiscal period.
Indirect costs - Costs incurred for common or joint objectives and therefore cannot be identified readily
and specifically with a particular sponsored project, and instruction activity, or any other intuitional
activity (Uniform Guidance, Subpart E). Examples include:
• General administration
• Space related costs (operations and maintenance, utility costs, building depreciation)
26
• Information technology costs
Specialized service centers are required to recover indirect costs.
Internal User – A user that purchases goods or services for research and/or educational activities on
behalf of Harvard charged directly to a Harvard 33 digit account.
External User/Commercial Customer – An entity or person that is legally separate from Harvard that
typically purchases goods or services for reasons of convenience, quality, or uniqueness of goods or
services offered. Examples include PIs at affiliated hospitals, commercial research labs, collaborators at
other institutions, and non-consolidating tubs.
Local School/tub Level Official – Designated approver for your school/tub or unit (see policy for
complete list of contacts by school/tub).
Specialized Service Centers “SSC” -Specialized Service Centers are a category of Academic Service
Centers with annual operating expenses of more than $1 million or that provide highly complex or
specialized services to a select group of users. The billing rates for these centers are based on their
direct operating costs and an allocated portion of F&A costs. If the F&A is not included in the service
center rates these amounts must be covered by other school/tub funds and excluded from the federal
F&A calculations. SCCs are called specialized service facilities “SSF” in A21.
Subsidy – Financial support for a service center that is not generated by the sales of goods or services.
Subsidy (User) – Funds provided to a service center to cover deficit when a certain group of
users is charged a rate that is lower than the full rate charged to unsubsidized users. For example,
subsidies may be provided by a specific department that wishes to subsidize only users from that
department. The service center recovers the full cost of services provided to subsidized users by
charging the difference between the full rate and the subsidized rate to the department providing
the subsidy.
Subsidy (Service Center) – Funds provided to a service center to cover operating costs or
deficits. Subsidized users are charged a rate that recovers less than the total cost of the center’s
goods or services.
Support Account – An account established to record expense items that are unallowable as charges
within the service center accounts (i.e. bad debt, capital purchases (equipment over $5,000), any cost
unallowable for federal reimbursement, etc.). Support accounts also include the offset for the
depreciation entries, revenues collected from add-on charges for external customers and funds borrowed
by the service center for startup that must be returned once the service center is beyond the initial break-
even phase.
Surplus – An amount by which a center’s revenues exceed its expenses.
Total Cost - The costs of providing the service or product by the facility (direct cost) plus allocations of
building use allowance, operations and maintenance expenses and general administration expense
(indirect costs).
27
Useful Life– an estimate of the average number of years an asset is considered usable before its value is
fully depreciated.
28
Appendix III: Service Center Object Codes - Examples
Service Center credits from internal billing should be consistently recovered and recorded in the
General Ledger using an intra or inter-school/tub/tub expense credit object code within the same
super object code range as the debit.
Examples*
Debit Object Code to
Use By Customer
Departments
Credit Object Code to Use By Service
Center
Inter School/tub *
Intra School/tub *
General Laboratory
Services Glasswash,
Histology, Flow
Cytometer
8100 8109 8110
General Technical
Services
8250
8251
Tech Services
8254
Tech Services
8252
Client Contract
Services
8253
Misc. Tech Svcs
8255
Other Tech Services
Animal Per Diem 8030 8031 8032
Radiation Services 8100
8101
Radiation Waste
Control
8102
Radiation Waste
Control
8103
Radiation Survey
8105
Radiation
Registration
8107
Other Radiation Lab
Svcs
8107
Other Radiation Lab
Svcs
* Please consult your school/tub finance office for specific codes that may have been designated for
your service centers.
29
Appendix V: Consolidated and Non-consolidated School/tubs List
Consolidated
School/tub School/tub Name School/tub Rollup
100 Arnold Arboretum Other School/tubs
105 HU Art Museums Other School/tubs
110 Dumbarton Oaks FAS
135 Mem Church Other School/tubs
140 Nieman Foundation Other School/tubs
145 Villa I Tatti Other School/tubs
150 Dining Services Other School/tubs
155 Faculty Club Other School/tubs
170 Univ Health Svcs Other School/tubs
175 Univ Information Systems Other School/tubs
180 Univ Ops Svcs Other School/tubs
195 HU Library Other School/tubs
205 Inst of Politics HKS
215 Kennedy School of Government HKS
225 Joint Ctr for Housing Studies Other School/tubs
235 Grad School of Design Other School/tubs
245 Divinity School Other School/tubs
255 Grad School of Education GSE
265 Harv Law School Other School/tubs
275 School of Public Health HSPH
285 Radcliffe Other School/tubs
310 FAS College Life+Student Svcs FAS
325 Schl of Engineering & Appl Sci SEAS
340 FAS Athletics FAS
355 FAS Continuing Education FAS
370 FAS Core FAS
385 FAS Museums FAS
400 Grad School of Arts+Sciences FAS
415 Harv Coll Library FAS
420 FAS Interfaculty Initiatives Interfaculty Initiatives FAS
430 Harv Business School Other School/tubs
445 HBS - Executive Dev Ctr Other School/tubs
460 HBS - Publishing Other School/tubs
465 HBS - Student Clubs Other School/tubs
475 HBS - Student Ed Loan Fund Other School/tubs
490 Harv Med Center HMS
505 Harv Med Intnl HMS
510 Hrvd Med Intnl Gulf FZ LLC HMS
515 Dubai Harv Fdn for Med Rsch HMS
520 Harv Med School HMS
535 HMS - Ion Inc HMS
30
550 Harv School of Dental Med HMS
565 Armenise HMS
570 Harvard NeuroDiscovery Center HMS
580 Harvard Real Estate Services Other School/tubs
610 Central Administration Other School/tubs
625 President's Initiatives Other School/tubs
630 Univ Interfaculty Initiatives Other School/tubs
635 Wyss Institute HMS
640 Central Financial Core Other School/tubs
645 Allston Projects Other School/tubs
650 Benefits Other School/tubs
655 Investments Other School/tubs
700 Charitable Remainder Trust Other School/tubs
705 Charitable Lead Trusts Other School/tubs
715 Gift Annuities Other School/tubs
730 Harv Balanced Fund (PIF) Other School/tubs
745 Harv Growth Fund (PIF) Other School/tubs
760 Harv High Yield Fund (PIF) Other School/tubs
775 Harv Income Fund (PIF) Other School/tubs
790 Intl Equity Income Fund Other School/tubs
805 International Equity Fund Other School/tubs
820 International Bond Fund Other School/tubs
835 Life Return Find (PIF) Other School/tubs
850 Long Term Income Fund (PIF) Other School/tubs
Non-consolidated School/tubs
School/tub School/tub Name
130 Harvard Magazine
185 Agencies
190 Yenching
295 American Repertory Theatre
455 HBS Research Centers
595 HPRE 3
rd
Party
660 GIA Nonconsolidated Entities
670 Master Trust
685 Charitable Annuity Lead Trust
31
Appendix VI: School/tub Specific Requirements
FAS
The following documentation must be submitted to Nuala McGowan prior to operating a service center:
Documentation Due Date Fiscal Year Approval Date
Annual Budget
on or before
April 15, 2013
2014
by June 1, 2013
Annual Rate Proposal, including:
• Annual Financial Operating Report
(See Exhibit G)
• Proposed rate structure and
calculation method
on or before
April 15, 2013
2014
by June 1, 2013
All service center operation cycles should align with the Harvard fiscal year: July 1
st
-June 30
th
.
Exhibits Page 32
Exhibits
Exhibit A: New Service Center Request Form
Harvard University - New Service Center Request Form
**Please complete and submit to your Local School/tub Level official **
Service Center Name:
_______________________________________
Fiscal
Year:
________
Date Completed:
____________
_
Tub and Managing Department:
______________________________
Service Center Manager:
____________________________
Service Center Classification (check one)
Academic Service Center - Annual operating expenses >
$100,000 or charges to federal grants > $75,000
Specialized Service Center - Annual operating expenses
>$1,000,000 or involves the use of highly complex or specialized
facilities
Please provide details in response to the following questions about activities, usage, and long-term management of your service center.
1. Description of activities including products/services and anticipated users )attach addition sheet as necessary):
2. Describe the billable units to be used in your rate calculation (i.e. labor hours, units processed, etc.):
3. Describe how records of usage will be accumulated and maintained:
4. Describe the estimated/anticipated billing to federal awards:
5. Provide an estimated budget summary:
FY13 Budget
Comments (if any)
Salaries and fringe benefits
Materials and supplies
Maintenance and repair
Equipment – depreciation only
Rentals & Leases
Travel & Conf/Prog Fees
Purchased Services/Professional Fees
Total Budgeted Expenses
Subsidies (if any)
Balances Available
6. Provide estimated rate projections:
FY13 Budget
Comments (if any)
Estimated volume of activity
1,500
Estimated volume (units) of activity during the upcoming year
Cost per unit
67
Total budgeted expenses/estimated volume of activity
Subsidies (if any)
5,000
Sources of income outside of operating revenue to subsidize internal user
groups
Total costs- net of subsidies
95,000
Total budgeted expenses – subsidies
Cost per unit – net of subsidies
3
Subsidy/Estimated volume of activity
Price/rate per unit charged
63
Cost per unit – net of subsidies
Total Revenues
95,000
Estimated volume of activity x Price/rate per unit charged
Net budget surplus/(deficit)
0
7. Proposed Internal Rates
8. Proposed External Rates
Dept. Approval by:
________________________________________________
_______________________________
Signature of Responsible Person (Service Center Manager)
Signature of Fiscal Officer
Exhibits Page 33
Exhibit B: Annual Rate Documentation Form
**Please complete one form for each service center **
If this form does not fit your specific SC, alternative supporting docs including these data specs are acceptable.
Service Center Name:
Service Center Manager:
Tub and Managing Dept.
Fiscal year:
Date Completed:
Service Centers - provide goods or services to other University groups for a fee. Service units must be able to demonstrate compliance with federal requirements, cannot use
fee structures that discriminate between federal and non-federal sponsored activities, and can recover only their aggregate costs (based on actual usage).
Prior year Classification (check one)
Academic Service Center - Annual operating expenses >
$100,000 or charges to federal grants > $75,000
Specialized Service Center - Annual operating expenses
>$1,000,000 or involves the use of highly complex or specialized
facilities
Service Center Account Information (These fields required)
tub
org
object
fund
activity
sub-activity
root
1. Description of Services/Goods Offered (list each service separately)
Comments (if any)
Service
Internal Rates
External Rates
Service #1
Service #2
Service #3
2. Service Center Financial Summary
Prior FY
Actual
Annual Budget
Comments (if any)
Total Annual Operating Expenses
Annual Charges to Federal Awards
Annual Operating Revenues Internal users
Annual Operating Revenues External users
Total Operating revenue
Annual Operating Transfers
to Service Center
from Service Center
Subsidies (if any)
Balances Available
3. Rate Development - Please complete a separate rate development sheet for each service offered within this service center.
Cost description
Prior FY
Actual
Annual Budget
Comments (if any)
Salaries and fringe benefits
Materials and Supplies
Maintenance and repair
Equipment - depreciation only
Rentals & Leases
Travel & Conference/Prog Fees
Purchased Services/Professional Fees
Prior year (surplus)/deficit
Total budgeted expenses
Estimated volume of activity
Cost per unit
Subsidies (if any)
Total costs net of subsidies
Cost per unit - net of subsidies
Price/rate per unit charged
Total Revenues
Net budget Surplus/(deficit)
Review and Approval by:
Signature of Responsible Person (SC Mgr.)
Signature of Fiscal Officer
Exhibits Page 34
Exhibit C: Annual Financial Operating Report Example
<Service Center Name>
Operating Report
<Fiscal Year>
Income:
External Billings $ __________
Internal Billings $ __________
Total Income $ __________
Expenses:
Salaries $ __________
Fringe Benefits $ __________
Materials & Supplies $ __________
Maintenance and Repair $ __________
Equipment Depreciation $ __________
Rentals and Leases $ __________
Travel & Conferences $ __________
Purchased services/professional fees $ __________
Other $ __________
Total Expenses $ __________
Net Operating Surplus/Deficit $ __________
Subsidy (if applicable) $ __________
Operating Account Number: _______________________________________________________
Support Fund Account Number (if any): ______________________________________________
Contact Person: _________________________ Position / Title: _______________________
Email: ________________________________ Address/Telephone: __________________
Date submitted: _________________________
35
Exhibit D: External Rate Calculation Example
Rate Calculation Example #1
ALL CUSTOMERS
FYxx Operating Expenses:
Salaries
$70,000
Fringe
$24,500
Supplies $37,000
Maintenance& Repairs
$11,000
Travel
$3,000
Office supplies
$500
Telephone
$800
Postage, Express Mail
$200
Total estimated operating budget
$147,000
Estimated billable units (based on FYxx usage)
1
3000
Cost per run unit - (operating costs / # of units)
$49.00
1
Facility may use most appropriate units of service such as hours, revenue, number of users, samples, work orders, etc. In this
example, we are utilizing # of units.
F&A ADD ON FOR EXTERNAL ACADEMIC CUSTOMERS
F&A recovery rate calculation:
Room A
625
Room B
14
Room C
14
Total Square Footage
653
Current FY Cost per square foot:
$110.00
Total Cost of Space (Total Sq ft X current cost per sq ft)
$71,830
Estimated billable units (based on FYxx usage)
3000
Cost per run unit - all customers (operating costs / # of units)
$49.00
F&A Add-on to external academic customers (space cost /#units)
$23.94
Total cost per unit - external academic customers
$72.94
ADD ON FOR COMMERCIAL CUSTOMERS
Cost per run unit - all customers (operating costs / # of units)
$49.00
F& A Add-on to external academic customers (space cost / #of units)
$23.94
Subtotal cost per unit - external academic customers
$72.94
10% Add-on to commercial customers (rounded to the nearest $)
$7.00
Cost per unit - commercial customers
$79.94
36
Exhibit E: Internal Users Rate Calculation Example #1
Base Rate - Used for all Internal Customers
FY XX Operating
Expenses:
Service A
(in hours)
Service B
(in units)
Salaries & Wages
70,000
40%
28,000
60%
42,000
Fringes
24,500
40%
9,800
60%
14,700
Supplies
37,000
80%
29,600
20%
7,400
Maintenance & repairs
11,000
80%
8,800
20%
2,200
Travel
3,000
40%
1,200
20%
600
Office Supplies
500
40%
200
20%
100
Telephone
800
40%
320
2%
16
Postage, Express Mail
200
40%
80
20%
40
Total Estimated Operating budget
147,000
78,000
67,056
Budgeted billable units/hours
Hours
1,800
Units
1000
Rate for internal customers
43.33
67.06
F&A Add on for External Academic Customers
F&A Recovery rate calculation:
FY XX Operating
Expenses:
Service A
(in hours)
Service B
(in units)
Room A
625
Room B
14
Room C
14
Total Square Footage
653
Space allocated to services (based on expenses)
53%
46%
Current FY cost per square Foot
$110
Total cost of space
71,830
Add on Rate for External Academic Customers
21.17
32.77
Total Cost for External Academic Customers
64.51
99.82
Add on for Commercial Customers
10% add on to commercial customers
6.45
9.98
Cost per run for External Academic Customers
70.96
109.80
Annual Rate Proposal, including:
• Annual Financial Operating
Report (See Exhibit G)
• Proposed rate structure and
calculation method
on or before
April 15, 2013
2014
by June 1, 2013
All service center operation cycles should align with the Harvard fiscal year: July 1
st
-June 30
th
.
37
Harvard University is committed to keeping up with the changing regulatory requirements and
providing helpful service center guidance. To that end, readers are encouraged to forward
suggestions for changes, updates, and corrections to:
Jessica Schmidt
