Fees, Rates and Charges Heather Richards, Administrative Manager Comprehensive Cancer Center Heather.Richards@osumc.edu

OSU Guide Lines for Earnings Operations Purpose of this talk OSU Guide Lines for Earnings Operations Rate setting Rationale Excel tool to aid in determining rates with an example References

Basic Requirements for fee calculations Full-Cost Recovery Rationale Basic Requirements for fee calculations Full-Cost Recovery Fees or rates or charges are the amounts charged for goods and/or services Calculated fees must satisfy these basic requirements: They must cover all of the costs, including personnel costs, incurred to provide the service If the calculated rate is higher than the operation wants to charge, the department may choose to support the operation, thereby lowering the rate, and cost- sharing the difference If the actual costs are unknown, rates must be calculated on historical or projected costs In no case may calculated rates include the “Unallowable Costs” detailed in OMB A-21 Rates must not intentionally undercut the prices charged by businesses in the private sector.

Examples of Unallowable Costs Rationale Examples of Unallowable Costs Entertainment Advertising and Public Relations Lobbying, and Fund Raising Make Contributions or Donations Fines and Penalties Personal Expenses Bad Debt Alcohol See also section J of A-21 circular for a complete list

Facilities and Administration (F&A) costs Rationale Facilities and Administration (F&A) costs Allowed as part of charges, if the Service Center is considered “specialized” and must recover all costs! Specialized Service Facility is not a part of the University’s negotiated F&A rate Example: Telephone service at OSU Most Service Centers can not charge for indirect costs Cores/Shared Resources are a part of negotiated F&A rate for OSU Therefore project is already charged “indirect costs” by OSU and paying a second time is illegal Example: research services such as the Genomics Shared Resource

Additional Considerations Rationale Additional Considerations If there is an active grant/project supporting the service center, then this must be recognized as revenue and used to offset the recharge rate If instrumentation is paid for by a project, then depreciation can not be considered as part of the cost, although maintenance should be Surplus can not be used to pay for capital equipment, but depreciation can be placed in a separate fund for equipment replacement. University overhead, 5.7% and account #66901, can be included as a direct cost All internal users must be charged the same rate, i.e. no “hookups” for your friends

Basic Requirements for fee calculations Rates Submission/Approval Rationale Basic Requirements for fee calculations Rates Submission/Approval Rates for all earnings operations must be submitted to Financial Planning & Analysis either in PeopleSoft or on a spreadsheet in an approved format for publication Fees submitted via PeopleSoft, are considered to be in effect until they are changed or inactivated Fees submitted on a spreadsheet only remain in effect for that specific fiscal year and must be re-submitted annually, even if they do not change All current rates are maintained on the Financial Planning & Analysis website (www.rpia.ohio-state.edy/efb/) Earnings operations must review all of its rates annually during the earnings budget process, regardless of whether or not re-submission is required, and any appropriate changes should be made during this process

Determining Rates: the basic equation Direct operating costs (supplies, labor, maintenance) Subsidies Prior year surplus/deficit Annualized equipment depreciation (if utilized) Aggregate Costs ($) Calculated rate per unit ($) Projected # of Units # of Units/goods sold per service Units can be volume, weight, hour, test, pages, rack, CPU, or even each

Determining Rates: Example of Calculating Supply Costs Courtesy of Michael Zianni, The Ohio State University Determining Rates: Example of Calculating Supply Costs

Recharge Rate Calculation – Excel Example Instruction document included

The Internal rate is done, so what about the external rate? Determining Rates The Internal rate is done, so what about the external rate? Charge whatever you want as long as: • Higher than internal rate Reasonable Market competitive • Acceptable to add F&A at whatever rate is approved by Office of Resource Planning FY16 = 54% Be careful of having too much external revenue which may jeopardize the “Unrelated Business Tax Income” (UBIT) status • • Consult the Tax Manager in the Controller’s office if questions Mike’s recommendation: If you have any external revenue, then contact Scott Gill (gill.414@osu.edu; Corporate Tax Manager) about how to proceed, issues, etc.