1. Fees, Rates and Charges Heather Richards, Administrative Manager
Comprehensive Cancer Center

2. 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

3. 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.

4. 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

5. 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

6. 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

7. 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 (
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

8. 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

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

10. Recharge Rate Calculation – Excel Example Instruction document included

11. 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 Corporate Tax Manager) about how to proceed, issues, etc.