1. OBFS System Government Costing
Anne Marshall – Assistant Director
Richelle Lu – Coordinator
André Britten – Coordinator
OFFICE OF BUSINESS AND FINANCIAL SERVICES – System Government Costing
2/25/2019

2. Agenda Overview of System Government Costing
Internal Service Activities
Policy and Compliance
Best Practices
Resources
OFFICE OF BUSINESS AND FINANCIAL SERVICES – System Government Costing
2/25/2019

3. Overview of System Government Costing
OFFICE OF BUSINESS AND FINANCIAL SERVICES – System Government Costing
2/25/2019

4. Who are we? OBFS System Office Support all 3 universities Staff
6 – located in Urbana
3 – located in Chicago
OFFICE OF BUSINESS AND FINANCIAL SERVICES – System Government Costing
2/25/2019

5. Organizational Chart
OFFICE OF BUSINESS AND FINANCIAL SERVICES – System Government Costing
2/25/2019

6. Our Responsibilities We do the following:
Federal Facilities and Administrative (F&A) rate calculations and proposals
Fringe benefit rate calculations and proposals
Tuition remission rate calculations and proposals
Rate negotiation with the federal government
State F&A reporting and rate calculations
Higher Education Research & Development Survey (HERD) – UIUC & UIS only
Service activity rate reviews and training (Banner 3E fund types)
OFFICE OF BUSINESS AND FINANCIAL SERVICES – System Government Costing
2/25/2019

7. Internal Service Activities
OFFICE OF BUSINESS AND FINANCIAL SERVICES – System Government Costing
2/25/2019

8. Internal Service Activities
Specialized institutional operation established to meet the instructional or research needs of the University
Adds value and recovers costs of providing a service or good to customers
Services are provided to internal University units, and federally and non-federally funded sponsored projects
Internal service activities are coded as a Banner fund type 3E
Service activity charges often become direct costs of sponsored projects, many of which are federally funded
OFFICE OF BUSINESS AND FINANCIAL SERVICES – System Government Costing
2/25/2019

9. Internal Service Activities
OFFICE OF BUSINESS AND FINANCIAL SERVICES – System Government Costing
2/25/2019

10. Internal Service Activities
Service center’s responsibilities include, but not limited to:
Calculating service rates at least once every two years
Complying with University, Federal, and State policies
Exercising good business practices to run a breakeven service
Timely billings
SGC’s responsibilities include, but not limited to:
Training
Guidance to service centers
Service rate/fund reviews as determined necessary
Monitoring compliance
OFFICE OF BUSINESS AND FINANCIAL SERVICES – System Government Costing
2/25/2019

11. Policy and Compliance
OFFICE OF BUSINESS AND FINANCIAL SERVICES – System Government Costing
2/25/2019

12. Why Do You Care? Potential consequences of NOT being compliant
Negative audit findings (Internal/External)
Refunds to the federal government
False Claims repercussions
Negative publicity for the institution
Increased scrutiny of other institutional service activities
OFFICE OF BUSINESS AND FINANCIAL SERVICES – System Government Costing
2/25/2019

13. Why Do You Care?
Under Uniform Guidance, Service Centers are required to be reported in our Federal Disclosure Statement (DS-2)
The DS-2 must be submitted to our F&A cognizant agency (ONR) for audit and approval
Auditors and agencies often request a copy of our DS-2 for their review
OFFICE OF BUSINESS AND FINANCIAL SERVICES – System Government Costing
2/25/2019

14. Federal Government Requirements Related to Service Activities
Federal Uniform Guidance 2CFR200 – include but not limited to:
Rates must be calculated at least once every two years
Costs of services must be charged to awards based on “actual usage”
Consistent charging (treatment) of rates to all users
Rates must be based on the costs of providing the services
Surplus/deficits must be considered when calculating rates
OFFICE OF BUSINESS AND FINANCIAL SERVICES – System Government Costing
2/25/2019

15. University of Illinois’ Policies and Procedures for Service Activities
Based on Federal Uniform Guidance 2CFR200
OBFS Self-Supporting/Revenue Generating Activities – Section 22 – “Service and Storeroom Activities”
OFFICE OF BUSINESS AND FINANCIAL SERVICES – System Government Costing
2/25/2019

16. What are the OIG Auditors Finding?
Universities did not:
Establish and/or adhere to policies and procedures
Maintain adequate accounting records
Analyze and adjust billing rates or monitor recharge centers on a regular basis
Biennial reviews were not performed to adjust rates based on actual costs
Failure to revise and appropriately set billing rate structure resulted in submission of numerous false claims
Billing rates were not adjusted for accumulated surplus and deficit fund balances
Surplus from recharge centers used to fund unrelated activities
Included administrative fees in rate calculations that were not part of the cost of providing the service
Included duplicate or unallowable costs in the calculation of billing rates
Did not charge based on actual usage of the service provided
Billed some users at reduced rates
Computed rates by averaging rates that other universities charged
OFFICE OF BUSINESS AND FINANCIAL SERVICES – System Government Costing
2/25/2019

17. Real Life Scenario at UIUC
NSF OIG Audit Findings FY14
Auditors reviewed a total of $435.2 million in costs charged to NSF projects between 1/1/10-12/31/12
They were reviewing for:
Unallowable, unallocable, and unreasonable costs
Noncompliance with regulations, requirements, and terms
Findings included unsupported expenses of $39,296, a significant portion of which was related to service center rates
OFFICE OF BUSINESS AND FINANCIAL SERVICES – System Government Costing
2/25/2019

18. Best Practices
OFFICE OF BUSINESS AND FINANCIAL SERVICES – System Government Costing
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19. Rate Calculation Overview
OFFICE OF BUSINESS AND FINANCIAL SERVICES – System Government Costing
2/25/2019

20. Best Practices Services Usage base
Services with different usage bases are calculated independently, cross-subsidy is not allowed between unrelated services
Usage base
Unit of measurement/customers. For example: machine hour, person hour, per sample, number of units, miles, etc.
Track actual usage for base (denominator)
Existing services must use an actual historical year’s usage
New services estimate usage (recalculating in one year using actual)
All users (internal and external) must be included in the base whether or not charged
OFFICE OF BUSINESS AND FINANCIAL SERVICES – System Government Costing
2/25/2019

21. Best Practices Expenditures
Only costs that directly relate to the service are charged to the fund
Costs should be allowable per university and state policy, and Federal Uniform Guidance
Determine best method for identifying, allocating, and tracking expenditures across multiple related lines of service in a C-FOP
Using activity codes and/or program codes are recommended for multiple services in one fund
Expenditures and any allocations must be allowable, reasonable, and well documented
OFFICE OF BUSINESS AND FINANCIAL SERVICES – System Government Costing
2/25/2019

22. Best Practices Equipment
Annual depreciation may be included in the rate calculation, not the purchase price or replacement cost
Federally funded purchases are NEVER allowable in internal rates
Equipment purchased using 3E should be included in rate calculation
Equipment purchased with funds other than 3E (non-3E) may be allowable for the rate calculation
Contact Government Costing for assistance
Make sure to ENTITY CODE equipment used in a 3E service and depreciation will be recovered as part of rates
UPAR assists with entity code assignment
OFFICE OF BUSINESS AND FINANCIAL SERVICES – System Government Costing
2/25/2019

23. Best Practices Fund Balance
Service centers must operate on a break-even basis
Cumulative fund balance must be used and incorporated into rate calculation
Fund balance is “adjusted” for net asset value of equipment due to the way the Banner System records fixed asset/depreciation data
Fixed assets are tracked in the Banner system by the CFOP which purchased the equipment
Fixed asset data feeds into the GL and OL at a high control organization and fund level
Departments adjust their service center fund balance for the net asset value (purchase price less accumulated depreciation) of assets purchased on 3E fund
Required as part of Section 22 Self-Supporting/Revenue Generating Activities (over-arching policy)
Audit by Federal Defense Contract Audit Agency (DCAA) in 1994 required us to begin adjusting service centers’ fund balances to include the net asset value of the 3E assets
OFFICE OF BUSINESS AND FINANCIAL SERVICES – System Government Costing
2/25/2019

24. Best Practices Over/Under Recovery Identification
The over/under recovery of the service activity adjusted fund balance must be included in the rate calculation
Working capital reserve of up to 60 calendar days of “cash” expenses for “normal” operating purposes can be maintained in the fund
Balances in excess of this amount must be eliminated over a period of time, normally 2 years
3 step process to identify the over/under recovery:
Step 1: Compute adjusted fund balance
Step 2: Compute working capital reserve
Step 3: Compute over/under recovery
OFFICE OF BUSINESS AND FINANCIAL SERVICES – System Government Costing
2/25/2019

25. Best Practices Monitor service activity fund Review rate annually
Check for variances that could affect the break-even rate
Check estimates used in setting rate and determining usage base for accuracy
Review rate annually
Must recalculate at least every two years, annual review is recommended
Adjust next year’s rate for surplus or deficit carryover
The over or under recovery balance is the accumulated fund balance, not just balance from the previous year
Maintain documentation of calculation and rates
Publish current rates and maintain historical rates for prior years
OFFICE OF BUSINESS AND FINANCIAL SERVICES – System Government Costing
2/25/2019

26. Best Practices Bill on a timely basis
Billing is recommended on a monthly basis, REQUIRED for sponsored projects
Internal customers charged same rate for same level of service
All customers are to be charged
JV FOATEXT must list the following, at a minimum:
Service provided
Date(s) of service/sale
Unit cost
Total dollars charged to the user
Revenue should be recorded using a revenue account code
Negative expenditures are not an appropriate way to record revenue
OFFICE OF BUSINESS AND FINANCIAL SERVICES – System Government Costing
2/25/2019

27. Resources
OFFICE OF BUSINESS AND FINANCIAL SERVICES – System Government Costing
2/25/2019

28. Resources and Training
SGC Website
Service Activities Resource Page
Job aids, Business Objects/Webi templates, Excel spreadsheet rate calculation templates, and training materials
Self Supporting Funds Training
Government Costing provides instructor led training for 3E funds
OBFS UAFR provides training that covers entire Banner “3” fund group
OFFICE OF BUSINESS AND FINANCIAL SERVICES – System Government Costing
2/25/2019

29. Training Opportunities
Service Activity Basics Certification Program
Service Centers
Accounting Practices
Identify Risks
Allowable/Unallowable Expenses
Depreciation
Internal/External Rates
Over/Under Recovery
Determine Base
Service Activity Advanced Certification Program
Coming in near future!
Case studies
Hands on calculations
Hot topics
Visit the OBFS Certification Program website “Get Started” page:
OFFICE OF BUSINESS AND FINANCIAL SERVICES – System Government Costing
2/25/2019

30. Workshop Summary Overview of System Government Costing
Internal Service Activities
Policy and Compliance
Best Practices
Resources
OFFICE OF BUSINESS AND FINANCIAL SERVICES – System Government Costing
2/25/2019

31. Contact Information
System Government Costing
Who To Ask
OFFICE OF BUSINESS AND FINANCIAL SERVICES – System Government Costing
2/25/2019

32. Questions?
OFFICE OF BUSINESS AND FINANCIAL SERVICES – System Government Costing
2/25/2019