University of California Davis Self-Supporting Recharge Operations - Introduction
A self-supporting recharge operation is one that is funded entirely by those who purchase the goods or services offered. Recharge operations must function like a non-profit business and collect revenues sufficient to cover all costs. Services offered are rate-based and must be necessary to advance the educational, research, patient care or public service functions of the university. Recharge operation activities may involve internal recharge (when one department provides a good or service to another department), external billing (when the University provides a good or service to an external entity), or a combination of both. The establishment of recharge operations and activities are governed by UC Davis Policy and Procedure Manual, Chapter 340, Section 25.
Contents
- Criteria
- Classification
- Examples
- Alternative Options
- Non-Rate Based Process
- Billing Processes for ‘Non-Rate Based Activities’
Criteria
In order to qualify as a self-supporting recharge operation you must meet these conditions:
- There must be a sound business case supporting the need for the recharge operation to exist that coincides with the University’s mission of teaching, research, patient care, or public service, and where services to university customers will not be impaired.
- A product or service is provided, for a fee, by campus units/departments to other units/departments or to non-university parties.
- Direct costs (labor hours, supplies, materials, etc.) required to perform the service can be clearly defined and exceed $50,000 annually.
- Activities less than $50,000 per year are still subject to full-cost recovery including application of NUD for external customers and must be able to justify costs factored into billable rates for Dean/VC office approval. CPA/BIA approval is not required for these low risk activities.
- The product or service is offered on an ongoing basis:
- Demand for Services/Goods is projected to last for a minimum of 2 years
- Services/Goods are provided throughout the year
- Services/Goods are provided to multiple customers
- The revenue collected must be sufficient to cover all costs.
If your activity does not meet all of the above criteria, alternative processes are available to recover the cost of services provided (see below). If your department would like to request an exception to operate as a recharge operation you should provide documentation stating which criteria cannot be met and outline the need to operate as a self-supporting recharge operation to your Dean, for consideration and consultation with the Vice Chancellor (VC)/Business & Institutional Analysis (BIA)/Costing Policy & Analysis (CP&A).
Classification
Self-supporting, rate-based recharge operations are classified as one of the following:
- Sales and Services of Educational Activity: Activities that are revenue producing operations within an academic unit in connection with the training of students or support of research activities. Examples include the Crocker Nuclear Lab and the Primate Center. Revenue for these activities report under the CoA Fund 12100, Natural Account 775000 (410000 for external), as well as the assigned GL or PPM Project using Purpose code of 44 (45 for AES Research).
- Other Self-Supporting Service Activity: Activities that are rate-based operations which do not fall naturally into any of the other classifications. Revenue for these activities report under the CoA Fund 12100, Natural Account 775000 (410000 for external), as well as the assigned GL or PPM Project using Purpose code of 72.
Other common self-supporting activities that are not covered under UC Davis Policy and Procedure Manual, Chapter 340, Section 25 are as follows:
- Auxiliary Enterprise: Provides non-instructional support to students, faculty and staff. These activities are primarily external revenue producing operations. Revenue for these activities report under the CoA Fund 12100, Natural Account 775000 (410000 for external), as well as the assigned GL or PPM Project using Purpose code of 76.
- Teaching Hospital: Revenue producing activities operated by teaching hospitals that support the clinical teaching and research programs. Revenue for these activities report under the CoA Fund 12100, Natural Account 775000 (410000 for external), as well as the assigned GL or PPM Project using Purpose code of 42.
- Other Activities: Other sources include income sources which do not fall naturally into any of the other classifications. Primarily sales and services from non-academic departments. These other revenues are not rate-based but should be self-supporting and not carry any deficits. Revenue for these activities report under the CoA Fund 12101, Natural Account 775000 (410000 for external), as well as the assigned GL or PPM Project using Purpose code of 72.
For more information on non-rate based activities please refer to the Non-Rate Based Self-Supporting Activities website.
Examples
An example of a self-supporting recharge activity would be Reprographics providing copy services to campus departments. The rates they charge are enough to cover the expenses of providing those copies. The Crocker Nuclear Lab and the Primate Center are examples of recharge operations that provide services to both recharge (internal) and external customers.
Alternative Options
If your activity does not meet all of the above minimum criteria to qualify as a self-supporting recharge operation, alternative processes for ‘Non-Rate Based Activities’ are available to recover the cost of goods or services provided. These processes should be used for one-time quotes, internal direct cost agreements/memoranda of understanding (MOU), and revenue agreements.
The department is responsible for billing and accounting using the non-rate based fund 12101. In the event a project code is needed for tracking, the department will need to provide substantial evidence of ongoing activity for it to be granted. Please send justification to recharge@ucdavis.edu to request a project code. The department is responsible for maintaining the GL or PPM Project.
Non-Rate Based Process
- Create a Budget: Work with your dean’s office to develop a budget that generates a non-recharge “rate”. This “rate” is the total amount that will be charged for your good(s) or service.
- Establish an Agreement, if required: Use the budget to create an agreement between parties. The need and type of agreement depends on the kind of customer (internal/external), and/or billing amounts.
- Direct Cost Agreement/Memorandum of Understanding (MOU) - is required for all internal customers.
- Revenue Agreement – is only required if, the customer is external, and individual billing is over $500 and total annual billing between $5K - $50K.
- Get Dean Approval: Send your budget and agreement (if required), to your dean’s office for approval. Do not send to the Recharge Team.
- Bill Customer – The billing process differs depending on customer type, and/or billing amounts. See Billing Processes for Non-Rate Based Activities below for information on each process.
Billing Processes for ‘Non-Rate Based Activities’
Internal Bill Process - For intermittent/infrequent, direct charges to internal customers.
- Use the Finance Internal Transfer System (FITS) at https://fits.ucdavis.edu/ to process internal billing transactions to internal customers.
- Departments should utilize the following CoA Segments for all internal, non-rate based activity:
- Fund 12101 (Sales and Services Non-Rate Activities)
- Project "0000000000" (No associated GL or PPM Project, although departments may request to be considered for a unique project code.)
See knowledge base to learn about the billing process in FITS. Send FITS inquiries to Aggie Enterprise Help Desk.
IOC/UC Bill Process - For intermittent/infrequent, direct charges to other UC campuses or ANR.
- Use the Intercampus Order/Charge (IOC) Process.
- Departments should utilize the following CoA Segments for all other campuses or ANR, non-rate based activity:
- Fund 12101 (Sales and Services Non-Rate Activities)
- Project "0000000000" (No associated GL or PPM Project)
See the OIC webpage to learn about the IOC billing process. Send IOC inquiries to Aggie Enterprise Help Desk.
External Bill/Customer Invoice – For the individual billing of external customers.
This process falls under PPM 340-09, Sales of University Goods and Service to Non-University Users.
- Individual billing under $500 and total annual billing not to exceed $5K:
- Requires department head approval.
- Department completes billing via the AR Invoice document.
- Individual billing over $500 and total annual billing between $5K - $50K:
- Department completes a Revenue Agreement.
- Department completes billing via the AR Invoice document..
- Departments should utilize the following CoA Segments for all external, non-rate based activity:
- Natural Account 410000 (External Sales and Services Revenues)
- Fund 12101 (Sales and Services Non-Rate Activities)
- Project "0000000000" (No associated GL or PPM Project)
See knowledge base to learn about the external billing process.