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Introduction to Self-Supporting Activities

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  1. Introduction toSelf-Supporting Activities

  2. Agenda HAVE FUN! • Introductions • Course Objectives • Section I • Definitions • Understanding Recharge vs. Income • Identifying Possible Self-Supporting Activities • Identifying and Classifying Costs • Developing Effective Pricing Rationale • Understanding the Rate Review Process

  3. Agenda…….And More! • Section II • Integrating with Kuali • Account Setup • Establishing and Maintaining Budgets • Balance Sheets • Decision Support Report Examples • Billing Process • Questions and Answers

  4. By the end of this course, you will be able to…. • Identify possibilities for self-supporting activities • Differentiate between types of activities • Identify the differences for university and non-university clients • Establish rates to recover operation costs • Identify costs related to self-supporting activities • Develop pricing rationale and proposal narratives

  5. In the near future you may be able to... • Establish and maintain financial accountability • Establish Self-supporting activity accounts on Kuali, • Use the budget to manage fiscal activity, • Select Decision Support reports to best manage your activity.

  6. Introductions • Name • Department • Position • Years experience with Campus • Experience with self-supporting activities

  7. Definitions

  8. What is a Self-Supporting Activity? • Products or services are provided, for a fee, by campus departments • An activity functioning as a non-profit business. • An activity that collects revenue sufficient to cover all costs. • Services offered are necessary to advance the educational, research, or public service functions of the University.

  9. What are the Activity Classifications?

  10. What is an Auxiliary Enterprise? • Provides non-instructional support to students, faculty and staff. • Examples: Bookstore and Residence Hall

  11. What is a Service Enterprise? • Provides service to campus departments and operating costs are primarily supported by recharges. • Examples: Storehouse and Fleet Services

  12. What is a Sales and Services of Educational Activity? • Income producing activities operated by academic departments in connection with the training of students or support of research activities. • Example: Crocker Nuclear Laboratory Services, Dental Clinics.

  13. What is an Other Activity? • Other sources include income sources which do not fall naturally into any of the other classifications. Primarily sales and services from non-academic departments. • Examples: Recreation Hall (OSSSO) ,Patents (OTHER) or Research Conferences (OTHUNV).

  14. What is a Teaching Hospital Activity? • Revenue-producing activities operated by teaching hospitals that support the clinical teaching and research programs.

  15. What is NOT a Self-Supporting Activity? An Agency Account • Event/activity is sponsored by a non-university entity • Event/activity is funded by the participants through ticket sales or contributions for which a faculty, student or staff will be responsible for covering any deficit and/or the balance will not be returned to the department • Retirement parties, award banquets, special graduation ceremonies

  16. What is NOT a Self-Supporting Activity? How can I get help if I am not sure? Check General accounting website: • Step by Step instructions are located at: or • Contact Jim Seibert at

  17. Who are your clients? • Recharge: • UC Davis departments (including contracts and grants) • Other UC campuses (Interdepartmental) • Income • Non-university clients

  18. Non-University Clients Defined • What is a non-university client? • A client from outside the UC system. • Does not have a Kuali Account • Pays non-university differential (NUD) when purchasing goods or services from UC Davis.

  19. You Mentioned NUD? • The NUD ensures that self-supporting activities recover full costs by including indirect costs. • The NUD is charged in addition to the calculated recharge rate (direct costs). • More on this later…….

  20. What about core-supported activities? • General or Registration Fee supported departments can not recharge for a service or product that is within the scope of their core funded activities. Why???

  21. What about core-supported activities? • Shifting core-supported activities to recharge activities is typically done to free up core-funds by charging other campus departments. • Essentially shifting the cost burden to units that are also taking reductions. • Certain administrative positions are included in the F&A overhead rate. • If you bill Federal contracts and grants you would be charging double. Also referred to as “Double Dipping”.

  22. How does this relate to our Campus?

  23. Revenues(Excludes Medical Centers)

  24. Revenue Break-Out by Activity Type

  25. Understanding Recharge vs. Income VS

  26. Recharge Provide products / services to other UC departments. Kuali Inter-departmental bill (IB) Kuali Feed (GLIB) Financial object=3900 Budget object =SUB9 Income Provide products / services to non-UC clientele only. Cash (SCC) Banner (Invoice) DaFIS A/R (Invoice) Financial object= 0060 Budget object =INCO Recharge vs. Income

  27. Recharge Governed by federal costing guidelines OMB A-21 allowable cost principles. Required to recover direct costs. Income Not subject to federal costing guidelines. Required to recover all costs; direct and indirect (e.g., NUD). Recharge vs. Income

  28. Recharge Limited to operating reserves equal to 8.33% of annual revenue. Required to consider operating reserves and deficits in pricing rationale. Income Can accumulate operating reserves. Recharge vs. Income

  29. Common to both Recharge and Income Activities • Rates must be established on a per hour or per unit basis. • Pricing rationale worksheets are used to itemize and calculate costs. • Different rates should be established for different levels of services. • Base & Current Budgets are required for all self-supporting activities.

  30. Let’s Test Your Knowledge! With a Few Questions…..

  31. True or False? UCD attempts to compete with local businesses when a profit can be made. False Self-supporting activities are an effective tool in early retirement planning. False Base & Current Budgets are required for self- supporting activities. True

  32. True or False? Non-university clients pay the non-university differential (NUD). True Core support activities can become recharge activities without much consideration. False

  33. Income or Recharge? Sale of olive oil to Paesano’s restaurant Income Reprographics printing of department handbook. Recharge Bookstore sells grammar book to Budget Office. Recharge

  34. Income or Recharge? Surgery performed by the VMTH to correct my dog’s “cherry eye”. Income Sale of T-shirts to public that were made during class. Income

  35. Income or Recharge? Analytical services charged to a Federal grant for your PI’s research project. Recharge

  36. Identifying and Classifying Activities

  37. Identifying Possibilities Market Assessment Questionnaire can be used to assess: • Core support issues • Relationship to department mission (Unrelated Business Income Tax) • The market potential • If criteria for operation will be met • Start up costs

  38. Identifying Costs The following must be identified for each activity: • Direct Costs • Indirect Costs

  39. Direct Costs • Costs that can be directly and consistently traced to the product or service. • Examples • Personnel costs • General Administration, if >5% effort • Materials for the end product • Equipment Depreciation

  40. Indirect Costs • Costs of conducting business that are incurred for common or joint objectives. • Also known as Facilities & Administration (F&A) Costs • Cannot be identified readily and specifically with particular projects or a specific activity • Indirect costs must be charged to non –University clients by assessing the NUD.

  41. WHY do I have to charge NUD? • Consumers must be charged no less than what the Federal Government is charged on contracts and grants.

  42. How is the NUD calculated? • The F&A Sponsored Project Rate is the basis for calculation. • Two NUD rates are available: • Full NUD • Deducts services typically not utilized by outside clients • Department receives percentage back for departmental administration.

  43. How is the NUD calculated? • Reduced NUD at 8% - Exception required • Cannot charge Federal clients • Departmental Markup cannot be applied • Department does not receive departmental administration component • Additional data must benefit the campus research mission

  44. How is the NUD rate calculated? 12

  45. NUD Flowchart

  46. Allowable Costs • All costs charged to the Federal Government must be allowable under OMB A-21 guidelines. • If unallowable costs are included in rates, they will be rebated to Federal sources by General Accounting. • Examples: Reserve for Improvements General/Auto/Employment Practices Liability (GAEL) • How do I know what is unallowable? • The Charging Practices for Federally Funded Grants and Contracts guide located on-line at

  47. Is it allowable? Which hat belongs to a prudent person? • After reviewing the Charging Practices guide and you are still unsure if a cost is allowable, you should apply the “Prudent Person Test”. • What does “prudent” mean? • Reasonable • Careful

  48. Is it Allowable? • What questions should a “prudent person” ask? • Is it necessary for the operation of the activity? • Can the cost be identified specifically to an activity? • Is the cost consistent with institutional policies, procedures and practices? • Still not sure? • Contact Extramural Accounting

  49. Costing Resources: Details, Details! UC Davis P&P Manual Extramural Accounting OMB A-21 Circular

  50. Let’s Test Your Knowledge! With a Few Questions…..