Establishing, Managing, and Discontinuing a Center

Managing a Center

Annual Review

See Review Process for more information. The center must publish the approved list of rates upon receiving campus approval.

Billing

• A Income & Recharge Center may only bill customers using the approved posted rates for goods and services.
• Income & Recharge Centers must bill all customers in a consistent, accurate and timely manner. It is highly recommended billings be processed within 45 days of when the services were provided; or no longer than 45 days after the center has been billed by a third party providing the goods or services. If this schedule cannot be met, it is the responsibility of the Income & Recharge Center to notify the billed department of any delays. Income & Recharge Centers must receive approval from the Office of Budget & Planning if they need to bill in advance of providing the goods or services to a customer.
• Untimely billings processed against terminated and closed sponsored project budgets may need to be absorbed by the Income & Recharge Center using other discretionary funding (i.e., cannot be charged to the recharge operation)
• The Income & Recharge Center assumes any risk associated with nonpayment of goods and services when goods and services are provided in advance of receiving valid customer billing. 
• Income & Recharge Center shall maintain records to substantiate all billing transactions, including requisitions, purchase orders, or similar written verification of individual user requests for goods or services. Centers are responsible for maintaining copies of recharge procedures, use or level of activity logs, and billing statements provided to users. All documentation shall be subject to periodic review. (Note: The Income & Recharge Center must also retain the original signed copy of the Income & Recharge rate proposal and the approved billing rates.)

Statement (or invoice) Format and Content Requirements

Statement (or invoice if appropriate) must be available online or sent to the department at least 5 days prior to billing in order to allow departments to review charges and make any needed corrections.

Statement or invoices should contain the following information:

1. Name of Income & Recharge Center
2. Full chartstring – All fields should be shown even if blank. Each field should be clearly defined in a separate block.
3. Period posted to General Ledger
4. Description in the General Ledger
5. Order number/work order number/reference number
6. Detailed description of the goods or services, including the units of measure and billing rate
7. Date of service
8. Amount charged/liened to the ledger
9. Income & Recharge Center contact name, phone number, e-mail address.
10. Requesting department contact name, phone number, e-mail address.

Internal Customers

• An internal charging mechanism, referred to as “recharge”, is used to redistribute expenses for goods or services provided by the Income & Recharge Center. This mechanism is accomplished using a Financial Journal (see “Financial Journal Requirements” and “Financial Journal Procedure” below for more information).
  • Other UC campuses are considered to be directly affiliated with the university. These entities are defined as internal customers for recharge purposes, and hence, are not subject to a surcharge. When recharging another campus, departments should complete an Interdepartmental Order and/or Charge (IOC) form and submit it to General Accounting for processing. Accounting will complete the corresponding Financial Journal. The Interdepartmental Order and/or Charge form and instructions can be located here: https://www.bfs.ucsb.edu/general-accounting/intercampus-transactions.
• The recharge center must use the correct account/fund/sub for the transaction as provided by the customer, and the correct object code. Recharge debits (object code 3905) and credits (object code 3900) must match.
  • In the future, every Income & Recharge Center will have its own unique debit and credit object codes that will be used for recharge transactions only.

Financial Journal Requirements

• In order to avoid duplicate journals processed, the department receiving the credit should prepare the financial journal.
• The financial journal should only include recharge transactions for a single center. Please limit financial journal submissions to one per month per center.
• Recharge debits (object code 3905) and credits (object code 3900) must match
  • Other specific object codes can be used but require prior approval from General Accounting since they must be mapped to object code 3900 or 3905. Several object codes are already mapped to roll up to these object codes, please consult with General Accounting for additional information.
  • In the future, every Income & Recharge Center will have its own unique debit and credit object code.

Financial Journal Procedure

1. Complete the Financial Journal form (see instructions)
2. Submit the completed Financial Journal to Business & Financial Services for processing
   1. Send one email to Data Control (gldata@bfs.ucsb.edu) with your completed DocuSign approved journal and your excel document by the ledger cutoff dates.
      1. Subject: Dept Code, # Journals for GL Month/period
         For example, Subject: CNSI, 1 journal for April/Period 10
      2. Body of email: List the filenames & the debit/credit totals
         For example, Filename # 1 $110.00
3. File the form & supporting documentation in the department

External Customers

1. Sales and services provided to external entities are not achieved by the internal recharge mechanism. Instead charges and revenue are processed by a billing invoice and a cash receipt or credit card transaction.
2. Cash payments should be processed to record any split between external revenue (credited to the recharge revenue account of the recharge fund) and Non-University Differential (NUD) (credited to the NUD fund linked to the recharge revenue account) on the deposit slip or requested through Financial Control so that the ledger is correctly stated.

Mediation – Handling Disputes Between Centers and Campus Departments

Both parties agree to mediation by the Office of Budget & Planning for items in dispute where the department and the Income & Recharge Center and respective control authorities (Vice Chancellor or Dean) cannot come to an agreement. Items in dispute will be forwarded to the Office of Budget & Planning for resolution.

Budget

On an annual basis, Income & Recharge Centers are to update the budget for their main recharge operating fund to align it with the estimated revenue and expenditures for the year. This practice allows the Income & Recharge Center to compare the expected financial activity (budget) with actual performance.

Instructions to Update Budget for 2024-25:

1. Income & Recharge Center receives campus approval for their 2024-25 proposal to update rates for 2024-25
2. Within one month of receiving campus approval, the Income & Recharge Center initiates Transfer of Funds (TOF) to establish the updated budget for 2024-25. All transfers must be sent to the Income & Recharge Analyst, Erica Vizcaino, for review.

Points to consider while completing the Transfer of Funds (TOF):

1. Budget for the Provision to Equipment Reserve should be allocated to Sub 8
2. Budget for the in-year surplus or deficit is to be allocated to Sub 8
3. The budgeted amounts in the external revenue account (2XXXXX account), recharges in Sub 9, and any in-year deficit balance are to be established as debit entries
4. The budgeted amounts for expenditures (Sub 0 through 8) and any in-year surplus balance are established as credit entries
5. The estimated external revenue (2XXXXX account) and recharges in Sub 9 must equal the budgeted expenses in Sub 0 through Sub 8 
6. These transactions are considered permanent budget transactions. Therefore, if you are setting up your budget to be effective July 1st of the following fiscal year, transactions should be completed in the “Permanent Debit” and “Permanent Credit” side of the transfer. If you need to adjust the budget for the current fiscal year then the transactions are to be completed under “Current Debit” and “Current Credit”. 

Example TOF
How to Establish Budget for 2024-25 Training

Equipment

Inventorial Equipment

Inventorial (capital) equipment is a stand-alone item with a useful life of greater than one year and a value greater than $5,000. Inventorial equipment used in support of the Income & Recharge Center shall be included in the recharge rates; however, it cannot be charged directly to the recharge operating fund* [See BFB-56]. Instead, a Provision for Equipment Reserve, based on the straight-line depreciation methodology, must be included as a cost in the rate development, and a Reserve for Equipment Reserve is established in a separate fund (fund range: 76000-76999) linked to the recharge account, to segregate equipment cost recovery funds from the operating fund. If the Income & Recharge Center chooses not to include a Provision for Equipment Reserve at the appropriate level in the rates for recovery, an exception must be requested in the annual rate proposal and, if approved by both the divisional control point and the Office of Budget & Planning, the department and control point will assume responsibility for covering the cost.

The Provision for Equipment Reserve will be budgeted annually by the Income & Recharge Center from the appropriate operating fund (6XXXX fund) Sub 8 with an offsetting budget credit to the associated Equipment Reserve fund via a Transfer of Funds (TOF); once submitted, the Office of Budget & Planning works with General Accounting to financially transfer these budgeted provisions via financial journals on the balance sheet. 

*Purchases of inventorial equipment must be funded from other sources including equipment reserves, gift funds or other allowable fund sources

Capitalization Threshold

As of July 1, 2004 equipment with an acquisition cost of less than $5,000 is not considered inventorial equipment and should be charged directly to the Income & Recharge Center operating fund. 

Provision for Equipment Reserve

The Provision for Equipment Reserve Schedule (Tab F) is included with the recharge proposal form and must be submitted with all recharge proposals. This schedule is a list of the equipment that is used for the production of rechargeable goods and/or services and will be included in the provision calculation. 

The following equipment costs cannot be included in the Provision for Equipment Reserve calculation:

• Equipment funded by the Federal government or is identified as cost sharing to a federal project. [See BFB-56]

Donated equipment is considered to be the financial equivalent of a cash donation that is subsequently used to purchase equipment.  When an Income & Recharge Center receives an equipment donation, the equipment may be included in the Provision for Equipment Reserve.

The Provision for Equipment Reserve is calculated using the straight-line method of depreciation with no salvage value. Alternatives to the depreciation methodology may be approved when the center can clearly demonstrate that the alternative method more accurately represents the actual usage, consumption or life. [See BFB-56].

Provision for Equipment Reserve = (Asset Value - Federal Amount)/Useful life 

In other words, the total cost of the asset less the amount that was purchased with federal funds or is identified as cost sharing to a federal project. You take that total and divide by the asset's useful life (# of years) to get your annual provision amount.

To determine the useful life, use the useful life schedules issued by the Office of the President (http://eulid.ucop.edu). Any exceptions are subject to approval by the divisional control point and the Office of Budget & Planning.

Equipment Reserve

Equipment reserves are amounts set aside strictly for the renewal and replacement of equipment that is related to the recharge activity. The equipment reserve may only be used to make purchases when there are sufficient funds to cover the purchase. Use of the equipment reserve for other recharge related expenses is by exception only and subject to approval by the divisional control point and the Office of Budget & Planning. Requests for alternate uses of equipment reserve funds must be sent to the divisional control point and the Office of Budget & Planning and describe the proposed use of the reserve funds, including the dollar amount to be used. The request must also discuss the center’s future capital needs and how they will be met in the absence of a fully funded equipment reserve.

Transfer Process (instructions)

Acquiring Equipment

There are several ways inventorial equipment used for Income & Recharge Center activities can be acquired:

• Inventorial equipment is typically purchased from the Equipment Reserve budgets of the Income & Recharge Center.
• Inventorial equipment acquired with federal grant funds may be turned over to the Income & Recharge Center after the equipment has served the purposes of the grant, provided title is given to the University.
• Inventorial equipment may be leased. The terms of the lease will determine whether it is a capital lease or an operating lease. Please consult with the Office of Budget & Planning prior to entering into lease.
• Inventorial equipment may be donated to the University and used by the Income & Recharge Center.
• Inventorial equipment for Income & Recharge Center may be purchased by a department using non-federal funds.

Disposal of Equipment

1. Consult with the Income & Recharge Analyst on how to record gain or loss. Typically, any gain or loss from the sale of the equipment is recorded in the recharge operating account.
2. Remove equipment from the Provision for Equipment Reserve schedule in your rate proposal and stop including the provision for that item in the rates. 

Subsidy

• Subsidies must be disclosed in the rate proposal, including amount, purpose, and funding source.
• Subsidized rates must be consistently charged to all internal university users. All internal users must benefit proportionately from any subsidy.
• University funds may never subsidize external users.
• Multiple subsidies are allowed.
• The center must record the full costs (including the subsidy) for the activity in an identifiable account. See Chart of Accounts for more information.
• If a subsidy is used, the center should first calculate a fully costed rate. Then the subsidy is applied against the fully costed rate. No subsidies should be included in the calculation of the recharge rate. 
• Any exceptions are subject to approval by the Office of Budget & Planning in consultation with the appropriate control point.
• Subsidies may be applied using one of the following methods:
  • Billing Subsidy – to reduce the rate charged to the users for recharge goods or services by charging a portion of the billing rate directly to a subsidy LAFS. The full rate is billed, but a portion of the rate is charged to the users and a portion is charged to the subsidy. The billing subsidy method is preferred in order to maintain fund integrity, and for federal subsidies, avoid center income reporting requirements to a federal award.
    • Example: The fully costed rate of a recharge service is $100 per unit. Users receive a 20 % billing subsidy from a subsidy LAF. The subsidy LAF pays $20 by charging the subsidized portion of the rate directly to the subsidy fund and the users are charged $80
    • When preparing a recharge journal with a billing subsidy, only two additional journal lines are needed to recharge the billing subsidy fund source (one line to debit the subsidy fund and one line to credit the recharge operating fund). The subsidy object codes are to remain the same as the ones used to charge customers. Financial Journal (example).
  • General Subsidy – prior year deficit balances may be covered using a departmental discretionary fund. These transactions require special processing and must not be completed on the recharge journal. Please consult with the Income & Recharge Analyst for more information.

Discontinuing a Center

If an Income & Recharge Center decides that a service activity is no longer going to be provided, please email the Income & Recharge Analyst with the following information:

• When will the operation close?
• A final reconciliation of the activity (net position)
• A financial reconciliation of all associated NUD and reserve funds (net position)
• The proposed disposition of recharge net position(s)

Also, the center should notify its customers at least 30 days in advance. Notification via the departmental website should also follow. 

DEFICIT BALANCES:
If an Income & Recharge Center wishes to close a recharge activity but the account/fund is in deficit, the owner department should make arrangements with the Income & Recharge Analyst to transfer the deficit to an appropriate chart string within the department. Any surplus balance in the NUD fund or reserve fund will be used to cover any deficit.

SURPLUS BALANCES:
If an Income & Recharge Center wishes to close a recharge activity, but the recharge account/fund has a surplus, the owner department should make every effort to refund their customers using one of the two methods described below. If a surplus of less than one month’s operating cost remains in the recharge fund, the balance may be retained by the department and transferred to the department’s operational account (same fund).

Method # 1

• Segregate the recharge income surplus to a different account (same fund)
• Continue providing services to internal users but re-direct the recharge to the new surplus account until the surplus is exhausted. Users will still be invoiced but show a credit equal to the charges for net zero charge. 

Method # 2

• Center must review its recharges over the past “X” number of months and provide proportionate refunds to each fund that received recharge (to the extent that those funds were still open).