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1415 Allocating the Cost of University Services
Vice President for Finance and Chief Financial Officer
Finance and Business Operations
July 1, 2011
February 3, 2012
This policy covers the allocation of cost for general services provided by central administrative and academic support units (as specified in Procedure 1415 PR.01 A University Services Included in the Allocation Method) to schools and units at the University.
The cost of University Services will be allocated to the schools and units intended to benefit from these services, except where such allocation is expressly forbidden by donor or other legal restrictions.
This allocation will be performed using the method set forth in Procedure 1415 PR.01 Method for Allocating the Cost of University Services.
The ongoing administration of this policy and the supporting procedures will be governed by Procedure 1415 PR.01.C Governance of the Method for Allocating the Cost of University Services.
Reason for the Policy
The University provides a variety of support services on a shared basis for schools and units across campus. The reason for providing services on a shared basis can be related to the desire for greater efficiency, quality of service, compliance, or other reasons. The University has determined that these costs will be allocated to the schools and units intended to benefit from them in order to
- ensure the economics (full costs; all funding sources) of its various schools and units are transparent, including the costs associated with support services provided on a centralized basis as well as any funding support provided;
- reinforce the ongoing need for collaboration among the providers and intended beneficiaries of these services regarding efficiency, service levels, and future plans; and
- provide an ongoing funding source for these shared activities.
Since the costs related to these services are significant, the method for allocating them should be transparent to the providers of the services, those intended to benefit from them, and those who are funding these costs. This policy and the supporting procedures seek to provide transparency into these costs and the method for allocating them.
Services provided by central administrative or academic support units as specified in Procedure 1415 PR.01 A University Services Included in the Allocation Method
A single method will be used to calculate the amount of costs intended to benefit schools and units. This calculation will be shared with the leadership of schools and units (both providers and payers of the services) to a) foster greater transparency into administrative costs and the method for allocating them; and b) facilitate conversations about appropriate actions to reduce costs and/or increase service levels.
The method should be a reasonable approximation of how much the services are intended to benefit each school or unit.
The calculation will be updated at least annually, although the frequency of updating the allocation to each school may differ in order to facilitate predictability (see Procedure 1415 PR.01.2B Allocating Costs to Certain Self-Support Schools and Units to Improve Predictability. In these cases, the annual calculation will still be available for information purposes to the schools and units intended to benefit from the services.
To facilitate the transparency of administrative costs and ongoing discussion about improving cost effectiveness and service levels, the calculation to allocate costs will be kept separate from whether or not a school or unit can afford to pay for the services. Decisions about funding support will be informed by but kept separate from the allocation of costs to avoid obscuring a comprehensive view of the economics (full costs; all funding sources) of the University’s academic and administrative activities.
Procedure 1415 PR.01 Method for Allocating the Cost of University Services
1415 PR.01.1 Base Calculation
A. University Services Included in the Allocation Method (“Cost Pools”)
B. Allocation Metrics
C. Schools and Units Intended to Benefit from the Services (“Base Units”)
D. Other Aspects of the Base Calculation
1. Costs to be Allocated Will be Based on Actual Costs Incurred
2. Allocating overhead to units who re-allocate it to others (“Step Down”)
3. Confidential Payroll
1415 PR.01.2 Allocating Costs from the Base Calculation
A. Allocating Costs to Certain Self-Support Schools & Units to Improve Predictability
B. Allocation to All Other Schools & Units
1415 PR.01.3 Governance of the Method for Allocating the Cost of University Services
Exceptions, amendments, or considerations regarding the policy or related procedures should be directed to the Vice President for Finance & Business Operations (VP F&BO) for discussion and resolution.
Decisions by the VP F&BO regarding this policy or related procedures may be appealed to the Provost.
Decisions by the Provost regarding this policy or related procedures may be appealed to the President.