1410 PR.02 University Service Providers: Rate Calculations

Revision Date: 
June 8, 2020


1.      Overview

2.      Submission Requirements

3.      General Principles

4.      Fully-Costed Rate Calculation Process

5.      Passthrough Charges for Goods and/or Services from External Suppliers

6.      Record Retention

1. Overview

This procedure supports Policy 1410 University Service Providers.  It describes the concepts behind rate calculations and the processes to follow for those University Service Providers (“USPs”) required to develop Rate Schedules, as mandated by Policy 1410, Section 1410.4.

2. Submission Requirements

Per Policy 1410 University Service Providers, on an annual basis, Specialized Service Facilities (“SSFs”) and Recharge Centers (“RCs”) must develop a goods and services Rate Schedule for their users.  SSFs and RCs that certify as a part of their registration or annual renewal that they will not charge sponsored awards during the current year of operations are exempt from this requirement.

Annual calculations must be prepared before the beginning of the fiscal year in which the rates will be charged.  Calculated rates are used for billing in the next fiscal year (e.g., rates for FY21 are calculated during FY20, using final (or near final) expenses for FY20).

SSFs and RCs must submit their Rate Schedules for central monitoring by completing Form 1410 FR.02 University Service Providers: Rate Calculation Worksheet and submitting it with their registration or annual renewal, per Procedure 1410 PR.01 University Service Providers: Registration and Annual Renewal.

USPs may request authorization from the USP Operating Committee to calculate rates using a process other than that documented in Form 1410 FR.02 University Service Providers: Rate Calculation Worksheet

3. General Principles

A USP’s Fully-Costed Rate reflects the total allowable costs divided by the estimated volume of providing a good or service that results in revenues equal to allowable costs.  USPs must offer all internal users the same Customer Rate for the same level of goods or services purchased in the same circumstances (excluding any discounts offered, at the discretion of the USP (as described in Subsection 4.E., below)).  Customer Rates must be equal to or less than the USP’s Fully-Costed Rate for that good or service.  The USP must obtain prior approval from its lead administrator to establish a Customer Rate that is lower than its Fully-Costed Rate.  USPs may use alternate Customer Rates in certain circumstances, such as for high volume work or off-hour usage, but the alternate Customer Rates must be equally available to all users.

Adjustments to either a Fully-Costed Rate or Customer Rate are permitted during the year, as needed, since rate calculations are based on estimated future costs and usage.  Any adjustments require prior approval by the USP’s lead administrator and must be documented and submitted to isp@yale.edu.

A. Sales to External Users

USPs wishing to provide goods and/or services to External Users must obtain approval pursuant to Procedure 2100 PR.02 External Sales Approval Process prior to providing goods and/or services to External Users.

4. Fully-Costed Rate Calculation Process

In general, USP Fully-Costed Rates are calculated by dividing estimated future recoverable costs by estimated future usage.  USPs must calculate their Fully-Costed Rates on an annual basis by completing Form 1410 FR.02 University Service Providers: Rate Calculation Worksheet, unless the USP Operating Committee has granted an exception.  The subsections below describe the basic principles and methodologies of rate calculations.  Form 1410 FR.02 University Service Providers: Rate Calculation Worksheet contains detailed instructions on the use of the form.

A. Accumulate Current USP Costs

Per Policy 1410, Section 1410.3, USPs must use a unique account to record all revenues and expenses pertaining to the USP’s activities.  USPs providing multiple goods and/or services should separately record the revenues and expenses for each good and/or service, per Procedure 1410 PR.03 University Service Providers: Accounting and Billing.

B. Calculate Current Recoverable USP Costs

Only costs that are allowable and allocable expenses (“recoverable costs”) may be included in the Fully-Costed Rate calculation.  Therefore, any unrecoverable costs for goods and/or services accumulated in the USP’s account must be removed before calculating the next year’s Fully-Costed Rates.

In general, costs funded by a sponsored award must not be included in a USP’s recoverable costs.  Procedure 1305 PR.04 Unallowable Costs describes common unallowable costs (and, therefore, unrecoverable).  Other common costs that are typically unallowable as direct charges to sponsored awards may still be recoverable costs.  Policy 1403 Charging of Administrative and Clerical Salaries and Certain Other General Administrative Expenses to Federal Funds discusses such costs.  If included in the USP’s Fully-Costed Rate, administrative salaries and related fringe benefits must be charged to the USP’s unique account.

Certain costs recorded in the University’s management reporting, per federal regulations, must not be included in a USP’s recoverable costs.  Such costs include, but are not limited to, capital equipment purchases, University interest and amortization, and fringe benefits charged at University rates.  Instead, USPs should include costs of the federally-defined equipment depreciation and fringe benefits at federally-negotiated rates.

USP costs, in all years but the USP’s first year of operation, must also be adjusted by any surplus, and may be adjusted by any deficit, in the account fund balance, as described below:

  • Surplus: Any federally-calculated surplus in excess of 60 days of operating expenses in the account fund balance must be included as a reduction in the recoverable cost estimate, thereby reducing future rates charged.
  • If, however, the USP’s federally-calculated surplus is much larger than 60 days of operating expenses, the USP need not fully eliminate that surplus in a single year.  In such instances, the USP may request approval from their appropriate Rate Reviewer and the USP Operating Committee to implement a 2- to 4-year reduction plan.
  • Deficit: USPs with a federally-calculated deficit may include that deficit in the subsequent year’s recoverable cost estimate with prior approval from the USP’s Rate Reviewer and lead administrator.  Ability to roll-forward this deficit is limited, however, to the immediate subsequent year only.

These adjustments to the accumulated current costs for each good or service produce the current recoverable USP costs for that good or service.

C.  Estimate Future Recoverable USP Costs and Usage

Costs: USPs estimate their future recoverable costs by reviewing their current recoverable costs, analyzing the previous year’s activities and reasonableness of those costs, and, using knowledge of their activities and business projections for the next fiscal year.  Form 1410 FR.02 University Service Providers: Rate Calculation Worksheet provides a recommended methodology for creating this estimate.

Usage: USPs estimate future usage expected during the fiscal year in which the calculated rate will be charged.  Estimated usage should represent the volume of units expected to be used in the fiscal year, not the highest potential output of the USP.  Typical units of measure for usage include time (e.g., hours or days of equipment use or labor), units of mass or volume (e.g., pounds, liters), number of users, samples, slides, or assays, but may vary based on the specific good or service provided by the USP.

Expected usage should include both internal and external users, regardless of rate charged.  Even if no rate will be charged for a good or service (e.g., via an offered discount), all usage should be included in the estimated total.  Overestimating usage will result in a deficit, while underestimating usage will result in a surplus.

D. Calculate Fully-Costed Rate and Prepare Rate Schedule

USPs calculate their Fully-Costed Rates for the upcoming fiscal year by dividing estimated future recoverable costs by estimated future usage (as described in Subsection 4.C., above) for each of the goods and/or services provided.

Once a USP calculates its Fully-Costed Rate, it must create a full Rate Schedule.  This Rate Schedule must include the Fully-Costed Rate and the Customer Rate for each good and service it provides.  To do so, USPs complete Form 1410 FR.02 University Service Providers: Rate Calculation Worksheet and submit it with their annual registration renewal.

E. Allowable Discounts

USPs have the discretion to offer discounts on their goods and/or services to users, with approval from their lead administrator.  A discount is a reduction in price charged to a user below the typical Customer Rate for that good or service.  USPs are expected to record all such discounts in accordance with Procedure 1410 PR.03 University Service Providers: Accounting and Billing and Accounting by and for University Service Providers.   

5. Passthrough Charges for Goods and/or Services from External Suppliers

Some SSFs and RCs, in addition to their primary goods and/or services, also offer users goods and/or services obtained from external suppliers.  If an SSF or RC aggregates and distributes goods and/or services obtained from external suppliers, but it does not charge internal users for personnel and/or other administrative costs related to the provision of goods and/or services or impose any additional charges, it is expected to indicate these goods and/or services in the appropriate tab on Form 1410 FR.02 University Service Providers: Rate Calculation Worksheet.  The USP is not required to provide a cost buildup for these goods and/or services unless the SSF or RC imposes any additional charges on the goods and/or services.  In that instance, it must include those goods and/or services in its Fully-Costed Rate cost buildup.

6. Record Retention

USPs must maintain a Rate Schedule for all rates charged annually, along with documents to support the calculated rates.  These records must be retained in compliance with Policy 1105 Retention of University Financial Records.

USPs should note that sponsored awards may last ten years or more.  USPs should, therefore, consult the Office of Sponsored Projects before discarding any records.