Creating Billing Rates February 2008

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´╗┐Creating Billing Rates February 2008

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Who Needs A Billing Rate? Benefit Centers : A working unit that gives products or administrations that are 1 repeating, 2 one of a kind, 3 not promptly accessible from outside clients, 4 advantage the adequacy of the University when accessible, and 5 are liable to government and additionally state costing controls and rules. (Since Clemson is a foundation that gets government reserves we are required to reliably apply these costing directions and rules.) The expenses connected with giving those products or administrations are recuperated from clients through built up and endorsed charging rates. All Service Center movement should either support or identify with the University's main goal. Illustrations: Machine shops; Lab testing charges; Instrument and PC offices Recharge Centers : A working unit that gives products or administrations inside a solitary school or office. A revive focus' rates may not be formally posted but rather still require looking into by the Comptroller's office. Case: Departmental Copy Centers

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What Is A Billing Rate? The sum charged to recuperate a few or the greater part of the cost connected with creating a decent or giving an administration. Charging Rates are: Determined by isolating the yearly government reasonable expenses connected with a specific item or administration by the aggregate yearly charging units connected with that item or administration (i.e. a hour of machine time, a lab test). May shift by sorts of clients or potentially benefits/items May likewise incorporate extra charges to non-college clients with an end goal to advance full recuperation. Rates being charged to CU clients MUST NOT be more prominent than those charged to non-CU clients.

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What Are Federal Allowable Costs? For a cost to be governmentally permissible, it must be: Reasonable the nature and measure of the products or administrations obtained mirror the activity that a judicious individual would have taken under similar conditions. Allocable task of a cost to a specific action (i.e., a particular venture, supported understanding, office) if the cost: (a) was brought about particularly for the action; (b) benefits both the action and different exercises, and can be appropriated among them in sensible extent to the event got; or (c) is important to the general operation of the action, in spite of the fact that an immediate relationship can't be appeared. Not named unallowable in OMB Circular A-21, Section J .

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Examples of Federal Allowable Costs Operating costs which are recorded in the administration focus' record : Salaries & compensation Associated college benefits Materials and supplies Subcontracts and outside administrations Equipment rent or rental External intrigue cost Facilities costs (utilities, custodial) paid straightforwardly by the administration focus Prior year working deficiency/excess (convey advances) Other specifically related costs (e.g., travel, interchanges) Depreciation identified with capital resources bought by the administration focus and recorded in the administration focus' record. Deterioration of gear obtained with government assets can not be incorporated. NOTE : Must have the capacity to explicitly recognize any hardware whose deterioration is incorporated the charging rate. Gear incorporated into the University aberrant cost rate count can NOT be incorporated into a charging rate. Contact the Comptroller's Office if help is required in making this distinguishing proof.

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Examples of Federal Unallowable Costs Unreasonable concerning nature or sum; Unallocable; Specifically regarded unallowable in OMB Circular A-21 Section J; Advertising of administrations/items , Alcoholic drinks, Bad obligations, Entertainment (diversion and social exercises), Goods or administrations for individual utilize, Fines & punishments

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Costs Which CAN NOT be Recovered Through Billing Rates: Costs that must not be incorporated into charging rates since they are recuperated through different means, for example, the roundabout cost recuperation rate, include: Building devaluation; Facilities cost (utilities, support, and custodial cost) paid straightforwardly by the college and not recorded in the administration focus account; University and departmental overhead costs that are not straightforwardly charged to the administration focus account (counting deterioration on hardware acquired with departmental assets); Purchase cost or estimation of gear (this ought to be deteriorated).

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So How Is A Billing Rate Calculated? 1. Build up a cost evaluate for every item or administration to be given. Increment or lessen the cost evaluate by earlier year convey forward and diminish the cost assess by any appropriations. This will give you evaluated net cost. 2. Decide an aggregate of the fitting unit of yield for every charging rate to be produced. This can be gotten from past results and additionally from contributions from likely clients. Run of the mill units of yield are: hours of work; hours of machine time; tests dissected; units of measure, for example, pints, pounds, feet, and so forth. Alert: When hours is the picked unit of yield, guarantee that the aggregate hours used to ascertain the hourly charging rate reflects assessed billable hours and not add up to repaid hours. There can be a critical distinction between evaluated billable hours and aggregate repaid hours (get-away hours, wiped out hours, breaks, tidy up, leading inventories). 3. Partition net cost assess by the aggregate unit request gauge to decide the charging rate for a specific item or administration. evaluated net yearly expenses = yearly charging rate per unit assessed yearly charging units

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Billing Rate Example Allowable Operating Costs for FY08: B eakers $ 5,000 Chemicals $ 10,000 Gloves $ 2,500 Misc. supplies $ 2,500 Labor & fringe $ 50,000 Total FY08 evaluated $ 70,000 reasonable costs Total FY08 estimated 7,000 specimens # of samples Total FY08 assessed cost $10 per test This is a case of a lab that performs tests on tests for inner and outside clients. Above are the evaluated admissible expenses for the administration focus.

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Billing Rate Example Internal Customer Rate Calculation: Estimated # of samples 5,000 Estimated cost for every sample x $10 Internal segment of total $ 50,000 allowable costs Carry forward surplus $( 5,000) from inward clients Subsidy from Dean $(10,000) Total lessening to costs $(15,000) Total FY08 net estimated $ 35,000 costs INTERNAL CUSTOMER RATE PER SAMPLE $7 External Customer Rate Calculation: Estimated # of samples 2,000 Estimated cost for each sample x $10 External segment of total $ 20,000 allowable costs Carry forward surplus $( 4,000) from outside clients Subsidy from Dean $ 0 Total diminishment to costs $( 4,000) PLUS: Advertising expense $ 2,000 (unallowable for inside) Total FY08 net estimated $ 18,000 costs EXTERNAL CUSTOMER RATE PER SAMPLE $9 Billing Rate Subsidy: Operating costs must be net of any endowment got. Non-Billed Users: ALL clients must be incorporated into the aggregate volume while ascertaining a charging rate, even clients that won't be charged. (i.e. classroom utilize) Carry-forward : The surplus or shortage coming about because of the over or under evaluating of charging rate costs or units (by and large figured on a monetary year premise). 10

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Calculation Checklist Service focuses ought to audit the charging rates count to guarantee that: No scientific blunders exist Estimated incomes rise to evaluated cost Expense assessments are in accordance with earlier years Expense gauges incorporate just allocable and admissible costs Depreciation cost is just for non-governmentally obtained and independently distinguished hardware that has been represented in the administration focus' records A proper yield measure was spoken to the billable unit Prior period working surplus or shortfall was incorporated into figurings Service focus chiefs are in charge of protecting that working incomes and costs are reliably recorded at a similar office, store and venture level. Benefit focuses ought to keep up nitty gritty documentation and avocation of assessed costs, incomes, surpluses, and shortages that bolster the reason for every charging rate estimation. This documentation ought to be promptly accessible upon demand.

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How Is Billing Rate Activity Accounted For? Under typical conditions, benefit focuses ought to have the capacity to cover working costs through built up charging rates; be that as it may, divisions may finance an administration focus. Keeping in mind the end goal to precisely represent the sponsorship, a diary section must be prepared to record the financed charges as a cost in the office's record and as an income in the administration focus' record. For E&G and PSA self-supporting units, record income from other college clients to Internal Recoveries account code (48xx). For Auxiliary units record income in Auxiliary Revenues account code (46xx) or to Internal Recoveries account code (48xx). Record income produced from money deals into another income account code. Alert: Do not utilize a cost record to record benefit focus incomes. Alert: Billing rates charged to CU clients can't be higher than charging rates charged to non-CU clients.

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How Are Billing Rates Processed? Method - Billing Rates 1. Benefit focus supervisors are required to survey charging rates every year, amend where essential, and present any progressions (alongside satisfactory avocation) to the office's suitable Business Officer. 2. Every Business Officer is then in charge of exploring the readied rates and conveying the rates to their Dean or Department Head. 3. Subsequent to speaking with the Dean or Department Head, every Business Officer s