Rates must be updated by departments and approved by Financial Reporting at a minimum of every 2 years for each service. Annual review is encouraged. Service Center rates should allow the operation to "break even" over time; however, working capital balance of up to 10% of annual operating expenses may be maintained.
- Departmental Lookback Review – Departments must review operating statements to evaluate the total revenue and expenses related to providing each service. If it is determined that revenue exceeded expenses for the period under review and working capital balance exceeds 10% of annual operating expenses, adjust rates for the following period (whether the period is one year or two) down to give back the surplus (except for external user rates). If revenue was less than the expenses of providing the service, adjust future rates up to capture all the costs and recover the shortfall provided that the working capital balance remains under 10% of annual operating expenses.
- Revenues that exceed the actual costs of a service can not be used to subsidize other services of the Service Center, except for revenue generated by external users. For example, one service can’t be run at a profit, to subsidize another service that is run at a loss (for federal grant rates).
- Cumulative surplus should not exceed 10% of annual operating expenses.
- Surpluses or deficits should be cumulatively used to adjust future billing rates or be credited back to users by tracking the carry forward net cumulative surplus or deficit. This effort can exclude the balance created on external customers, so long as these surpluses can be documented.
- It is the department’s responsibility to maintain operating statements to support calculations used to develop and review rates.
- Consider setting up a separate account for each service center and/or sub-account for each line of service to facilitate accurate costing and tracking of revenues, expenses, and working capital balances.
- Financial Reporting Approval – Submit details of the rates to be charged and costs involved in developing those rates (see examples in D, 10. Above) to the Office of Financial Reporting at billingrates@ctlr.msu.edu for approval. The rates will be reviewed and, if no issues are identified, an approval letter will be e-mailed back to the sender and any other individuals copied on the requesting message.
- Provide the following information either in your rate or in the body of your e-mail request:
- Users (Internal, External, Federal).
- Account to receive the revenue from the service.
- Rate Effective Date (when will the rates be charged).
- Review and approval (or follow up) will typically occur within two weeks of submission. You will receive an approval via e-mail. A sample approval letter is viewable here. This approval letter along with the rates approved will be attached to the KFS Account e-doc in KFS for future reference.
- Rates for federal users will additionally be reviewed by Contract and Grant Administration Staff before approval is sent.
- Document activities and maintain records supporting the expenditures for 3 years for federal compliance requirements. Beyond 3 years, see University Archive policies.