Chargeback Forms and Information | Accounting Office

Chargeback Forms

Chargeback Policy

A chargeback occurs when one University unit provides a good or service to another University unit and seeks to recover the cost of the good or service. This document describes the policies and procedures for establishing chargeback rates at Binghamton University. The primary objective is to establish a University approved review and approval process that ensures users pay only their appropriate share of actual chargeback costs and that proper records are available to support the chargeback rate.

The process applies to all chargebacks conducted at the University including the State, Income Fund Reimbursable (IFR), Dormitory Income Fund (DIFR), SUTRA, Research Foundation (RF) and Binghamton University Foundation, Inc (BUF).

I. Costing Principles:

It is important that chargeback rates be established in accordance with applicable costing regulations. The primary guideline for educational institution rate setting is found in the Code of Federal Regulations Title 2 Grants and Agreements Part 200. These guidelines require that chargeback rates must conform to the following standards:

Consistency in estimating, accumulating and reporting costs – to ensure that the practices used in estimating costs for a chargeback rate are consistent with those used by the University to accumulate and report costs.
Consistency in allocating costs incurred for the same purpose – to ensure that each type of cost is allocated only once and on only one basis by the chargeback operation.
Accounting for unallowable costs – to ensure unallowable costs are not included in chargeback rates. A sample listing of unallowable costs is provided in Exhibit 1.
Cost accounting period – to establish time periods for cost estimating, accumulating, and reporting.
Federal grants must be charged the lowest rate.

Chargebacks for goods and services must be charged directly to all users with no discrimination between federally and non-federally supported activities.

II. General Policies:

Billing rates are designed to recover the direct operating costs of providing the good and service. No costs other than those incurred to provide the good or service may be included in the billing rates charged to campus units.
Billing rates are based on a reasonable estimate of the cost of providing the good or service for one year and the projected number of billing units for one year. Actual costs and usage should be reviewed for reasonableness by the chargeback operation at least biennially and adjusted as necessary. Although it is not expected that the billing rates will be exactly equal to the cost of providing the services during any one fiscal year the rate should be reviewed by the chargeback operation annually to ensure consistency with the long-term plan to operate on a break-even basis.
A Chargeback Rate Development Worksheet will be prepared for each rate being requested. Supporting materials should be attached to the worksheet as needed to support or explain the items presented. Where a chargeback operation provides different types of goods or services or a variable rate structure, a separate worksheet must be developed for each type. In the rare event that the financial system cannot support the segregation of costs for each individual chargeback operation then an alternate chargeback calculation method must be devised. The alternate method may involve utilizing averages, comparisons to providers of similar services at other colleges and/or professional judgement of what the market will bear.
The Chargeback Committee will review the purpose of the chargeback program, evaluate the reasonableness of the rate support information, and recommend final approval of chargeback rates and appropriate chargeback account to the Chairperson of the Chargeback Committee. The Chargeback Committee will be composed of a representative from each Vice President area and chaired by a person assigned by the Senior Associate Vice President for Business Affairs.
In accordance with SUNY Fee Policy #7804, chargeback units must be able to track related revenue and expense for each approved chargeback rate. It is recommended that a separate account be established in the University, RF or BUF accounting system for each chargeback operation. All cost components identified in the Chargeback Rate Development Worksheet (personnel, fringe benefits, campus overhead and other than personal service expenses) will be charged directly to the assigned chargeback account. Likewise, costs not identified in the Chargeback Rate Development Worksheet cannot be charged to the account. Accumulating chargeback cost information in this manner will provide information to support rate accuracy, allow for accurate monitoring of surpluses and deficits and provide managers with accurate information relating to their chargeback operations. To help the proliferation of accounts, if an individual chargeback will not have a significant amount of activity then a separate account is not needed. If the chargeback activity resides in a Binghamton University IFR, the unit may choose to utilize separate sub-accounts for each chargeback.
Charges are to be levied no later than 30 days following the month in which the service is completed. If not billed within that period, the billed unit can reject the charge. Departments who believe they have been charged amounts other than those approved for the good or service can contact the Business Affairs Office to verify that charges are appropriate. Errors in billings will be adjusted as necessary.
If a chargeback operation provides services to individuals or organizations outside the University, the billing rates charged may be higher but cannot be lower than those charged to internal users plus overhead charges. Revenue from outside parties may have sales tax and Unrelated Business Income Tax (UBIT) implications and may require a separate account. Questions regarding sales taxes and UBIT and the need for a separate account should be directed to the Business Affairs Office.
The following details the allowable payment methods for different types of chargebacks. Avoidance of the assessment of campus overhead will not be sufficient reason to deviate from the established campus payment process.

Binghamton University IFR

Internal Binghamton University Users:

o Expenditure Transfer to another Binghamton University IFR/DIFR/SUTRA/State Purpose account

o P-Card payments are not permitted

Research Foundation/Binghamton Foundation Users (internal rate):

o Cash

o Check

o Credit Card

External Users:

o Cash

o Check

o Credit Card

Research Foundation

Internal Research Foundation Users:

o Expenditure Transfer to another Research Foundation Award

Binghamton University/Binghamton Foundation Users (internal rate):

o Cash

o Check

o Credit Card

External Users:

o Cash

o Check

o Credit Card

Binghamton Foundation

Internal Binghamton Foundation Users:

o Expenditure Transfer to another Binghamton Foundation account

Binghamton University/Research Foundation Users (internal rate):

o Cash

o Check

o Credit Card

External Users:

o Cash

o Check

o Credit Card
It is not appropriate to transfer chargeback operation revenues to other accounts to support unrelated activities. If funds have accumulated in a chargeback operation account because of prior or current year surpluses, an adjustment to future rates is necessary.
In some instances, a chargeback operation may elect to subsidize its goods or services by charging rates that are lower than actual cost. Chargeback operation deficits caused by intentional subsidies may not be carried forward as adjustments to future billing rates. The amount and funding source of subsidies must be identified in the Chargeback Rate Development Worksheet.
Auditable financial, statistical and other records related to chargeback operations are the responsibility of the Chargeback Committee Chairperson and must be retained for six years from the end of the fiscal year to which the records relate. Records are subject to audit by federal and other sponsors as well as internal and external auditors and University administrators.
All Chargeback Rates must be reviewed and reapproved at least every two years by the Chargeback Committee. If a Chargeback Unit fails to submit new rate forms and is not responsive to requests for information, the chargeback will be deactivated until the proper documentation is received.

III. Rate Development:

A. Cost Identification

Care should be given to identifying all costs on the Chargeback Rate Development Worksheet, as this will be the basis upon which chargeback rates will be established. Where possible, actual costs for the good and service should be documented and presented. Often it will be necessary to estimate activity and costs and the basis for such estimates should be clearly identified and explained.

B. Variable Billing Rates

All internal users must be charged the same rate for a good or service provided by a chargeback operation. There are two user designations for the purposes of billing rate development and assessment:
- Internal users: those using State, IFR, DIFR, SUTRA, RF or BUF funds.
- External users: those who do not pay through the above funding sources
While the base rate for a good or service for all users will remain the same, external users may be charged higher rates. A separate account must be established when there are a significant number of internal and external users of the good or service. External users must be charged at least the initial cost plus 13% overhead.
Alternate pricing structures based on time of day, volume discounts, turn-around time, etc. are acceptable, provided that they have a sound allocating basis, do not discriminate among users and do not result in recovering more than the cost of providing the services. Alternate pricing structures should be clearly identified and explained in the Chargeback Rate Development Worksheet. Alternate pricing structures will be published so users are able to consider the least costly means to obtain a good or service.
External only chargebacks may exist when expected users are not affiliated with the University and there is federal funding or a grant involved. These rates are developed using the same Chargeback Rate Development Worksheet. These rates only require review and approval by the Chargeback Committee Chairperson.

C. Cost Allocation

There are generally three categories of cost that need to be allocated: (a) salaries of staff to provide the good or service (b) supplies and materials associated with the good or service and (c) depreciation associated with equipment used in the process.
In addition to the direct costs associated with providing the good or service, significant deficit or surplus accumulations will be considered as adjustments to future billing rates.
Where a chargeback operation provides multiple services and uses separate billing rates, the costs related to each service must be separately identified using a cost allocation process.
When cost allocations are necessary, they should be made on an equitable basis that reflect the relative costs associated with providing the good or service. For example, if an individual is involved with multiple services, an equitable distribution of his or her salary among the various services would be accomplished by assigning the proportional amount of time the individual spends on each service. Other costing techniques such as the proportional amount of direct costs associated with each service, space used, may also be applied (refer to section II.3 of this policy in the event that other costing techniques fail to result in acceptable chargeback rates). Questions concerning appropriate cost allocation procedures should be directed to the Business Affairs Office.

D. Equipment Costs Included in Billing Rates

The cost of equipment that will be used to provide the good or service should be recovered through assignment of a depreciation rate over its estimated life. Standard useful lives for various categories of equipment are included in Exhibit 2. The established rates will provide the chargeback operation with funds to replace the equipment in the future. The funds recovered by the depreciation charge should be set aside as an equipment replacement reserve to be drawn upon as needed. If additional funds are necessary to cover the cost of the new equipment, other sources may also be used.
Equipment purchased either wholly or partially through federally funded sponsored programs may not be included in billing rates.

E. Inventory Accounts for Products Held for Sale

If a chargeback operation sells products from an inventory or maintains an inventory of parts and supplies used in providing its services and the amount of stock on hand is significant, inventory records must be maintained. Although first-in-first-out is most common inventory method, valuations may be based on other methods (e.g., last-in-first-out, average cost, etc.). Once the inventory method has been chosen, the valuation method may not be changed.

IV. Rate Review, Notification and Monitoring:

Completed Chargeback Rate Development Worksheets should be submitted to the Chargeback Committee Chairperson. Up to thirty days should be afforded the Chargeback Committee to complete its analysis of the proposal. Chargeback areas should provide adequate lead-time to receive approval of the rate. It is strongly recommended that chargeback areas propose adjustments before the annual budget development process so operations can properly budget for any changes in chargeback rates.

All currently approved University chargeback rates will be posted and maintained on the Business Affairs Office website. Chargeback units may only charge users the approved and posted rates for providing the good and service.

During the (at minimum) biennial rate review process, the Business Affairs Office will evaluate the financial records of chargeback operations focusing on the appropriateness of revenue and expense activity, surplus and deficits accumulation, and the adequacy of the chargeback operation’s record keeping practices.

Questions and concerns related to the campus chargeback process and procedure should be directed to the Business Affairs Office.

VI. Definitions:

Billing Rate: The amount charged to a user for a unit of service. Billing rates are usually computed by dividing the total annual costs of the chargeback operation by the total annual number of billing units expected to be provided to users of the service.

Billing Unit: The unit of service provided by a chargeback operation. Examples of billing units include hours of service, animal care days, tests performed or machine time used.

Campus Overhead: An assessment to chargeback operations and other activities to support the administrative and support functions of the campus.

Chargeback: Financial transaction to charge for a good or service.

Chargeback Operation: An organizational unit that provides a good or service and charges for the good or service.

Chargeback Committee: Individuals identified by the vice presidents to review and recommend chargeback rates to the Chairperson for approval and implementation.

Deficit: The amount by which costs of providing a good or service exceed the revenue generated during a fiscal year.

Direct Operating Costs: Costs that can be specifically identified with a good or service provided by a chargeback operation. These costs include the salaries, wages and fringe benefits of University faculty and staff directly involved in providing the good or service (i.e.: materials and supplies, services, equipment rental or depreciation).

Equipment: An item of tangible property having a useful life exceeding one year and an acquisition cost as specified in Exhibit 2.

Fiscal Year: The 12-month period used for accounting purposes (July 1 to June 30).

Fringe Benefits: An assessment for costs associated with most personal and temporary service positions.

Internal User: A customer that will pay for the good or service through a State, IFR, DIFR, SUTRA, RF or BUF account.

Subsidy: Subsidized costs are identified as expenses that will be incurred by the chargeback operation but will not be recouped through the chargeback mechanism. The chargeback operation or University administration may choose to subsidize a service by paying a portion of its costs from another funding source.

Surplus: The amount by which revenue generated exceeds the cost of providing the good or service during a fiscal year.

Unallowable Costs: Costs that may not be charged as part of a chargeback fee. Examples of unallowable costs are provided in Exhibit 1.

Exhibit 1: Examples of Unallowable Costs

This list is based on the Code of Federal Regulations Title 2 Grants and Agreements Part 200. The list is not all-inclusive and failure to mention a particular item of cost does not imply the cost is allowable or unallowable.

Alcoholic beverages unless directly related to the program being provided.
Cost of membership in any social, dining, civic or community organization.
Unreasonable reimbursements for travel expenses; those which are outside the established travel policy of the institution
Bad debts or uncollectable accounts.
Donations or contributions.
Costs of entertainment, including amusement, diversion and social activities and any costs directly associated with such activities.
Advertising costs which are not used for (1) recruitment of personnel, (2) the procurement of goods and services required for the performance of the sponsored agreement.

Exhibit 2: Equipment Useful Life

Depreciation provides a method to recognize that the value of an item of equipment is consumed over an extended period of time. This period is called the useful life of the asset. The following asset categories and useful lives are for use for chargeback operation equipment.

Equipment Designation:

Assets Purchased with State & IFR Funds $1,500
Assets Purchased with Research Foundation Funds $ 5,000
Assets Purchased with Foundation Funds $5,000

Asset Description Recovery Period in Years --Useful Years

Computer Equipment/Printers (including software purchased with equipment) 5 years
Furniture 10 years
Scientific/Technical Equipment 5 years
Vehicles (cars and light trucks) 5 years
Trucks (heavy duty) 6 years
Shop Machinery/Tools 10 years
Audio/Visual 5 years

Annual Depreciation is determined by dividing the cost of the asset by the number of useful years indicated above.

Notes

This is a general guideline table. Exceptions will require written justification for an alternative recovery period. The justification should be submitted with the Chargeback Rate Development Worksheet.
Salvage value shall not be considered to calculate depreciation.
Once the recovery period has been set and depreciation has begun, it cannot be changed.
No depreciation is allowed on assets that have outlived their depreciable life (recovery period).