Subject Area: Accounting
Responsible Office: Financial Services
Sponsor: Associate Vice President for Finance
Originally Issued: January 1989
Revised: October 1992, January 2010, December 2014
Refer Questions To: Casey Campbell, 773-702-3695
Purpose: To provide information to recharge operations to ensure they are managed in accordance with University guidelines contained in the Financial Services' Accounting Protocol for Recharge Operations and the applicable provisions from federal regulations.
A recharge operation exists primarily to furnish goods or services to University departments and/or programs. Individual students, faculty, staff and the general public may be served incidentally by the operation. A recharge operation charges a fee directly related to the recovery of the cost of the goods or services provided. Other characteristics of recharge operations are that they act only upon specific user request, provide goods or services measurable in terms of materials used or hours worked for each user order, and operate as an on-going concern rather than on a sporadic or intermittent basis.
Recharge operations are budgeted and accounted for as discrete operating units in the recharge operations section of Ledger 2 in the Financial Accounting System (FAS). The operation of each recharge unit in Ledger 2 must be separately budgeted and accounted for in accordance with the following guidelines:
- Requests for new recharge operations must be presented to Financial Services' Manager of Current Unrestricted Funds for approval. The request must include a description of the proposed recharge operation and an operating budget for three fiscal years.
- The service or product provided by the recharge operation must be charged at a rate established annually. The rate should be calculated in accordance with the guidelines contained in Financial Services' Accounting Protocol for Recharge Operations.
- In addition to the recovery of direct costs, specialized service centers will have a rate structure designed to recover an allocable share of University indirect costs. (Note: Recovery of indirect costs by certain recharges will be determined on an individual basis by Financial Services in accordance with the applicable provisions of federal regulations.)
- Established rates must not include a markup for "profit" over and above what is necessary to recover the costs of operations.
- Established rates must be applied consistently to all recharge operation users and should be designed to recover the aggregate direct costs of the operation over some reasonable break-even period, preferably the University fiscal year.
- Any recharge operation that has an operating deficit at fiscal year end (June 30) must fund the deficit from other divisional funds unless Financial Services has approved a plan that demonstrates the recharge operation will return to break-even over some other approved period of time.
- Any recharge operation that has an operating surplus at fiscal year end (June 30) must consider this surplus in the establishment of rates for the next fiscal year.