Developing a Usage Rate Procedure

Developing a Usage Rate

Units must go through a rate development process to ensure an accurate composition of allowable costs on a cost recovery basis.  Although units may vary in size, complexity, and services provided by the units, they are required to follow common administrative practices.

Outlined on this page are suggested steps that a unit should take to ensure all necessary items are considered when going through the rate development process.

1. Define Products or Services and Determine Related Costs: Fee-for-service educational activities must determine what will be sold and the related costs of producing those goods and services.  These costs are used to establish a billing rate to charge for those products and services.  Billing rates should be established in measurable units and a separate rate should be established for each class of goods or services provided
2. Estimate Customer and Facility Usage: Determine the customers (internal vs external) of the fee-for-service educational activity, and estimate the use of the products or services that will be sold to the customers on an annual basis.  The usage base is the volume of work expected to be performed, expressed in units such as labor hours, machine hours, CPU time, or any other reasonable measurement
3. Determine Allowable Operating Costs:
   • Direct Salaries: Salary and benefit expenses directly related to sale of the product or service provided. (6xxxxx Accounts)
   • Other Operating Expenses: Expenses that are directly related to the cost of providing the product or service. (7xxxxx accounts)
   • Administration or Overhead Salaries: Salary and benefit expenses related to the administration or oversight of the fee-for-service educational activity.
   • Subsidies: Expenses that are directly related to the cost of providing the product or service that are recorded outside of the Auxiliary Chartfield.
   • Using Equipment purchased with Federal Funds: Costs and depreciation associated with equipment purchased using federal funds are not allowed to be factored into the billing price. With permission from the federal agency the equipment may be used by the FSEA.
   • Depreciation: Depreciation expense is not allowed to be included in the calculation of the billing rates because it is included in the Facility and Administration cost rate recovered from sponsors.
   • Unallowable Costs: Costs that are not allowed to be included as part of the internal billing price. These unallowable costs are referenced in the Allowable and Unallowable Costs page as well as OMB Uniform Guidance, Subpart E, §200.420 through §200.475
4. Assign the Allowable Operating Costs to the Individual Product or Service: Since many fee-for-service educational activities provide more than one service, each cost should be allocated to the different services in relation to their use in each service
5. Calculate the Billing Rate: The billing rate is calculated by dividing the total annual cost directly chargeable to the facility by the total estimated annual usage

Resources

Allowable and Unallowable Costs

Types of Billable Units

OMB Uniform Guidance, Subpart E, §200.420 through §200.475

FSEA Authoritative Guidance

Contacts

Auxiliary Accounting: (352) 294-7236

Cost Analysis: (352) 392-5778