Recharge or Service Center? It Needs to Break Even.

The most interesting presentation that I attended yesterday afternoon was on service centers and recharge centers, given by Nicole Nichols from Washington University School of Medicine and Hannah Clampitt from University of Missouri-Columbia.

The federal government does not neatly define what constitutes a service center or a recharge operation; it allows institutions to define those types of centers within their institution-specific policy documents. Research administrators should consult their university’s policies for information on the management of service centers and recharge operations because many terms are specific to how an institution will choose to define them based on language or a budget guideline.

There are some general guidelines on the management of recharge or service center activity, regardless of the term of art, if you are using the mechanism to manage funding related to sponsored research:

  • The policy guidance that applies to service/recharge centers is the OMB circular A21 section J47. This circular requires that service centers charge their users based on actual use at non-discriminatory rates calculated to recover actual costs.
  • Recharge rates are calculated to include direct costs that are allowable on federal awards.
  • If you receive a federal award to set up a recharge center, those funds cannot be used in your rate calculation. (they serve as a subsidy that lowers rates charged to users)
  • Investigators often seek to set up recharge centers or service centers to “make money.” This is not possible for many reasons, as a requirement of rate calculations for service centers is that they are budgeted at a break even rate.
Specifically:
      1. There are 2 rates for each recharge center, an internal (full cost) and external rate (full cost plus F&A); the government needs to receive the most favorable charge when a user applies recharge activities  to a grant or a grant manages a recharge center.
      2. Its not possible for institution to generate revenue from customers paying with federal funds.
      3. While some industry contracts use service centers for reasons unrelated to the aims of the award for which it was established, and these customers could be charged higher rates, these customers subject the university to business taxes, which can be problematic over time for the institution’s non-profit status.

Administrators should review their accounts to ensure their balances are within 10% on a quarterly basis and consider adjusting rates during the year to assist with closeout and reconciliation at the end of the year.

Service centers and recharge centers, especially those operating for research purposes will be receiving additional scrutiny in the coming months from regulatory agencies. We need to remain current on all requirements for financial record keeping and compliance, especially because more funding agencies and universities are looking towards recharge models to maximize research resources.

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