What is a service department and why does it exist?
A service department provides value-added goods and/ or services to Texas A&M University System users on a recurring basis and charges a fee for those goods/services in order to recover their costs. A service department exists for reasons of convenience, efficiency, or because the product is not otherwise available to the Texas A&M University System community. A service department may have external customers but external usage should be incidental to the operation. A service department's primary customers should be internal to the Texas A&M University System.
Why must service departments provide rate studies and follow service department requirements?
Service departments often charge federal programs (sponsored/grant agreements). Costs charged to such programs must be in compliance with federal regulations outlined in the Code of Federal Regulations (2 CFR 200). Service department rates may be charged to internal users where costs will ultimately be assigned to an F+A (indirect) cost pool. 2 CFR 200 rules also govern this cost pool. Rate studies are needed to ensure compliance with federal regulations.
What if my users are mostly or entirely non-grant accounts?
The service department requirements still apply, although the federal audit risk may be lower.
What if an existing account reflects a mix of unrelated activities, one of which is a service department activity?
Calculate a rate based on all costs and all users. Then charge that rate only to the select group of users. The set of users that are charged should in no way subsidize the cost of providing the product or service to any other users.
If I don't include equipment depreciation expense in my rates, can I still build a capital reserve?
If no depreciation is included in rates, a capital reserve can only be built through external customer revenue (UBIT must also be considered when receiving revenue from external customers). Service departments are meant to be break-even entities.
How do I buy new equipment if I don't have an established capital reserve?
The funds to support the cost will have to be identified elsewhere (subsidy, school, department, debt issue).
If I perform services that will be charged to a TAMUS federal grant or to a federal agency, do I have to charge them the lowest rate?
Yes, the federal government should always receive the lowest rate.
If I perform services for a non-Texas A&M University System/non-federal agency customer that is paying with federal funds, do I have to charge them the lowest rate?
No, if the customer is another university or corporation, the service department is not responsible for knowing the type of funding the customer is using to pay for services. The customer can be charged the external customer rate.
What type of expenses can I pay for out of my 87xxxx account?
The service department can use its 87xxxx account to purchase new equipment, replacement equipment, or repairs/maintenance expense it incurs for pieces of equipment that extends the useful life. It should not be used for normal operating expenses.