University of California Davis Self-Supporting Recharge Operations - Establishment of Chart of Account Project & Assessments

Content

• Activity Setup
  • General Ledger (GL) Project
  • Project Portfolio Management (PPM) Project
  • Important Chart String Segments 
• Assessments
  • NUD
  • Markup
  • Campus Income Assessment
• Core Subsidies

New Self-Supporting, Rate-Based Activity Setup

When establishing a new self-supporting, rate-based activity, it is important to utilize the correct accounting structure within Aggie Enterprise.  Activities will have the option to transact within the General Ledger (GL) or via the Project Portfolio Management (PPM) module.  Once this is decided, activities will be assigned a single and unique Chart of Account (CoA) Project segment to track an activities operations.  Use the guidance below to determine when to use the PPM module to manage your activity versus when to use a GL.   

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General Ledger (GL) Project

The General Ledger (GL) is the universities record-keeping system that supports robust, high-level, financial reporting.  A GL Project is a good choice for activities that are not complex or for those activities that are not rate-based.  Once a rate proposal for a new activity is approved you can establish a new Project segment for activities transacting at the GL level by following the KBA, Requesting a new Chart of Account (CoA) value.  

Pros:

1. Simplified and robust financial reporting. 
2. Does not require a POET(AF) chart string.
3. Revenues and Expenses can be viewed together at GL level.
4. Project code can be used across multiple financial departments for subsidy support tracking.

Cons:

1. Activities are not able to track expenses by service and/or area utilizing a POET(AF) Task.
2. Activities are not able to create detailed expense budgets.

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Project Portfolio Management (PPM) Project

The Project Portfolio Management (PPM) module is a subledger in Oracle and is used for activities that are too complex, or require additional reporting at a more detailed level, to be managed in the General Ledger (GL). PPM self-supporting projects are often supported by multiple funding sources (i.e. income, reserves and/or subsidies) have multiple service lines and/or costing areas, or serve larger operations.  PPM financial details are summarized and rolled up into the GL nightly.  Once a rate proposal for a new activity is approved you can establish a new Project segment for activities transacting within the PPM module by following the KBA, Requesting Non-sponsored PPM Faculty, Department or Recharge Project Values.  

Pros:

1. Able to establish Tasks to track costs at a more detailed level such as service line or cost area.
2. Able to create and maintain Budgets at a detailed level.

Cons:

1. Requires the full POET(AF) for all PPM financial transactions.
2. Must establish and maintain Tasks and Budgets.
3. Income does not post within PPM, requires manual allocation of Income for P&L view at the Task level
4. Cannot use the PPM project across different Financial Departments 

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Important Chart String Segments in Aggie Enterprise 

Key CoA natural accounts in Aggie Enterprise related to self-supporting recharge operations are listed below.  

• 410000-External Sales and Services Revenues
• 770009-Central Campus Income Assessment Expense: Campus 15% Income Assessment
  • these costs are unallowable for sponsored awards
• 770008-Central Campus Assessment Expense: Campus 3% on internal administrative recharges
  • these costs are unallowable for sponsored awards
  • the Campus Overhead Assessment (Op Tax/UC Path assessment) will also use 770008 in departments 
• Markup - there will not be a separate account for units with markup.  It will remain as part of total gross revenue and charged the 15% income assessment
• 770104-Rate Depreciation Expense charged to recharge operations, credit side to reserve fund will post to 775104
  • depreciation not allowable for equipment purchased with federal funds
• 770101-Balances to Reserve Expense is the debit against the recharge operation when moving department share of NUD/Markup to reserve fund. Credit side to reserve fund uses 775101
• 775103-Fund Transfer Revenue will be used in rare instances where are one-time buy down of operating deficit is required and reserve funds are insufficient.  It is similar to fund balance transfers in KFS.  Debit to subsidy fund source will use 770103.
• 770000 to 770007 expense accounts for recharge services provided, replaces individualized KFS legacy object codes

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Assessments

Non-University Differential (NUD)

Self-supporting activities are required to charge external customers the full Non-University Differential (NUD) in addition to the direct cost of the service. The Non-University Differential (NUD) is an assessment on goods or services provided to non-university customers in order to recoup Facility and Administrative (F&A) costs, also known as indirect costs, associated with providing the goods or services. Non-university customers must pay at least the full direct and indirect costs that internal customers are required to pay.  Therefore, self-supporting activities that internally recharge federally sponsored contracts and grants (including federal flow through awards) are required to use the Research NUD rate.  Self-supporting activities that do not internally recharge federal contracts and grants can utilize the Other Sponsored Activities NUD rate.  The table below demonstrates the current federally approved F&A rate components and indicates which components are excluded from NUD. 

Campus guidance for the NUD assessment is detailed here or utilize the calculation aid workbook linked below.
NUD, Assessments and Year-end Reserves Calculation Aid (.xlxs) 

Current F&A Rates and Derived NUD Rates:

*These items have historically been excluded from the UCD NUD rate

**Required when services are also provided to federal awards

***Please update rates as soon as possible, but no later than 1/1/25, if required to change to the Organized Research Rate.  Only Dean's office approval required.  Updated copy of rate workbook should be sent to recharge@ucdavis.edu   

When calculating the cost to charge customers, determine all of the direct costs associated with the activity. Only the direct cost is charged internally because contract and grant accounts will pay indirect costs associated with the goods and services provided as part of their agreement. The full NUD is charged to external customers to ensure that they are paying their share of the indirect costs. Normally, in a rate, the NUD is not separated from the cost per item/service (as it is in contract and grant agreements).  

After fiscal close, it is the department’s responsibility to transfer the balance of the departmental portion of NUD to a reserve account.  Funds should only be transferred if there is a balance on account at fiscal year end.  To transfer surplus NUD funds, provide Finance and Accounting the Project, account and calculation of the amount to be transferred via email to recharge@ucdavis.edu

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Mark-up

A recharge activity may charge a mark-up rate in excess of the full direct and full NUD costs to non-university customers.  Activities that include a mark-up must charge customers the full NUD.  Mark-up must be documented with the rate proposal and is calculated as a percent of the activities direct cost.  Mark-up funds, less the campus income assessment, are retained by the department and can be used to support the activity, provided their use complies with other university policies.  

After fiscal close, it is the department’s responsibility to transfer the markup out of the recharge activity's operating account to a reserve account at least annually, but no more than quarterly (unless the fund is operating at a deficit).  To transfer mark-up income, provide Finance and Accounting the Project, account and calculation of the amount to be transferred via email to recharge@ucdavis.edu.

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Campus Income Assessment

Indirect costs recovered through the NUD rate charged to external customers help to recover infrastructure and support expenses required to support operations at the university. A significant portion of this infrastructure is supported through centrally managed and distributed resources. Consequently, a portion of the indirect costs generated through NUD are returned to central campus via an income assessment. 

The income assessment rate is 15% and calculated against the total gross income (including markup) posted.  The campus income assessment process is managed by BIA and posts monthly to the CoA Project as an expense.  In addition, the 3% assessment on administrative unit internal recharges will also continue.

For Q3 2024 (January'24 - March'24) assessments were delayed to March to provide as much time as possible to correct mapping issues with the conversion to Aggie Enterprise.  Separate journals were posted for each Month with journal line descriptions as follows:

2024 Q3 Assessments Data for All Units (.xlxs)
Campus guidance for Income & Recharge assessments along with NUD assessment information is detailed here.

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Core Subsidization

For various reasons, an activity may wish to charge its internal UCD users less than fully costed rates, and may choose to subsidize unit operations from other unrestricted fund sources. In these circumstances, the amount, funding source, and purpose of all subsidies should be disclosed in the recharge activity's rate proposal workbook. It is important for the department, division, and UCD-wide administration to properly recognize subsidies when they occur.  All subsidies should include the assigned activities Project CoA segment for budget allocations and related expenses.  Subsidized rates must be consistently charged to all internal University users. Subsidies should not be used to reduce the rates charged to selected users of the recharge activity in a discriminatory manner.

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