Overview of Service Centers

1. Overview of Service Centers OSP Office of Cost Analysis Susie Won & Mary Nicholson

2. Service centers are… • Operated as a not-for-profit ‘small business’ by a DLC to facilitate MIT research • Created to provide service to others at MIT on the basis of use • Not intended as a service outside users What are the financial, accounting benefits of setting up service centers?

3. Federal cost principles describe • A-21: “specialized service facilities” that must: • “Be based on actual use of the center… • “Not discriminate between federally and non-federally funded programs • Be non-income producing: “… designed to recover… • Not more than the aggregate cost of providing services over reasonable period of time” Costs are collected, managed to capture only direct, allowable costs in a base for rate setting purposes

4. Service centers are closed-loop, self-adjusting operations

5. Collect allowable, recoverable costs Service center expenses defined in center plan, collected in deferred charge cost collector Service Center Most common costs Salary, wages, employee benefits Administration,management Maintenance Supplies

6. Some costs unallowable, unrecoverable in service centers • Cannot be collected in service center: • F&A • Equipment costs • Reserves for future expenses • All A-21 unallowables Service Center

7. Rates are based on expenses and use • Set user rates or fees Service Center Salary, wages, employee benefits Administration,management Maintenance Cost: $2M ÷ Use: 10,000 cycles/ year = Rate: $200 per use Supplies

8. Three management and oversight roles • Establish balance liquidation plan • Administrative and fiscal officers • Ensure centers are properly managed, with department head or lab/center director • Ensure that policies are adhered to by service center managers • Evaluate rate calculation annually, adjust if necessary • Annually develop balance liquidation plan, if necessary • Monitor srpluses, deficits • Evaluate rates at least annually • Monitor surpluses, deficits • Evalute rates at least annually

9. Three management and oversight roles, cont’d. • Service center managers • Day to day responsibility for operating under Federal guidelines, Institute policy • Track use, manage billing, address balances/surpluses • Office of cost analysis • Monitor operation for compliance • Provide technical assistance • Provide reports to Institute leaders • A-133 Audit • Monitor surpluses, deficits • Monitor surpluses, deficits

10. Managing service centers requires complete, accurate tracking • All revenue and expenses of the service center must be recorded in the service center cost object • Accurately tracking and charging users results in accurate rate setting • No funds can be transferred out of the cost object

11. Current MIT service centers (FY 2010) • Seventy-two service centers in 24 DLCs • Expense volumes from… • $1,000 to $3,000,000 • Total • Billings: ~ $15,400,000 • Deficits: ~ $900,000 • Surpluses: ~ $500,000

12. Recommendations • Review the policy and procedures as guides to feasibility • Use it as checklist to collect information • Discuss purpose, goals, user base, and fee/rate structure with Office of Cost Accounting • Glad to advise • Eager to help determine whether the administration of a service center is worth the time and effort • If you inherit or are assigned responsibility for a service center • Collect history of the purpose and plans from predecessor, or Office of Cost Accounting • Identify recurring issues in operation and funding to anticipate how to manage/monitor service center