Internal Service Center Policy - Admnistrative Guidelines

A. Separate budgeting and accounting. Internal Service Centers and Specialized Internal Service Facilities must be separately budgeted and accounted for apart from non-Internal Service Center activities (for example, teaching, research). In particular, this affects Internal Service Centers that operate within academic, research, academic support, or institutional support departments. Such Internal Service Centers often use operating resources funded by non-Internal Service Center accounts (e.g., State/General Operating Funds, Indirect Cost Recovery Funds) to subsidize the cost of providing services/products to customers. Regardless, the following rules apply:

1. Consistent with section IV.B., separate accounting should be established for individual cost centers (e.g., separate agency/orgs, sub-orgs and/or reporting categories).

2. The separate Internal Service Center account(s) must contain only revenues and expenditures directly related to the provision of services/products to customers for that Internal Service Center. Funds in these accounts cannot be expended for non-Internal Service Center activities such as teaching or research.

3. Annual budgeting of all Internal Service Center revenue and expenditures must conform with applicable University and Arizona Board of Regents budgeting procedures.

B. Official financial records. Advantage is the official financial database for the University and must be the basis of all financial related information that affects billing rate computations. Non-Advantage financial record keeping systems must be reconciled to Advantage on a regular basis.

C. Record keeping procedures and systems (e.g., subsidiary records) must be established and maintained by Internal Service Centers to capture all financial or statistical data that is:

1. Necessary for good internal control and Internal Service Center management.

2. Necessary for development and maintenance of service/product billing rates.

3. Not available in necessary detail or format from central university databases such as Advantage.

Examples of subsidiary record keeping include:

• Financial records that capture revenue (both actual and imputed), expenditures, and fund balances (no more than 60 days worth of expenditures) to services/products within cost center.

• Statistical records that capture units of service available and consumed (for example, vehicle miles, central processing units, animal care days).

• Effort reporting records that capture employee work-time (in hours or percentage of time) to services/products within cost center.

• Inventory systems to account for raw materials, work in process, finished goods, and resale merchandise.

• Depreciation schedules showing annual depreciation for each piece of equipment.

D. Identification of equipment. Internal Service Center equipment must be identified separately from non-Internal Service Center equipment via the University's Property Control System. The Internal Service Center agency/org must be assigned to the Internal Service Center equipment in the Property Control System to distinguish it. The Internal Service Center should contact Property Control for assistance in establishing and maintaining this inventory.

E. Stock inventories. Physical inventories of raw materials, work in process, finished goods, and re-sale merchandise, when material in value ($25,000 or more) must be taken at fiscal year end. Inventories must be valued using an inventory method approved by Financial Services (Comptroller).

F. Schedule of billing rates. Internal Service centers must maintain a schedule of current billing rates and make them available upon request.

G. Billings to university departments are done through the interdepartment purchase order (PO). Such billings will be recorded to an appropriate PO revenue source code in Service Center accounts, and to appropriate operations or capital object codes in customer accounts.

H. Billings to the public may be done through established invoicing/billing procedures (see FIN 306), or handled directly by the Internal Service Center.

I. Equipment Replacement Accounts. Separate Advantage agency/orgs must be established to account for all capital related additions and expenditures being recovered by Internal Service Centers and Specialized Internal Service Facilities. Additions to these accounts will be made by cash transfers from appropriate Internal Service Center revenue accounts. Such transfers will be based on annual depreciation expense of capital assets (refer to Section IV-F.).  Although funded-capital accounts will belong to Internal Service Centers, they must be used solely for Internal Service Center related capital acquisitions. Contact Financial Services (Comptroller) for assistance in establishing capital replacements accounts or transferring funded-capital funds and depreciation amounts.

J. Institutional overhead recovered according to section IV.G. will be transferred to appropriate local funds accounts on a periodic basis, but no less frequently than once a year.

K. Administrative service charges (ASC) Service centers are subject to ASC in accordance with prevailing policies and procedures. When these charges apply they must be incurred against an Internal Service Center's operating account(s).

L. Financial Services (Comptroller) prepares a year end report on Internal Service Center fund balances in order to identify units with excess fund balances. An excessive fund balance is defined as a balance greater than 60 days of total annual expenditures, exclusive of depreciation. This report is distributed to the Vice Presidents/Vice Provosts who have responsibility for the Internal Service Centers.

M. Exceptions. Internal Service Centers may request specific exceptions to section V guidelines. Such exceptions must be submitted in writing to the Executive Vice President for Business & Finance for review and approval. Approved exceptions usually will be temporary in nature and will not relieve the Internal Service Center of long-term responsibilities for complying with section V. guidelines.