Appendix S: Sales & Service Additional Information
Contents:
A sales and service activity refers to an approved campus business activity that provides a good or service to a non-university entity at a uniform pre-established price. All sales and service activities must at a minimum recover both the direct and indirect cost of producing those goods or providing those services. This page describes how indirect costs are calculated when establishing the price of the good or service and how those funds are distributed.
Facilities and Administration Cost Recovery
Indirect costs are those costs that cannot be readily identified with or related to a specific UC Irvine unit. Indirect costs include overhead like operation and maintenance costs and general administrative services. For sales and service activities, indirect costs are calculated as a percentage of the direct cost.
This Indirect Cost (IDC) Rate is based on the current federal (negotiated) research Facilities and Administration (F&A) rate for the campus, less four specific components:
- Equipment Depreciation
- Sponsored Project Administration
- Library
- Student Administration & Services
The applicable indirect cost rate further depends upon where the sales & service activity takes place. If the activity occurs on campus, it will include costs for campus buildings, operations and maintenance. An off-campus activity (in a building not owned or maintained by UC Irvine) does not include those costs.
When distributing the revenue from a sales and service activity, the direct cost of the good or service is credited back to the unit, while the indirect cost recovery funds are distributed in two parts:
- Central Administration
- Department Support (or to the vice chancellor responsible for the activity)
The standard distribution for overhead cost recovery generated is as follows:
Standard Distribution of Overhead Cost Recovery
| IDC Rate as a % of Direct Costs | Equivalent IDC Rate as a % of Revenues | |||||
| Central Administration | Department Support | Combined Rate | Central Administration | Department Support | Combined Rate | |
| On Campus | 14.60% | 15.20% | 29.80% | 11.25% | 11.75% | 23.00% |
| Off Campus | 8.00% | 15.20% | 23.20% | 6.49% | 12.34% | 18.83% |
Per Sec. 701-23: Sales and Service Activities Policy, waivers or reductions to indirect costs may be permitted on a case-by-case basis in rare circumstances. A request from the UC Irvine unit, endorsed by the Dean or Director, can be submitted to Accounting and Fiscal Services for initial review. The Accounting Office may then submit the waiver or reduction request to the Provost and Executive Vice Chancellor and the Chief Financial Officer and Vice Chancellor for the Division of Finance and Administration for their approval.
Departments approved to waive the department support indirect costs may offer their goods or services at a lower price (minimum indirect rate). The standard distribution for overhead cost recovery (minimum indirect rate) generated is as follows:
Distribution of Overhead Cost Recovery Using Minimum Indirect Rate
| IDC Rate as a % of Direct Costs | Equivalent IDC Rate as a % of Revenues | |||||
| Central Administration | Department Support | Combined Rate | Central Administration | Department Support | Combined Rate | |
| On Campus | 14.60% | -- | 14.60% | 12.74% | -- | 12.74% |
| Off Campus | 8.00% | -- | 8.00% | 7.40% | -- | 7.40% |
Indirect Cost Recovery Distribution
Assuming there are no indirect cost waivers, total income from a sales and service activity includes recovery of direct cost and indirect cost. For every billing, the central administration and department support indirect costs is calculated by applying the “equivalent IDC rate as a % of revenue” to the sales and service activity income.
For example, a unit’s on-campus sales and service activities generate income of $100,000, which includes recovery of direct costs and full indirect costs. Based on the above table for the standard distribution for overhead cost recovery, the calculation and accounting entries are as follows.
Central Administration Indirect Costs
The central administration indirect costs equal $11,250 ($100,000 x 11.25%), which is charged against the sales and service account and IDC recovery income by central administration account via monthly automated journal entry in KFS. No action is needed by the department/unit to record the central administration portion.
| KFS Account | Object Code | Dr. (Cr.) |
|---|---|---|
| Sales & Service | 2490 – Campus Income Assessment | $11,250 |
| Central Administration | 3906 – Sales & Service Indirect Cost | ($11,250) |
Department Support Indirect Costs
The department support indirect costs amount to $11,750 ($100,000 x 11.75%), which is charged against the sales and service account and IDC recovery income by department support account via department unit-initiated internal billing in KFS.
| KFS Account | Object Code | Dr. (Cr.) |
|---|---|---|
| Sales & Service | 2041 – Deans Income Assessment | $11,750 |
| Department Support | 3906 – Sales & Service Indirect Cost | ($11,750) |
Revenue Deposit
Revenue collected from Non-University Entities is credited to the unit and should be deposited into external revenue object code RXXX or SXXX. The indirect cost (F&A) component of the revenue will be assessed and transferred to the appropriate support account.
Income object code for SSXXXX Accounts in sub-fund group code 409190
| R781 | KEY DEPOSITS |
| R807 | SALES OF GOODS |
| R821 | SALES OF SERVICES |
| R841 | RENTAL OF FACILITIES |
| R844 | RESIDENT AFFILIATE AGREEMENTS |
| S138 | CONFERENCES & RELATED INCOME |
Income Object Code for OSXXXX Accounts in sub fund group code 410290
| Object Code | Object Code Title |
| S754 | S&A OTHER INCOME |
Differential Income
Sales & Service Activities rates are built upon first recovering the Direct and Indirect costs of producing the good or service as outlined above. That pricing is known as the Official Recharge Rate. Any income generated that is in excess of the Official Recharge Rate for the same service is considered Differential Income.
To facilitate clear annual reporting on Sales & Service Activities, income attributable to Official Recharge Rate should be deposited directly to the recharge account. Differential Income associated with higher Sales & Service Activity rates (due to Indirect Cost recovery portion of the rate and any additional mark-up charged to Non-University Entities) should be deposited into a separate account. Both accounts are subject to the assessment and distribution of proceeds also noted above. Differential Income is unrestricted and can be used to cover unit/school support services, and to subsidize the Recharge Activity if necessary.
Sales and Service Accounts Review – 5-Year Cycle
Annually, the Accounting and Fiscal Services Office will review a sampling of approximately 1/5th of the funds with income recorded in the following Sub Fund group codes:
- 409190 - EDUCATIONAL ACTIVITY OTHER
- 410290 - OTHER
Certain activities are excluded from this annual review, since they do not fall under S&S education activity policies:
- Medical Compensation Plan
- Income in Control Organization codes
- Athletics
- Student Affairs
- Medical Center
The annual review will confirm the following:
- An Recharge / Sales & Service Activity Information Sheet is on file (and to collect a current version from the unit if one is not)
- Evaluate whether the activity is being appropriately assessed to recover indirect costs, consistent with policy and documented waivers.
The set of funds, involving 1/5th of those with activity, will be clearly defined each year, and will not repeat for five years. The table below defines the schedule for 5 years beginning with FY20-21. Due to the volume, the School of Medicine accounts are broken down evenly in each of the 5 years reviews.
| Year 1 - FY20-21 | Year 2 - FY21-22 | Year 3 - FY22-23 | Year 4 - FY23-24 | Year 5 - FY24-25 |
| School of Medicine Academic Affairs School of ICS Executive Management Libraries School of Business School of Biological Sciences |
School of Medicine Office of Research School of Education |
School of Medicine School of Humanities School of Law School of Nursing School of Physical Sciences |
School of Medicine School of Social Ecology School of Social Sciences VC Health Affairs University Advancement DFA OVP Teaching & Learning |
School of Medicine School of the Arts Information Technology School of Engineering |