Recharge FAQ
What is a recharge activity, a.k.a. “self-supporting” activity?
A recharge activity, also known as a “self-supporting” activity, or a service center, is one that is funded entirely by those who purchase the goods or services offered. In any recharge activity, the majority of goods and services are purchased by other university departments. Recharge activity moves funding and expenses from one department to another, without increasing total funding for the campus. It is allowable for recharge activities to offer their goods and services to non university customers at rates that recover all expenses, including the campus' federally negotiated indirect cost rate. Rates offered externally may not undercut the local market for similar goods and services.
How do I know if my situation qualifies as self-supporting/recharge activity?
Your activity must meet these conditions:
- An uncommon good or service is provided, for a fee, by campus units/departments to other units/departments. This fee/rate is approved annually by the AVC of Budget Analysis and Planning, through a review by the Direct Costing Committee.
- The product or service is offered on an ongoing basis (one-time services are not in the scope of recharge activity).
- The recharge revenue collected must be sufficient to fully recover costs without generating a surplus beyond a prudent reserve.
- If the product/service will not be charged to federal funds, annual revenue exceeds $25,000 annually. The establishment of a federally-chargeable recharge activity has no minimum threshold.
- The offered service is necessary to advance the educational, research, or public service functions of the university.
See Recharge Rate Policies for further guidance.
How do I know if I should develop a Miscellaneous Fee, a business contract, or a recharge rate?
If your customer base could include units that plan to use federal contracts or grants to pay for the services you are offering, and you are unable to directly pass through the expenses, you should pursue establishing a recharge rate.
If you don’t anticipate consistent and varied customers or a high volume of recharging, it may be most appropriate to pass through direct expenses instead of developing a composite rate that requires annual reporting and approval.
If your customer base is mostly external, ie. not campus units paying with a FOAPAL, and you don’t anticipate any campus users would be paying with contract and grant funds, you will most likely pursue a miscellaneous fee.
If you don’t anticipate repeat business from a variety of customers, you may pursue an agreement with a single customer with the assistance of the business contracts office.
In some cases a business contract is developed with customers in addition to having approved miscellaneous fees.
How do I set up a new recharge activity?
Contact the Direct Costing Committee Chair, SJ Casciato, scasciat@ucsc.edu, early in your pursuit of a new recharge activity to discuss viability. Recharges are not a vehicle to increase or expand services. Criteria for a new recharge activity includes:
- There is a demand for the product or service by more than one University department.
- There is a significant volume of recharging, both in dollars and transactions (>$25K anticipated annually for non-federally chargeable rates).
- Services will be provided on a regular and continuing basis.
- Services will be unique or specialized.
Can I offer a rate discount to a specific customer or group of customers?
All customers of a particular rate group (internal, external non-profit, or external for-profit) must be offered the same rate. No rate discounts are allowed to a specific customer. If an internal rate is subsidized by other fund sources covering a portion of operational expenses, the subsidized rate must be offered to all internal customers. External customer rates may not be subsidized. External customers must pay market rates for recharge services/products, and at a minimum, the fully costed internal rate plus the prevailing indirect cost rate for the fiscal year.
Ex. In fiscal year 2025 the indirect cost rate for on campus activities, also known as the F&A rate, is 56%. Any external customer must pay at least 56% greater than the fully costed internal rate approved for FY25.
If the internal rate is subsidized, the unsubsidized rate must be calculated to achieve a fully costed base rate, before adding the indirect cost rate.
Can I charge my customers for staff overtime incurred?
Recharge activities may only charge customers current year approved rates. If expenses such as staff on overtime pay are a routine part of the services offered, the expense should be calculated into the rate proposed for approval. It is not allowable to charge different internal customers different rates for the same service.
Can I apply Info User Assessment expenses to my federally chargeable recharge rates?
No. Costs of services funded via the Info User Assessment are included as indirect costs in the campus' Indirect Cost Rate proposal (aka F&A Proposal). Therefore these expenses may not be directly applied to federal funds, nor built into federally chargeable recharge rates.
Why do I need to add the on campus indirect cost rate to my external customer rates?
Recharge activities are housed in UCSC facilities. The on campus indirect cost rate is negotiated with the federal government every 3-5 years to achieve an approximation of cost recovery for the facilities in which the recharge services/products are produced & provided. If the indirect cost rate were not added to external customer rates, the rates would effectively be subsidized. Is it not allowable to subsidize external customer rates.
What are the correct account codes to use for recharge revenue and debits to campus unit customers?
Recharge revenue collected from a campus unit (a customer paying the internal rate and using a FOAPAL), or another UC campus customer, (paying through inter campus recharge) should always be recorded to the recharge revenue account code: “X09000 RCHG - CREDITS FROM DEPARTMENTS”.
If the recharge activity in question has its own unique recharge debit account, that account code should be debited to the internal customer’s FOAPAL. If there is not a specific account code for the recharge activity, use the default recharge debit account code: “ X01261 - RCHG - APPROVED MISC DEBIT”
Recharge activity revenue generated from external customers should be recorded in the appropriate revenue account. Revenue accounts begin with “R”. New revenue accounts can be set up by contacting Rob Jarvis, rsjarvis@ucsc.edu, in Accounting. The suggested revenue account code should match the recharge operating fund. Ex. R68027 PBSCI/CHEMICAL SCREENING CENTER . Use FIS to check if the Revenue account you desire might already be in existence. You can request a name change if necessary. In the interim, external recharge revenue can be recorded to “R66140 MISCELLANEOUS INCOME”
How can I cover STIP or other interest charges on a recharge activity that has only a single, federally chargeable rate?
Federally chargeable recharge rates cannot include interest or debt service charges on the recharge operating fund. See Recharge Rate Policies for a full list of federally unallowable expenses. If the recharge activity has these expense types to cover, the options are to either develop a dual rate, recovering the unallowable charges on a rate that is not federally chargeable, or cover the unallowable expenses with other available funds. If the recharge activity has customers paying with non-federal funds, ongoing interest charges to cover and no other funds available to cover the expenses, a dual recharge rate would be appropriate.
What is depreciation?
Depreciation is the reduction in value of an asset with the passage of time. Recharge activities shall include in their rate calculation the annualized expense of the future one-time expense of repairing and/or replacing capital equipment at the end of its useful life. This depreciation expense is accounted for by a fund balance transfer from recharge operating funds to the depreciation reserve on an annual basis. The DCC chair, SJ Casciato, can perform this transfer (provided it matches recharge reporting template 6 - equipment depreciation schedule).
How do I know if I should depreciate capital equipment used by my recharge activity?
Policy states that any inventorial equipment assigned to the activity other than that furnished by the Federal government shall be depreciated. If a recharge activity has non-federally chargeable rates, depreciation of federally furnished equipment is allowable on the non-federally chargeable rates. Recharge activities should depreciate assets even if the equipment is shared, donated, or purchased on subsidizing funds including 199XX funds.
Can depreciation ever be applied retroactively?
The recording of depreciation from a prior fiscal year is subject to BAP review and approval. BAP is inclined to approve only those prior year depreciation expenses that were not executed in a timely way due to reasonable oversight error. Contact DCC chair, SJ Casciato to inquire further.
What can the depreciation reserve funds be used for?
There is significant latitude to use the depreciation reserve funds for renewal and replacement of capital equipment, which can include major repair, purchase of improved models or even new/improved/alternate technologies.
Can inventorial equipment be purchased with a newly established depreciation reserve and be paid back overtime?
No. It is a campus wide rule to charge expenses only where budget is available. A depreciation reserve is built up overtime to repair/replace existing equipment. The first time purchase of inventorial equipment must be made from an available fund source, and cannot be purchased on recharge operating funds. Subsidizing funds, or other reserve funds (working capital or excess external revenue) are frequently used for initial purchases of inventorial equipment.
If a single piece of equipment was purchased partly on federal funds and partly on non-federal funds, is the portion spent from non-federal funds eligible for depreciation?
It is appropriate to depreciate any inventorial equipment assigned to the recharge activity other than that furnished by the Federal government. Therefore, the portion of the equipment, or depreciable components of the capital asset (provided the cost exceeds $5000) purchased on eligible funds* (non federal) should be depreciated, as long as it is still inside of its "useful life". When completing annual reporting templates, including template 6- equipment depreciation schedule, (which is required for all activities that include depreciation expenses in their rate calculation), the "purchase price" should reflect the amount purchased on allowable funds only. It is appropriate to explain the items full cost, and the portion covered by the various fund sources for full transparency. It is vital to include the Product ID on template 6.
Can GSR tuition remission be charged to recharge operating funds?
No, GSR tuition remission cannot be charged to recharge operating funds that are federally chargeable. Tuition remission is a federally allowable expense which is normally a direct fringe benefit charge to a sponsored award. However, tuition remission is different from most federally allowable expenditures in that it is excluded from Modified Total Direct Cost (MTDC). Non-MTDC expenditures cannot be expensed to the recharge operating fund of a federally chargeable recharge activity.
How can I update my projected recharge revenue (B09000), or revenue (R00000) in our systems of record?
Any recharge activity with anticipated revenues greater than $5,000 annually should establish a permanent revenue/recharge revenue projection in FMW.
To create or adjust B09000 projections -
Users with standard access may create/adjust B09000 via journal in both FIS and FMW at will. In FMW users are expected to utilize Trans Type 'A'/'I' coding appropriately. FMW 'I' entries cannot be made until the 3/31/YY permanent budget file has been submitted to OP (~ mid-April).
To create or adjust R00000 projections -
All current year R00000 projections are self-balancing 'BD04' rule code entries in FIS; and thus, units must request journal processing via the Budget Office.
All permanent year R00000 projections are balancing entries in FMW; and thus, users may create/adjust R00000 projections themselves assuming the specific revenue account-fund-org code combination has been previously validated within FMW.
What do recharge activities need to do at Fiscal Close?
At fiscal year end, the balance of recharge operating funds should approach zero. The activity should always maintain a balance of no greater than + or - 15% of annual operating expenses. If the recharge activity has a reserve fund, the annual fund balance transfer, matching annual reporting, must be requested within a reasonable period before fiscal close.
Please submit additional questions to Direct Costing Committee Chair: Sarah Jane (SJ) Casciato scasciat@ucsc.edu
