Updated: January 20, 2009
Historically, the responsibility for the direct program costs of the auxiliaries has been clearly understood to be the responsibility of the auxiliaries, and those costs have been separately identified in the accounting and budget systems. However, the accounting and budgeting of support services, and the responsibility for the cost of those services, have not been as clear. The purpose of this paper is to establish that auxiliary enterprises have a fiscal responsibility for the cost of support services, and to provide policy guidance and detailed instructions for assigning such costs. Appendix 1 identifies the auxiliary programs to which the policies apply, and the criteria for making program assignments; Appendix 2 identifies the support services provided by administrative units; Appendix 3 identifies the support services provided by physical plant units; and Appendix 4 provides the instructions for making charges for services received.
Auxiliary enterprises are defined by the University of Wisconsin System (UW-System) and the National Association of College and University Business Officers (NACUBO) as programs that “…furnish services directly or indirectly to students, faculty, or staff, and charge fees related to, but not necessarily equal to, the cost of services. Traditionally, these services have encompassed food services, student housing, and college stores…” User fees (e.g., room, board and parking) and/or a cash/credit sales (e.g., gate receipts, and bookstore sales) are primary revenue sources. Program costs (e.g., residence hall staff, food supplies, and other items for resale), and costs to support programs (e.g., payroll, building maintenance and accounting services) are the primary uses to which the funds are applied.
Auxiliaries are expected to provide quality services to students at rates competitive with the private sector, to maintain adequate but not excessive reserves, and to satisfy expectations of ongoing fiscal solvency. However unlike the private sector, auxiliaries are also expected to use a portion of its resources for the broader purposes of the institution. (As NACUBO explains, auxiliaries are not to be “… regarded merely as service activities or as businesses, but as active expressions of an institution…”, and as such offer services and facilities that are used to assist in the educational and social development of students.) Auxiliaries have, for the most part, sufficient resources to serve these broader purposes, but careful monitoring is needed to insure that the cumulative affect of increased charges (e.g., municipal services and support services), the broadened use of auxiliary funds and recent reserve reductions not jeopardize the financial solvency of those programs.
II. Administrative and Physical Plant Support Services
Administrative support services, within the revised UW-System Chart of Accounts, are assigned to the budget activity, Institutional Support and physical plant services to the Physical Plant activity. Executive management (e.g., chancellors and assistant chancellors), fiscal operations (e.g., accounting and bursar), general administration and logistical services (e.g., personnel, purchasing and stores), administrative computing, and public relations/development are assigned to the institutional support activity, see Appendix 2 for a more detailed explanation. The administration of physical plant, building maintenance, custodial services, utilities and grounds maintenance are all part of physical plant support services, see Appendix 3 for a more detailed explanation.
The auxiliaries shall be charged for administrative and physical plant support services when those services provide a direct benefit to the auxiliaries (e.g., payroll services, building maintenance, and heating fuels); not charged for institutional oversight functions (e.g. chancellor, vice chancellor and assistant chancellors); and limited to the services and costs prescribed in this paper. Where an office/officer provides direct services and oversight functions, a pro-ration of costs shall be made, with the auxiliary chargeback limited to payment for direct services.
For purposes of this paper, the NACUBO definition for auxiliaries is used to make program assignments. Where the assignment is not clearly established, a review was made of the purposes for which the program exists, the revenue sources used to support the program, and the facility within which the program is housed. The primary consideration was purpose, with facilities and revenue sources secondary to purpose. Auxiliary programs include: food services, bookstores and other retail sales, parking and housing, see Appendix 1 for explanations.
NACUBO defines auxiliary enterprises as programs that “…furnish services directly or indirectly to students, faculty, or staff, and charge fees related to, but not necessarily equal to, the cost of services. Traditionally, these services have encompassed food services, student housing, and college stores. On many campuses, services have expanded to include faculty dining, confectionery shops, ice cream parlors, vending machines, day-care centers, bus service, skating rinks, guest houses, athletic concessions, golf courses, ski lodges, bicycle shops, and others. The distinguishing characteristic of most auxiliary enterprises is that they are managed essentially as self-supporting activities, although sometimes a portion of student fees or other support is allocated to assist these activities…”, College and University Business Administration. (The UW-System defines “student fees” to be segregated student fees).
College and University Business Administration also states that “Intercollegiate athletics and student health services should be included in this category if they are essentially self-supporting. Hospitals, although they may serve students, faculty, or staff, are separately classified because of their relative financial significance to the total budget of an institution. Services provided by auxiliary operations are important elements in support of an institution’s educational program. Some auxiliaries, such as golf courses or concessions at athletic and cultural events, may incidentally serve the public. Auxiliary enterprises should contribute to and relate directly to the mission, goals, and objectives of a college or university. They should not be regarded merely as service activities or as businesses, but as active expressions of an institution, reflecting its history, style, and relation to its various constituencies. Such enterprises should reflect the quality of service that a college or university desires for its students, faculty, staff, alumni, and the public…”
Statutory reference is made to auxiliary enterprises in section 20.285(1)(h) Wis. Stats. The UW-System (UWS) and the Department of Administration (DOA) have established a funding designation (Fund 128), and an activity designation (08) for budget development and control purposes. Appendix 1 identifies programs assigned to Fund 128, makes distinctions between auxiliary and non-auxiliary programs within Fund 128, and explains the reasons for those distinctions.
An issue separate from, but related to, charging auxiliaries for support services is the policy to not charge university offices and departments for the use of student union/center and residence hall space. Meeting rooms are available to departments at no cost to encourage interaction between students, faculty and staff and is an acknowledgement of the broader purposes for which those facilities were constructed.
- Programs designated auxiliary in Appendix 1 shall be subject to charges for institutional support and physical plant services.
- Programs designated non-auxiliary student services in Appendix 1 shall be subject to the policies applied to student service programs in UW System Administrative Policy 822 (SYS 822), Student Services Funding.
- Programs designated non-auxiliary service departments, and programs assigned to academic and/or academic support activities in Appendix 1 shall not be subject to the charge for institutional support and physical plant costs.
- Institution departments shall not be charged for facility use; students shall not be assessed the cost of making facility space available; and as a means to recover costs, a credit may be allowed as an offset to centralized service charges (costs must be documented).
IV. Charging for Centralized Service Costs
A. Institutional Support
The intent of the policy is to insure a fair assessment for institutional support services provided and received, and to minimize changes to organization structures and accounting practices. Charges to the auxiliaries shall be made using either the costing methodology in Appendix 4, or methodologies specific to an institution.
Institution specific methodologies are as follows: UW-Madison provides many institutional support services from within the auxiliary organization itself (budgetarily, assigning support staff to auxiliaries); UW-Milwaukee has a centralized administrative service unit which is responsible for providing accounting, accounts payable and accounts receivable services on a charge for services basis (budgetarily, assigning staff to this administrative service unit, and receiving funds to support the unit by charging users for services); other institutions, consolidate organizationally all administrative duties for the institution, with the auxiliaries paying a portion of the administrative costs (as a chargeback or as direct budget support).
Institutional support shall be charged to the auxiliaries using either the costing methodology in Appendix 4, and/or institution-specific costing methodologies.
Appendix 4 is an adaptation of the Federal Indirect Cost Recovery (FICR) policies for reimbursing universities for indirect costs incurred, and is available for use by all institutions. Institution-specific methodologies are acceptable only where it can be demonstrated that the charge more accurately reflects the cost of services provided. Institution-specific methodologies must be approved in advance by System Administration.
B. Physical Plant
UW System Administrative Policy 322 (SYS 322), Physical Plant Service Chargebacks provides the policies and procedures to be used in charging auxiliaries for physical plant services. Those services include: administration, building maintenance, custodial maintenance (most institutions provide for this service with auxiliary staff), utilities, grounds maintenance, and major repairs and renovations. SYS 322, Physical Plant Service Chargebacks will be revised to add administrative services as chargeable services. Grounds maintenance will continue to be excluded because such maintenance is primarily for the overall campus benefit and the personal safety of students, faculty, and staff.
- A surcharge for physical plant administration will be added to labor rates used to charge for auxiliary enterprises, i.e., total administrative costs excluding capital as a percent of total physical plant salaries and fringe benefits. Institution specific methodologies may be used on the condition the results are essentially the same.
Physical plant administration costs are not included in the basic labor rate because the costs to General Purpose Revenues (GPR) funded departments would increase and cause duplicate charges to federal grants.
- Basic grounds maintenance services will be excluded from chargebacks, with charges limited to direct services such as snow removal from parking lots and specific requests for additional service.
V. Related Policies
- SYS 322: Physical Plant Service Chargebacks (formerly F25) (A provision to require that a surcharge for physical plant administration costs be added to the labor rates)
- SYS 822: Student Services Funding (formerly G15) (The programs in that Appendix 1 are identified as student service programs, and are not presently included in SYS 822, Student Services Funding, would need to be added to that policy paper)
- SYS 820: Segregated University Fees (formerly F50) This policy prohibits charging segregated fee programs for security and business services. The policy paper is restricted to non-segregated fee programs.