July 1, 1998
The purpose of the Recharge Activity policy is to provide guidelines for those Creighton University units which allocate (spread) the invoiced cost of specific goods or services among two or more organizations within the department. Cost allocations must be consistent with University policies on charging direct and F and A costs. (For further information, see Charging of Direct and Facilities and Administrative (Indirect) Costs). Recharge activities are differentiated from Service Centers in that Service Center rates are designed to recover the full cost to the unit of goods or services provided, while Recharge Activities involve only allocation of the invoiced cost of the goods or services. For example, Animal Quarters is a Service Center in that the rates charged for specific animals are based on the full cost to the Animal Quarters department of procuring, housing, and maintaining the animals. The allocation of an outside vendor's monthly invoice for a billing service to several user clinic organizations would be a Recharge Activity. Common allocations and allocation bases are: facilities rental expense (allocated based on square footage), and copier maintenance expense (allocated on number of copies made). (For further information regarding Service Centers, see Service Center Policies and Procedures.)
Recharge Activities are used in situations where two or more organizations share the cost of purchased goods or services in order to more accurately track the cost to each of the organizations. Typically, the invoice for the shared goods or services is paid by one organization and the amount is allocated to the other organizations which receive benefit from the purchase. In the interest of departmental efficiency, only invoices for relatively large amounts should be allocated. Because allocations are normally only done between organizations within the same department, the departmental administrator is the approval authority for decisions regarding allocations and amounts. Any organization desiring to allocate specific invoice costs outside of their department will need to get approval of the departmental administrator over each of the departments involved in the allocation.
This policy applies to all departments allocating the invoiced cost of specific goods or services between organizations within the department.
All allocations must be supported by documentation which includes the invoiced cost and the statistics illustrating the allocation method.
Those organizations having the capabilities of performing allocations through a Banner interface should do so. Those departments who send computed allocation entries to the Controller's Office for entry into Banner must perform the allocation and send supporting documentation with the Banner entry. One-time or infrequent allocations of invoices sent to the Controller's Office for entry into Banner must include the invoice number in the supporting documentation as well as a copy of the allocation computations.
While Service Centers use a 75XX code to record their revenue and a 74XX account code to record the charges to the charged organization, allocations (recharge activities) are to use the same account code when allocating charges between departments.
Example: Rental expense for a building which houses eight teaching organizations of the same department is $40,000 per month. The entire monthly rental is charged to Rental Expense (account code 7201) in the Administrative organization of this school when the invoice is paid. In order to more accurately track the costs of each of the smaller teaching organizations, the head of the administrative department elects to allocate the rental expense by square footage to each of the eight teaching organizations. Assuming that all eight of the teaching organizations occupy an equal amount of square footage of the builiding, then, each of the eight teaching organizations gets an equal share of the rent. The Administrator allocates one-eighth of the entire rental expense to each of the eight teaching organizations each month by increasing the Rental Expense (account code 7201) of each by $5,000 and reducing the Rental Expense (account code 7201) in the administrative organization by $40,000.
Whatever the allocation basis, the net effect of the allocation must be zero, (the total decrease to the allocating organization's expense must equal the total increase to the expense of the organizations receiving the allocated expense). In addition, the same account code must be used for both the increases and decreases of expense.
ADMINISTRATION AND INTERPRETATION
Administration of recharge activity which involves only the organizations within one department is the responsibility of the department administrator. If the allocations are to be between organizations in different departments, approval from all involved department administrators is required.
Questions regarding applicability of this policy should be directed to the Assistant Controller, 280-5750.