SOURCE:

Cost Accounting, Financial Management Services

DATE ISSUED:

March 2016

DATE OF  LAST REVISION:

June 2019

RSOP NO:

6.0 

RATIONALE:

To provide guidance to units about expenses that cannot be included in their recharge/service center rate.

RSOP:

Except where otherwise authorized by statute, costs must meet the following general criteria specified under Office of Management and Budget (OMB) Uniform Guidance section § 200.403 to be allowable under Federal awards:

1. Are reasonable and necessary to provide goods and/or services by the recharge/service center. 
2. Conform to any limitations or exclusions set forth in cost principles in the Uniform Guidance or other applicable cost standards established by federal agencies or the university.
3. Are consistent with applicable university policies and procedures.
4. Are accorded consistent treatment for the same type of cost in like circumstances.
5. Are not included as a cost or used to meet cost sharing or matching requirements of any federally-financed program in either the current or a prior period.
6. Supported by adequate documentation the cost was incurred. 

Cost Accounting regulations (commonly referred to as Uniform Guidance) identify certain expenses that are not allowed to be included in the recharge/service center rate calculation.

For a list of unallowable expenses, please refer to Unallowable Expenses.

If a recharge activity has an unallowable expense that hits the recharge/service center 66* account in the current year, the unit should initiate a Distribution of Income and Expense (DI) document to move the unallowable expense to a different operating account.

If a recharge activity has identified a prior year unallowable expense in their recharge/service center 66* account, the unit should initiate a DI document to move the unallowable expense to a different account using the Balance Sheet Adjustment-Unallowable object code (4993) in both the “To” and “From” sections. The DI document should refer to the original document where the unallowable expense occurred; as well as, the object code initially used.

If a prior year error is discovered and the expense is determined to be allowable, object code 4999 (Balance Sheet Adjustment) should be used.  Please see ASOP 11.0 for more information.

Examples

Example 1: After fiscal year end it is determined that an unallowable advertising expense was posted in a recharge/service center 66* account.  The expense should be moved to another operating non-66* account in the current year by using a Distribution of Income/Expense (DI) document and object code 4993 in both the “To” and “From” sections.  The DI should refer to the original document where the unallowable expense occurred as well as the original object code used.   

Example 2: After fiscal year end, it is determined that inventoried items for a recharge activity were incorrectly expensed in the previous year when they should have been counted as inventory.  A DI can be used to move the amount to inventory using object code 4999 since this is an allowable transaction for recharge activity. The DI should refer to the original transaction document and the original object code used.

DEFINITIONS:

Recoverable Rate Calculation: The process that recharge/service center account goes through to determine the amount that they charge for goods or services to other Indiana University accounts.

Recharge/Service Center Activity: An activity that furnishes goods or services to another Indiana University department for the convenience of the university and charges a fee directly related to, and not more than the allowable cost to provide the goods or services.

Uniform Guidance : Code of Federal Register, Title 2, Subtitle A, Chapter II Part 200--- Uniform Administrative Requirements, Cost Principles, and Audit Requirements For Federal Awards

CROSS REFERENCE:

OMB Uniform Guidance (PDF) "Office of Management and Budget (OMB) Uniform Guidance section § 200.403"

RESPONSIBLE ORGANIZATION:

Organizations that bill other Indiana University departments for goods or services