Business Operations Recharge

Business Operations Recharge Methodology

The intent of the business operations recharge (BOR) model is to allocate the administrative cost of central services to self supporting non-general fund units that primarily reside in the auxiliary fund.

Services providers

The central administration units included in the business operations recharge are University Audits, Procurement Services, General Counsel, Payroll, Accounts Payable, Financial Operations, Human Resources and ITS. Within these units there are cost centers such as financial reports, records and information services, plant fund, compensation services, etc. that provide specific services to self funded units. A list of service providers are listed further down this page.

Customers

The recharge is intended to capture the major auxiliaries with revenues that exceed $1M annually. It is not the intent of the recharge to charge small isolated internal service operations. Also included are non U-M affiliates that use the university’s systems and negotiate service level agreements.

For units that run all of their activity through the auxiliary fund, and the general fund is a significant customer, a credit is applied to the driver of activity. Units receiving this credit include, transportation services, utilities and plant operations. Credits are also applied in some cases where units either do not utilize a specific service or provide the function themselves.

Drivers

The cost of each service provider is allocated by the most accurate activity driver available that will not result in an overly complex allocation methodology. The BOR model is currently based on two drivers; total transactions and full time equivalents (FTE’s). Total transactions include all journal entry line counts (upload je’s, cash receipts, etc.) both manual and system generated.

The table below summarizes the costs pools and drivers for each of the service providers:

 

Service Providers

Accounts Payable

Accounts Payable is divided into two (2) distinct pools for the business operation recharge. The two pools are as follows:

• Pool 1 - purchase order audit team, non-purchase order audit team, customer service
• Pool 2 - vendor maintenance team

The Accounts Payable model is allocated based on total transactions. It should be noted that all costs associated with the P-Card group have been excluded.

Procurement Services

The cost pool for Procurement Services includes the procurement agents, buying support staff and the administration required to operate. Procurement Services is allocated based on total transactions. If a member of the Procurement staff is dedicated to a particular customer, they are removed from the business operation recharge calculation and costs are directly allocated to the customer.

Financial Operations

The cost centers included in the allocable cost for Financial Operations are the controllers office, fund areas, business processes, financial reporting, tax and transaction services. The Financial Operations model is allocated based on total transactions. Costs directly charged include student accounts, general accounts receivable, sponsored programs, plant and a portion of the tax department.

University Human Resources

Costs are allocated, based upon full-time equivalents (FTE’s), to departments within two (2) separate cost pools:

• Pool 1: University wide - Includes services for HR communications, UMID, background checks, mediation, diversity programs, a portion of staff services and compensation and classification services.
• Pool 2: Non-hospital - Includes services for employment, a portion of staff services, records and information. Hospital and health services are excluded from this pool.

Payroll

All costs of the Payroll office are included and are allocated based upon full-time equivalents (FTE’s) in departments.

ITS – Financial Suite

The ITS human resources charge is determined by allocating the costs of ITS services to the different products that ITS supports (financial, human resources, student administration and research and development). The costs associated with the ITS - Financial Suite are allocated based upon the total transactions posted in the M-Pathways Financial system.

ITS – Human Resources Suite

The ITS Human Resources charge is determined by allocating the costs of ITS services to the different products that ITS supports (financial, human resources, student administration and research and development). The costs associated with the ITS- Human Resources Suite are allocated based upon full-time equivalents (FTE's) in departments.

General Counsel

The costs allocation is based upon time studies that document the amount of effort General Counsel expends on the various auxiliary units.

University Audits

The allocation is based upon time studies that document the amount of effort University Audits expends on the various auxiliary units.

Tax

The allocation is based upon time studies that document the amount of effort the Tax Department expends on the various auxiliary units.

For further information or questions regarding BOR, please contact Sheryl Bourlier at [email protected].