How to Complete the Detail Cost Composition Form

Recharge rate calculations may only include direct costs.

While the primary “Required Request Form” must be completed and signed for all new and updated recharge rate requests, rate calculation detail may be provided using either the “Rate Detail” tab in the request workbook or another format provided by the unit as long as the required information is presented in a clear and precise manner with the appropriate degree of detail as indicated below.

It is the responsibility of the department to ensure information provided within the template is accurate including salaries, fund balances, etc. See the Resources page for additional information on what qualifies as a Direct Cost.

Labor

Include:

• Salaries and benefits for individuals actively and directly working on the recharge activity
  • Retroactive Salary Transfers - https://finance.umich.edu/programs/rules/retroactive-salary-transfers
  • Policy on Retroactive Salary Distribution Changes - https://spg.umich.edu/policy/501.09
• Individual(s) included in the recharge rate need to be appointed to the recharge chartfield based on the percentage included in the rate
  • Example - If Jill works on recharge activities 50% of the time, 50% of her salary and benefits should be included in the rate and the same percent of her time should be appointed to the recharge chartfield.
• Benefits are included at the appropriate rate based on actual results and appointments.
  • If this is a new recharge or you are not sure what percent to use, please contact the Benefits office for information on estimating benefits.

Do not include:

Administrative or oversight responsibilities that are already included within the Indirect Cost Recovery rate and are normally not included in the calculation of the recharge rate. Exceptions for inclusion of these costs must be validated and approved by Enterprise Financial Planning & Analysis.

Materials

Include:

• Direct costs for specific materials used to provide the recharge service
  • Example - For an assay service, include chemicals or other items needed

Do not include:

• Indirect costs for generic materials that cannot be specifically assigned to the recharge
  • Example – For an assay service, do not include the cost of pens used to label test results.

Equipment

Include:

• If capital equipment (i.e. equipment over $5,000) is being used exclusively in recharge activities, units may include equipment depreciation to recover the cost of that equipment.
• See tab 4 - How to Complete the Equipment Exclusive to Recharge Rate Form for more information.
• Computers, peripherals or other equipment costing less than $5,000 should be included in “Other Costs” as described below.

Do not include:

• Equipment purchased with federal or gift funds or purchased by another department ID
• Equipment that is past its useful life (as assigned by Asset Management)
• Equipment that has not yet been purchased

Other Costs

Include:

• Other costs necessary for the recharge activity include items such as third party processing costs or maintenance contracts.
  • Included in this section based upon utilization by the recharge service. i.e. If maintenance costs are associated with equipment not exclusive to the recharge, then those maintenance costs should be pro-rated based on the percent the equipment is utilized by the recharge service.
• Computers, peripherals or other equipment costing less than $5,000
  • Where equipment purchases are included, units will generally only be granted a one year approval because directly expensing a significant amount of non-depreciable equipment would cause future rate fluctuations in later years causing the rate to be out of compliance with university guidelines.

Total Operation Costs

This is the sum of the labor, materials, depreciation, and other costs included. It is the total annual cost to provide the service.

Adjustment for Prior Year Surplus/Deficit

• The University of Michigan guidelines for recharge balances are based on application of the Uniform Guidance (formerly A-21) break-even requirement
  • Fund balances for recharge activities may not exceed +/- 5% of annual recharge revenue
  • Formula = Ending fund balance / Annual Revenue
  • Example: $525 / $2,500 = 21.0% => Not in compliance
  • Example: $50 / $2,500 = 2% => In compliance
• If your fund balance exceeds +/-5% of break-even, a portion of that balance must be included to increase or decrease the rate as appropriate to bring the fund balance to the correct level.
  • For substantial balances that cannot be recouped in one year, units are granted three years in which to bring the balance into compliance. Units must indicate the intended recovery period on this form.
  • In addition to, or instead of, recovering deficits through a rate adjustment, units may fund that deficit, in whole or in part, from their discretionary funds.
  • Surplus balances may NOT be transferred out of a recharge chartfield. Recovery options for surpluses are limited to rate adjustments.

Units of Product or Service

This is the "Unit of Measure" used to allocate the costs of the recharge activity. It is also the unit that will be listed on the recharge rate approval. As with costs; the unit count must be listed based on the annual amount expected.

Unit(s) should be listed as whole numbers.

Example: If the recharge is for a researcher’s time this may be hours. Other examples include number of reports, prints, assays, etc. Next to the word “Unit”, indicate the type of unit applied, and then document the number of the annual units expected for use in the rate calculation.

Recharge Rate per Unit

This calculation divides total cost by the number of units to determine the recharge rate.

Rate(s) charged may include no more than two decimal places.

Previous Rate

Indicate the previous rate for the service, where applicable.