It might surprise you to learn that many service activities use non-3E equipment depreciation when calculating their rates. Before adding this depreciation to your rate calculation, ensure the following criteria are met.
Step 1: Confirm that the equipment is used by the service activity.
If you followed the advice in last month's article, you toured the facility and noted all the equipment used in production. These pieces of equipment are great candidates for including in a rate calculation because they actively support the purpose of the service activity.
Step 2: Verify that the equipment is still depreciating.
Only equipment with remaining depreciation can be included in your internal rates. Run the Rate Calculation Financial Report and review the Equip Service tab. If the Depreciation Amount column shows current depreciation, continue to Step 3.
Step 3: Check that the equipment has an entity code.
Using the same report, review the Entities Attribute Value column to verify that an entity code is assigned to the equipment. If no entity code is assigned, contact System Government Costing. We can determine whether the equipment has already been included in the university's Facilities & Administrative (F&A) study or help assign an entity code if the equipment is eligible. If it has already been captured in the F&A rate study, the depreciation cannot also be included in your rates, as we must avoid charging the federal government twice.
Step 4: Confirm that the funding source is allowable.
Finally, the funding source used to purchase the equipment also affects eligibility. Most funding sources are allowable, but equipment purchased on federally or non-federally sponsored projects and certain restricted plant funds requires additional review. Refer to the table below for guidance.
Include the Depreciation
If you answered "yes" to the previous four steps, you may include the non-3E depreciation in your rate calculation. Including the depreciation allows you to recover the cost of providing services. This may provide funds for plant fund transfers to assist with future equipment purchases. Watch for next month's Costing Corner article where we'll take a closer look at plant fund transfers.
Contact
If you have any questions, feel free to contact us or visit the Service and Storeroom Centers page on the BusFin website.
