Does your department operate a 3E service center? If so, do you have a clear and consistent way to track your usage base? While this data is not recorded in university financial statements (i.e. Banner), it is an important component in developing compliant service rates. It serves as the denominator in the rate calculation.
The usage base represents the total amount of goods or services provided to all customers over one fiscal year. If the usage base is inaccurate or incomplete, rates will also be inaccurate leading to over or under-recoveries over time.
An appropriate usage base should accurately reflect how services are delivered using consistent and meaningful units, such as hours, samples, square footage, or any other relevant unit of measure to ensure customers are charged fairly. It is important that only billable activity is included in the base. Non billable work, like internal quality control or setup time, should be excluded to avoid distorting the rate and causing an under-recovery.
Timing and accuracy are critical. Usage should be recorded based on when the service occurs, not when it is billed, to prevent mismatches between activity and revenue. Departments must also maintain clear documentation, including (at a minimum):
- The date the service was provided
- The number of units provided
- The customer who received the service
- CFOP information
Contact and Additional Information
Additional principles for determining an appropriate usage base can be found on the Goods or Services Sold page on the BusFin website. For additional questions, please search for System Government Costing on the “Who to Ask” page.
