Policy 5:8 – Service Centers

Policy Contact: Office of Finance and Budget/Grants and Contracts Administration

  1. Purpose

    This policy and its procedures are designed to establish consistent practices for creating, managing, discontinuing, and approving rates among the various Service Centers and serves as a guideline for complying with federal regulations.

  2. Definitions
    1. Service Center: University organizational unit, normally within a department, that provides ongoing goods or services primarily to departments within the University and, in certain instances, to entities external to the University. Operations are supported through the establishment of billing rates that ensure cost recovery and compliance with University policies. Please note that Service Centers do not include universities’ auxiliary services.
    2. Unallowable Costs: costs that must not be charged directly or indirectly to federally-sponsored programs. These costs are specified in 2 CFR Part 200. Common examples of unallowable costs include alcoholic beverages, bad debts, charitable contributions, entertainment, fines and penalties, and goods and services for personal use.
    3. Internal Users: institutional funds, federal and non-federal grants, and contracts and other sources administered by the University.
    4. External Users: individuals, businesses, groups, and organizations that are not part of the University’s academic and administrative communities but are users of a Service Center's goods or services. Students, faculty, and staff making purchases for non-University related purposes from Service Centers are considered to be external users.
  3. Policy
    1. Service Centers are required to comply with this policy, as well as 2 CFR Part 200, 200.468, and applicable SDBOR and University policies, and other applicable federal guidelines.
    2. The goods and/or services offered must be consistent with the University's mission and the normal activities of the college/department associated with the Service Center.
    3. The Service Center Application Form and Service Center Rate Template must be completed by the Service Center and approved by the Dean or Department Head, Shared Services Finance Director, and Finance and Budget designee to initiate the creation of a Service Center.
    4. Service Centers should operate at a break-even for internal users. Billing rates must be calculated to recover reasonable, allocable, and allowable costs applicable to the goods and services.
      1. A separate operational fund will be established in the University accounting system to record the actual direct operating costs of the Service Center. A separate reserve fund will be established to track depreciation recovery and any surplus generated by external users.
      2. Actual expenses and revenues will be reviewed annually by the Shared Services Finance Director and approved at least biennially by Finance and Budget, or designee.
      3. Service Centers are allowed to carry forward to the next approved rate, surpluses and deficits that are within 10% of annual expenses in their operational fund to the next approved rate cycle.
      4. Where a Service Center provides different types of services to users, separate billing rates will be established for each service that represents a significant activity of the Service Center.
    5. All internal users must be charged for the services they receive, and the billing rate must be consistent among all internal users.
    6. Rates charged to external users may exceed, but shall not be less than, the rates charged to internal users and may include the University’s then-current F&A rate. External user rate may also include an additional surcharge, as determined by the University in its discretion, to align with prevailing market rates and to ensure the University does not compete unfairly with commercial, for-profit enterprises.
    7. Revenue from external users will be charged a 5% cost recovery fee.
    8. Financial, rate setting, and other records related to the operations of a Service Center, including records supporting billing rate computations, must be maintained by the Service Center in accordance with the SDBOR’s records retention policy.
  4. Procedures
    1. To request a new Service Center, the Service Center Application Form and Service Center Rate Template must be completed by the Service Center and approved by the Dean or Department Head, Shared Services Finance Director, and Finance and Budget designee to initiate the creation of the Service Center. This provides University officials with the opportunity to review the proposed Service Center for feasibility and to ensure it will operate in accordance with federal cost principles and applicable SDBOR and University policies.
    2. An annual financial report must be reviewed by the Shared Services Finance Director to confirm financial accuracy, rate compliance, and alignment with federal cost principles. Updated rates and supporting documentation must be submitted for Finance and Budget approval at least biennially, or immediately whenever a rate change is proposed. No revised rate may be implemented until written approval is issued.
    3. Service Center Records Retention Procedures
      1. It is the responsibility of the Service Center to maintain records supporting all Service Center charges, billings, and rate calculations. Records must remain available for review or audit for the duration of the retention period applicable to the grants and contracts charged.
      2. If a Service Center closes, the sponsoring department remains responsible for ensuring records are retained in accordance with University and SDBOR requirements.
    4. Closing a Service Center
      1. When it is determined that an individual Service Center needs to be discontinued, the party responsible must complete the Service Center Discontinuation Form and submit it to Finance and Budget.
      2. A closing report must accompany the discontinuation request and must include reconciliation of all operating and reserve fund balances. All balances must be cleared as part of the closure process.

  5. Responsible Administrator

    The Vice President for Finance and Budget, or designee, is responsible for annual review of this policy and procedures. The University President is responsible for approval of this policy and procedures.

Approved by President on 09/16/2014. Revised 08/05/2024 (clerical). Revised 02/20/2025 (clerical). Revised; Approved by President on 04/30/2026.

Sources: 2 CFR 220; SDBOR Accounting Policies and Procedures Manual

Associated Forms: Service Center Application Form; Service Center Rate Template; Service Center Discontinuation Form