Service Centers

Last Revised: Tuesday, December 1, 2020

Responsible University Administrator: Vice Chancellor, Business & Finance

Responsible University Office: Accounting

Policy Contact: Ben Mayeux


This policy applies to all departments/service centers at the University of Nebraska-Lincoln (UNL).

Policy Statement

Responsibility for Monitoring Changes

It is the UNL department's responsibility to monitor all 22 and 23 cost center financial postings to ensure the operations are properly classified.  If it is found that this activity changes, Accounting should be notified immediately so that the cost center may be changed.

Establishing a Service Center Cost Center Account

Departments requesting a new service center account must complete the following:

  1. New Cost Center Request Form, available on SAPPHIRE:
    • All service centers must maintain a separate cost center.  If a service center has several services that generate significant revenue, child cost centers should be established to keep track of each service.  Additionally, if a service center recovers depreciation in its user rates and/or has external customers, a child cost center will be established as a reserve account to segregate these funds.
  2. New Service Center Request Questionnaire, available here
  3. Depreciation Schedule (if applicable), available here

This information will be reviewed by the Service Center Committee which includes individuals from Accounting and the Office of Sponsored Programs. Once the service center is approved and created, a confirmation e-mail will be sent to the applicant, containing the classification and number.

Types of Service Centers:

  • Reviewed – service centers that meet any one of the following:
    • Claim depreciation on capital items,
    • Charges to federal grants, federal contracts or federal pass-thru accounts exceeding $10,000 in a fiscal year, or 
    • At the discretion of the service center committee.
  • Unreviewed – all others

If a service center is considered a reviewed service center, it will stay a reviewed service center until the criteria is not met for three consecutive years.

Budget Development

Internal Rates

Service centers must develop budgets where rates breakeven; revenues will offset expenses over the budget period (usually a fiscal year).

Templates to develop rates can be found here.

Rates should be reviewed periodically and adjusted where necessary. A complete rate review and re-computation shall occur no less than annually. A service center rate is used to recover the expenses of the service center by charging per unit of output. To compute this rate, use the following equation:

Budgeted expenses +/- Prior Year Deficits/Surpluses (within +/- 15%)
                                 Budgeted Usage Base

The budgeted usage base is the volume of work expected to be performed, expressed in units (e.g. labor hours, machine hours, CPU time or any other reasonable measurement).

Service centers should evaluate their financial position and rates periodically throughout the year to assess their position with respect to break-even. Rates can be adjusted through a mid-year reduction/increase subject to review by the Service Center Committee.

Billing rates cannot be based on “market rates” or what others charge for the same service (except for external customers).

Break even rates should include amounts for:

  1. Direct Personnel
    The salaries, wages, and fringe benefits of all personnel directly related to service center activity (e.g. lab technicians or machine operators, administrative staff) should be included in the rate calculation and charged to the service center's operating account unless charged as a direct cost to federal award. When an individual has multiple duties, an equitable distribution of his or her salary among the duties can usually be accomplished by using the proportional amount of time the individual spends on each service. To adequately reflect an individual's duties, PAFs should be processed to split his or her funding among departmental (state-aided), grant, and service center (revolving) cost objects as appropriate.  Personnel numbers need to be included on the budget.
  2. Direct operating costs (supplies, materials, etc.)
    The costs of materials, supplies, and equipment costing less than $5,000 needed to operate a service center should be included in the rate calculation. Other operating expenses to be included in service center rates are rental and service contracts, equipment operating leases, and professional services
    If inventory is accumulated in a particular year, the service center should not include the costs of accumulated inventory in its rates. Service centers that maintain significant inventory should establish a separate inventory account.  Any inventory on hand at the end of the fiscal year must be reported to Accounting.
  3. Capital Equipment
    Capital equipment is defined as an item with a purchase price of $5,000 or more, with an estimated useful life greater than one year. Items that are expected to be used and remain within the service center should be capitalized according to the University Capitalization Policy. Federal guidelines do not allow the purchase price of a capital item to be recovered through service center rates. The rates should, however, include depreciation of the equipment as calculated by the University to allow for recovery of its purchase cost over its useful life. Depreciation may not be charged unless it is held in a separate child cost center. Depreciation for capital equipment purchased with federal funds, whether or not title has reverted back to the University, cannot be included in the user rates.  A depreciation schedule has to be included with your budget, the required template can be found here.
    • Capital Equipment Considerations. All capital equipment purchases must be made from this reserve account or another source, not the service center's general operating cost center.
    • Accounting must have information on all capital equipment for which a service center will charge depreciation. This will ensure the equipment is appropriately accounted for and is not included in the F&A rate proposal.
    • Proceeds from a sale of surplus equipment should also be held in this reserve account.

  4. Unallowable Costs
    Unallowable costs must be excluded from the internal/governmental user rate calculation. Such expenses (e.g. bad debt expense, internal interest, etc.) may be recovered only through charges to external users. Refer to Subpart E of the OMB Uniform Guidance for a list of unallowable expenses.   The 5% Administration Fee assessed by Accounting on external sales is not an allowable service center expense.  It must be posted to the reserve cost object.

External Rates

External (third-party) users may be charged a higher rate than UNL departments, grants and related parties.  External users are other institutions outside the University of Nebraska system, industry clients, and non-federal entities.  Third-party service center rates follow the same guidelines as internal/governmental rates with a few adjustments:

  1. Depreciation on all equipment, regardless of funding source used for initial purchase, may be included in external billing rates.
  2. Subpart E of the OMB Uniform Guidance excluded expenses may be included in external billing rates provided they are allowable      expenses for the University and of the service center.
  3. Any amounts charged to outside parties in excess of the regular break even billing rates must be held in a separate child cost center. Third-party surcharges should be excluded from the computation of a service center's surpluses and deficits for purposes of making carry-forward adjustments to future billing rates.
  4. Any charges to external users may be subject to the unrelated business income tax (UBIT) reporting requirements.
  5. Services proved to external clients are not considered collaborative in nature and should not result in intellectual property.  As such, there should be no IP terms in any agreement with an external user. Projects that are collaborative in nature and could result in intellectual property are considered a sponsored project and should be managed through the Office of Sponsored Programs.
  6. At no time will an external customer be charged less than UNL departments, grants or related parties for the same service.
  7. External sales are subject the 5% Administration Fee assessed by Accounting.


A service center's surplus or deficit should not exceed 15% of annual operating expenses, exclusive of depreciation. If the surplus or deficit is within the break-even range of +/-15% (exclusive of depreciation), the rate does not need to be adjusted for the following period. However, if the surplus or deficit is greater than +/-15% (exclusive of depreciation), the rate needs to be adjusted for the following period to more accurately reflect the cost of running your operation, taking the existing surplus/deficit into account when calculating the new rate.

Annual Review

All service centers are subject to annual review based on their assigned type:

  • Reviewed Service Centers:
    • Are required to submit an updated budget and Annual Reviewed Service Center Questionnaire, available here.
  • Unreviewed Service Centers:
    • Are required to submit an Annual Unreviewed Service Center Questionnaire annually.  If the nature or purpose of the service center has changed during the fiscal year, please also submit the Service Center Request Questionnaire, found here.

Pricing of Multiple Services

When a service center provides different types of services to different users, separate billing rates should be established for each service that represents a significant activity within the service center. Revenues and expenses should also be separately identified for each service.

A service center providing more than one service may sometimes have a surplus on some services and a loss on others.

Service centers must ensure that there is no cross-subsidization between user groups. Combining the results of various services is not acceptable if the mix of users of each service is different; that is, if higher prices charged to one set of users are subsidizing losses charged to a different group of users.


Normally, service centers should not be a conduit to transfer revenues, expenditures or fund balances (for example, cash) between cost objects since such transfers can distort billing rate calculations or alter the break-even plan. Surpluses due to premiums charged to external users should be set aside in a child cost center designated as a reserve account.

Reason for Policy

The University of Nebraska–Lincoln policy for the financial management of service centers has been established to provide consistent operational practices among the various service center units and to ensure compliance with federal government regulations. This is essential since UNL conducts sponsored programs under federal government grants and contracts. Service center activities result in direct and indirect charges to sponsored grants and contracts. Therefore, Service Center policies and practices must reflect government regulatory costing principles such as those contained in the Office of Management Budget (OMB) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (2 C.F.R §200) (Uniform Guidance) and those required by the Cost Accounting Standards Board. As a major research university, UNL cost accounting must be consistent for all operations.


Service Center: A service center is any organizational unit, or activities within units, that charge for goods or services provided primarily to other internal university operations or units, but also potentially to users external to the University. Any unit or activity established for the purpose of, or participating in, supporting internal or external research objectives through billing to federal or federal flow-thru funds for goods or services provided may be a service center. Examples include, but are not limited to, computer services, copy services, lab analysis services, research animal care services, etc. (SAP Flag USR, SRC, or SSC)

Service Center Reserve: The reserve cost center is used to hold depreciation and external revenue (above break-even).  Capital items need to be purchased from this account. (SAP Flag SRV)



  • This policy was reformatted 2020. No content edits were made.