OP-D-1   AUXILIARY ENTERPRISE OPERATIONS, OTHER ACTIVITIES (AUXILIARY ENTERPRISES FOR OTHER THAN STUDENTS/FACULTY/STAFF), SERVICE DEPARTMENTS (OTHER SELF-SUPPORTING ENTERPRISES), AND RECHARGE OPERATIONS

SPECIFIC AUTHORITY
NACUBO "College and University Business Administration," 6th Edition, 2000, Chapter 20
NACUBO "Financial Accounting and Reporting Manual for Higher Education" (F.A.R.M.), Chapter 300
NACUBO Advisory 99-2
Auxiliary Financial Statements: Chancellor's Memorandum CM-D-30.00-11/96
Florida Administrative Code, Rule 6C-9.013
OMB Circular A-21
Federal Cost Accounting Disclosure Statement
Health Fees: FS 240.235 (1); BOR 6C-7.001, 6C-7.003(6)
Housing: FS 240.209 (3)(r), 240.227 (22); State University System Rule 6C2R-2.02422
Parking: FS 240.263-267; BOR 6C-7.003(33) F.A.C. 6C2-23009
Working Capital Trust Funds: FS 240.279
Auxiliary Enterprises, Definitions: FS 240.2803
Auxiliary Exemption from Legislative Budget Request: FS 240. 277(3)
Auxiliary Facilities: Chancellor's Memorandum CM-D-31.00-02/97

OBJECTIVE

1. To describe the procedures and responsibilities for accounting for revenue activities, including:

a. Auxiliary Enterprise Operations for Students/Faculty/Staff (those within the auxiliary trust funds group; this does not include Athletics or the Union operation which are covered in other policy documents)

b. Other Activities (NACUBO's Auxiliary Enterprises for Other than Students/Faculty/Staff)

c. Service Department Sales (NACUBO's Other Self-Supporting Enterprises)

d. Recharge Operations *
* regardless of funding source

2. To describe the procedures and responsibilities for accounting for recurring expense refund activities, regardless of funding source.

3. To provide definitions and guidelines for the classification of revenue and expense refund activities, pricing policies, development of service rates, the costs to be recovered, inventory control and valuation and budget preparation.

A. OVERSIGHT AND FINANCIAL RESPONSIBILITY
The oversight policy board for the operations of these activities at the Florida State University is the Auxiliary Service Board (ASB). ASB has the responsibility for insuring that auxiliary operations reflect University policy and priorities, and, as such, reviews issues which affect these trust funds and other activities covered by this policy. ASB monitors cash balances, pricing policies and rates, fund balances, annually reviews administrative overhead assessments and distributions, and other relevant matters. The operation and finances of each operating unit are the responsibility of its dean or director and, ultimately, the appropriate vice president.

B. CLASSIFICATION OF ACTIVITIES

1. Auxiliary Enterprise Operations for Students/Faculty/Staff

An Auxiliary Enterprise is an entity that exists to furnish goods or services primarily to students, faculty, or staff, and that charges a fee directly related to, although not necessarily equal to, the cost of the goods or services. The distinguishing characteristic of auxiliary enterprises is that they are managed as essentially self-supporting activities. Examples are: resident halls, food services, college stores, student health centers, golf courses, parking and laundry.

2. Other Activities
(NACUBO's Auxiliary Enterprise for Other than Students/Faculty/Staff)

This category includes activities that are primarily intended to furnish goods or services related to the institution's mission of teaching, research, or public service and the customers of these goods or services will primarily not be the students/faculty/staff. The charges for these activities are also a fee directly related to, although not necessarily equal to, the cost of the goods or services. This category will include the classification previously known as Sales and Services of Educational Activities. Examples of Other Activities would include Theater ticket sales, Psychology Clinic, Seminole Productions, School of Music Summer Camp, etc.

NOTE: This classification does not include activities that should be administered through the Division of Sponsored Research (DSR). When revenue activities initially request the establishment of an auxiliary account, they are first evaluated by DSR to ensure that an auxiliary account is the proper placement for the activity. Established auxiliary activities are also periodically reviewed to make sure that appropriate activities are being conducted through the account. If an activity is determined to belong in Sponsored Research, the activity must stop operating as an auxiliary and must operate under the DSR. Avoiding the indirect cost associated with DSR is not a determining factor for proper account placement.

3. Service Department (NACUBO's Other Self-Supporting Enterprises)

A Service Department is a University activity that primarily provides a specific type of service to many and various University departments and units and is generally supported by charges to the benefiting departments and units. Service Departments include University copy centers, telecommunications, postal services, office supplies store, repairs and maintenance shop (working capital department), etc. The departments in this category usually provide a service to other departments rather than individuals, although individuals and external users may be served in limited cases.

4. Recharge Operation

A Recharge Operation is an activity that provides a specific type of service to primarily units within the same department or college. It operates primarily for the convenience of a department(s). Recharge Operations include: academic stockrooms, scientific equipment maintenance, departmental copy centers, etc.

C. DEFINITION OF TERMS

1. Users of Goods and Services

a. Internal users are University departments. All users should be charged the same rates regardless of the funding source or of their ability to pay. There will be no discriminatory pricing for University departments for the same type of good or service. University departments include departments within Colleges and Schools, areas within Academic Affairs, Research, Finance & Administration, Student Affairs, and some areas within University Relations. It does not include Direct Support Organizations (DSOs) such as the Alumni Association, the Foundation, Seminole Boosters, etc.

b. External Users are Students/Faculty/Staff, other state agencies, other individuals or groups, and for profit or not-for-profit entities. Rate/prices for external may be higher than for internal users.

2. Operating Costs

a. Operating Costs are the salaries and benefits, OPS, supplies, rent, cost of goods sold, University administrative overhead assessments, and other operating expenses of the activity.

1) Direct costs are those costs that can be specifically identified with the unit of output.

2) Indirect costs are those costs that cannot be specifically identified with the unit of output.

b. Equipment Depreciation is that portion of the original acquisition cost of the equipment purchased by the activity which is considered expired based on the passage of time or use of the equipment. The most common method of computing depreciation is dividing the acquisition cost by the number of years of expected useful life (straight line depreciation). Example: $5,000/5 years = $1,000 annual depreciation. Depreciation may be a direct or indirect cost depending on the Equipment/s use. Beginning with the fiscal year 2001-2002, the University will record depreciation expense at least annually in the property subsystem and financial statements. The property accounting system will include the straight-line depreciation and the accumulated depreciation for each property item. Depreciation and accumulated depreciation totals by organization number will be provided in reports to the auxiliary areas on an as-needed basis. Unless an exception to straight-line depreciation is justified and approved, all auxiliaries will use this University recorded depreciation for equipment for the purpose of a consistent application of depreciation expenses.

c. Equipment Acquisition Cost is the acquisition cost of equipment, including delivery and set-up charges, purchased by the activity. Equipment is defined as tangible personal property costing $1000 or more and having a useful life of a year or more.

d. Facility Costs include utilities, repairs and maintenance, debt service and building depreciation.

e. Inventory Cost of Goods Sold is the cost of the inventory that is sold during the year, not the total cost of inventory purchases during the year.

Example:

Beginning of year inventory	$10,000
Purchases for resale	5,000
Inventory available for sale	$15,000
Inventory on hand at year end	3,000
Inventory Cost of goods sold for the year	$12,000

3. Cost Recovery

Costs incurred and to be recovered by an activity vary according to the classification and funding responsibility of the activity.

D. ACTIVITIES

1. Auxiliary Enterprise Operations (for Students/Faculty/Staff)

a. Definition-- An Auxiliary Enterprise Operation is an entity that exists to furnish goods or services primarily to students, faculty, or staff, and that charges a fee directly related to although not necessarily equal to, the cost of the goods or services. The distinguishing characteristic of auxiliary enterprises is that they are managed as essentially self-supporting activities. Examples are: resident halls, food services, college stores, student health centers, golf courses, parking and laundry. The general public may be served incidentally by auxiliary enterprises.

b. Rate Principle-- Little or no support comes from Educational and General (E&G) sources. The pricing policies or rates charged should be sufficient to cover all operating costs plus an appropriate operating margin for equipment, facility and other applicable costs, and to maintain service quality and a reasonable working capital balance.

c. Rate Development--Continuing or updated rate schedules or pricing policies shall be forwarded to the Office of Budget and Analysis at the time the annual budget is requested. If there is no need to change the rates or pricing policies, a copy of the rates to be continued must still be forwarded.

d. Revenue Collections--See Office of the Controller’s Policy OP-D-2-B on cash management procedures and policies.

e.Record Retention--Departments will retain the supporting documentation for the current methodology in effect and the detail work papers used to develop the rates, to be available for review upon request. When the methodology is changed, the previous methodology and rate work papers must be retained for an additional three fiscal years. Each department will clearly account for its costs and the detail used for pricing and rates developed from those costs. Departments should have available comparison rates for the same goods or services if they can be obtained from outside vendors.

f. Inventory Control and Evaluation--See Section J

g. Establishment of an Account--See Section E

h. Budget Development--See Section H

2. Other Activities
(NACUBO's Auxiliary Enterprise for Other than Students/Faculty/Staff)

a. Definition--This category includes activities that are primarily intended to furnish goods or services related to the institution's mission of teaching, research, or public service and the customers of these goods or services will primarily not be the students/faculty/staff. The charges for these activities are also a fee directly related to, although not necessarily equal to, the cost of the goods or services. This category will include the classification previously known as Sales and Services of Educational Activities. Examples of Other Activities would include Theater ticket sales, Psychology Clinic, Seminole Productions, School of Music Summer Camp, etc.

b. Rate Principle--Other Activities should use a reasonable rate development and the rates charged should be sufficient to cover all operating costs and equipment depreciation plus an appropriate operating margin. Costs that are indirect (costs that benefit more than one service or good) should be allocated among services or goods on a reasonable basis, such as number of units produced or costs excluding joint costs.

Generally these operations do not have financial responsibility for facility costs. Costs not incurred by the activity's account should not be included in the rates to be charged.

Rates assessed for internal users by Other Activities must be at break-even if the goods or services are provided to departments. Accounting records must be maintained which clearly distinguish the source of the revenue as internal or external.

If an activity has both an Other Activity and an Auxiliary Enterprise function, accounting records must be maintained to clearly distinguish the costs and the revenues attributable to each of the two functions. The portion of the activity that is an Auxiliary Enterprise Operation can follow Auxiliary Enterprise Operation operating guidelines and if there are surpluses derived they may be used as noted in the paragraph above.

Other Activities should not transfer available funds to or incur expenses on behalf of an unrelated account or activity. If the department is not sure if a transfer is appropriate, it should consult the ASB for review and approval.

c. Rate Development--See Section F

d. Revenue Collections--See Office of the Controller’s Policy OP-D-2-B on cash management procedures and policies.

e. Record Retention--Departments will retain the current methodology in effect and the detail work papers used to develop the rates, to be available for review upon request. When the methodology is changed, the previous methodology and rate work papers must be retained for an additional three fiscal years. Each activity will clearly account for its costs and the detail used for pricing and rates developed from those costs. Departments should have available comparison rates for the same goods or services if they can be obtained from outside vendors.

f. Inventory Control and Evaluation--See Section J

g. Establishment of an Account--See Section E

h. Budget Development--See Section H

i. Required Supplemental Financial Information--See Section I

j. Surpluses and Restoration of E&G Funds--See Section K

3. Service Departments (NACUBO's Other Self-Supporting Enterprises) and Recharge Operations

This policy is to describe the procedures and responsibilities for accounting for revenue activities. In addition, this policy is intended to provide instructions for complying with the requirements of the Federal government in order to avoid overcharges (charges in excess of allowable cost recovery) and related penalties. Please see more information regarding the Federal requirements on the web site of the Division of Sponsored Research, specifically information stated under "Cost Accounting Standards," "Direct/Indirect Costs," and "Unallowable Costs."

a. Definitions

1) Service Department (NACUBO's Other Self-Supporting Enterprises). A Service Department is a University activity that provides a specific type of service to many and various University departments and units and is generally supported by charges to the benefiting departments and units. Service Departments include University copy centers, telecommunications, postal services, office supplies store, repairs and maintenance shop (working capital department), etc. The departments in this category usually provide a service to other departments rather than individuals, although individuals and external users may be served in limited cases.

2) Recharge Operation A Recharge Operation is an activity that provides a specific type of service to a few University departments. It operates primarily for the convenience of a department(s). Recharge Operations include: academic stockrooms, scientific equipment operations, departmental copy centers, etc.

b. Rate Principle--Service Departments and Recharge Operations should operate on a break-even basis. Annual surpluses or shortfalls should be used to adjust rates up or down in the following year or the next succeeding year, or more frequently if necessary. The rates charged should be sufficient to cover all operating costs and equipment depreciation. Costs that are indirect (costs that benefit more than one service or good) should be allocated among services or goods on a reasonable basis, such as number of units produced or costs excluding joint costs. These operations may or may not have financial responsibility for major equipment or facility costs. Costs not incurred by the activity's account should not be in the rates to be charged.

Rates assessed outside users by Service Departments and Recharge Operations could result in additional funds. Surpluses from this source may be used to reduce internal rates or for the acquisition of equipment or other needs of the activity. Accounting records must be maintained which clearly distinguish the source of the revenue as internal or external.

If an activity has both a Service Departments or Recharge Operation and an Auxiliary Enterprise function, accounting records must be maintained to clearly distinguish the costs and the revenues attributable to each of the two functions. The portion of the activity that is an Auxiliary Enterprise can follow Auxiliary Enterprise operating guidelines and if there are surpluses derived they may be used as noted in the paragraph above.

Service Departments and Recharge Operations may not transfer available funds to or incur expenses on behalf of an unrelated account or activity. If the department is not sure if a transfer is appropriate it should consult the ASB for review and approval.

c. Rate Development--See Section F

d. Revenue Collections--See Office of the Controller’s Policy OP-D-2-B on cash management procedures and policies.

e. Record Retention--Departments will retain the current methodology in effect and the detail work papers used to develop the rates, to be available for review upon request. When the methodology is changed, the previous methodology and rate work papers must be retained for an additional three fiscal years. Each activity will clearly account for its costs and the detail used for pricing and rates developed from those costs. Departments should have available comparison rates for the same goods or services if they can be obtained from outside vendors.

f. Inventory Control and Evaluation--See Section J

g. Establishment of an Account--See Section E

h. Budget Development-- See Section H

i. Required Supplemental Financial Information-- See Section I

j. Unallowable Costs--Certain costs may not be included in the calculation of the billing rates of Service Departments or Recharge Operations. These costs are defined as unallowable in OMB Circular A-21, Section J, and are not eligible for reimbursements from the federal government. These include but are not limited to:

1. Advertising or public relations. Expenditures to promote the University are not recoverable.

2. Alcohol beverages
3. Bad debts
4. Commencement or convocation costs
5. Contingency provisions
6. Contributions, donations, remembrances
7. Entertainment
8. Fines and penalties
9. Goods and services for personal use of employees
10. Student activity costs
11. Travel-first class
12. Memberships, subscriptions, and professional activity costs of a social or individual nature.

k. Surpluses and Restoration of E&G Funds--See Section K

E. ESTABLISHMENT OF NEW AUXILIARY TRUST FUND GROUP ACCOUNTS
Requests for the establishment of new funding accounts must be submitted to the Office of Budget and Analysis for review and consideration by the ASB through the appropriate dean or director and vice president. The request must include:

1. Sufficient information regarding;

1. programmatic and financial objectives of the activity,
2. the users who will purchase the goods or services to be provided and percentages thereof (Example: 75% from FSU departments, 25% from students),
3. the proposed pricing policies and rates to be charged and the detailed methodology and computations for each of the rates,
4. estimated annual revenues by source and estimated annual expenditures by type,
5. source of start-up capital,
6. location where the activity will take place,
7. whether the activity already exists on campus,
8. whether there are other sources of support, such as E&G and,
9. a rate comparison for similar services charged by outside vendors, if the services or goods are available outside the University.

2. Proposed classification of the activity per the four categories of activities defined in this document: Auxiliary Enterprise Operation, Other Activities, Service Department, or Recharge Operation

3. Approval of the department chairperson, dean or director and vice president.

The estimated revenue of the activity must exceed $10,000 annually; otherwise, an auxiliary trust fund group account will not be established. An account will not be established when existing accounts are available to appropriately serve the activity. An auxiliary account will not be established for activities that belong in Sponsored Research the FSU Foundation, FSU Research Foundation, or activities that are required to be run through the Center for Professional Development or other existing funds.

For some activities less than $10,000, the ASB may consider allowing the activity to operate using expenditure refunds to an existing account. These activities must be approved by the ASB.

F. RATE DEVELOPMENT

1. Service Departments and Recharge Operations

In establishing rates to be charged the user, units should observe the following:

a. The initial pricing policy and rates, and the methodology will be reviewed and approved by the Inspector General and the office of Budget and Analysis for the ASB. The ASB may review pricing policies and rates anytime at its discretion.

b. Departments are authorized to make changes to their existing rates if the changes are due to changes in cost. The changes must be in accordance with the previously approved pricing policy and rate methodology.

c. Rates charged to internal users must be consistently charged to all internal users, irrespective of the user's funding source or ability to pay.

d. Rates charged to external users may be higher than rates charged to internal users. Additional funds derived from external users may be used to reduce internal rates or to support the needs of the activity. Accounting records must be maintained which clearly distinguish the source of the revenue as internal or external.

e. The cost items (direct or indirect) used in computing the service rate of the auxiliary account should not include any cost items of any category that are charged to and are paid from Educational and General or Contract and Grant funds.

f. An official University list of equipment and other tangible personal property items costing $1000 or more purchased by the activity's auxiliary trust fund account, and a depreciation schedule reconciled to the list, will be retained by the department in support of depreciation included in the rates.

Beginning with the fiscal year 2001-2002, the University will record depreciation expense at least annually in the property subsystem and financial statements. The property accounting system will include the straight-line depreciation and the accumulated depreciation for each property item. Depreciation and accumulated depreciation totals by organization number will be provided in reports to the auxiliary areas on an as-needed basis. Unless an exception to straight-line depreciation is justified and approved, all auxiliaries will use this University recorded depreciation for equipment for the purpose of a consistent application of depreciation expenses.

If the auxiliary is a service department or recharge operation, the following guidelines apply: (1) Make sure that all auxiliary property is properly recorded in the property accounting system, and remember that the depreciation expense that can be included in the rates must be of property that was purchased with auxiliary funds; (2) Use the depreciation expense recorded on the property accounting system as one of the costs used in computing the rate.

g. Rates should be reviewed at least annually for over recovery or under recovery of costs and:

1. If there has been an over or under recovery of costs but the methodology has not changed, the rates should be adjusted up or down accordingly to maintain the break-even rate principle.

2. Continuing or updated rate schedules shall be forwarded to the Office of Budget and Analysis and Contracts and Grants at the time the annual budget is requested. If there is no need to change the rates, a copy of the rates to be continued must still be forwarded. Rates should be updated more frequently than annually if necessary.

h. If there are new activities or a new methodology, the rates must be reviewed and approved by the offices of Inspector General and Budget and Analysis prior to their implementation.

i. Only the costs incurred by Service Departments or Recharge Operations can be used to compute the service rate. The costs should be identified and segregated as either direct or indirect costs. Direct costs are those costs that can be specifically identified with the unit of output. Indirect costs are those costs that cannot be specifically identified with the unit of output.

2. Rate Development Example

An example of the rate development for an activity is illustrated below. It is based on an activity that provides two types of services and for which cost recovery entails the direct and indirect costs paid from the activity account.

The initial determination of the service rate will be based on estimates. Subsequent determinations of the service rate should include any cost variance (plus or minus) between the actual cost and estimated costs.

	Service A	Service B	Total Activity
Costs that can be directly attributable to each service
OPS payroll	$10,000	$23,000	$33,000
Supplies	5,000	7,000	12,000
sub-total	15,000	30,000	$45,000
Joint (indirect) costs pro-rated based on direct costs above	3,333	6,667	10,000
Total costs	$18,333	$36,667	$55,000
Hours of service to be provided	100	150	N/A
Rate per hour charged	$183.33	$244.45	N/A

Equipment costs (depreciation) should be included as cost items in the calculation of the service rate. The specific use of the equipment will determine if the use allowance should be included as direct or indirect costs. Depreciation charges can be used only on equipment purchased with auxiliary funds.

3. Cost Recovery and Updating the Rates

Using actual costs and the results of financial operations during or at the end of a fiscal year, the rates should be adjusted up or down, depending on whether there was a surplus or a deficit. If there was a surplus, and nothing else about the costs and units of service is expected to change in the future, the surplus should be used to reduce lower) the rates. If there was a deficit, the rates should be adjusted (raised) to make up the deficit.

As an example, assume the original calculation included an estimated direct cost item of $5000 and the actual item cost $7,000. The variance of $2,000 would be added to the estimated direct cost for the next year.

	Estimated	Actual	Estimated Next Year
Hours of service to be provided	100	100	100
Rate per hour charged	$183.33	$183.33	$223.33
REVENUES	$18,333	$18,333	$22,333
EXPENDITURES
Costs that can be directly attributable to each service
OPS payroll	$10,000	$10,000	$10,000
Supplies	5,000	7,000	7,000
Prior year deficit			2,000
sub-total	15,000	17,000	$19,000
Indirect costs pro-rated based on direct costs above	3,333	3,333	3,333
Total costs	$18,333	$20,333	$22,333
SURPLUS (DEFICIT)	$0	($2,000)	$0

Per the above, future rates should be raised to recover the $2,000 deficit.

G. PRICING POLICIES/SERVICE RATE REVIEW
The Offices of Inspector General and Budget and Analysis will review all initial activity pricing policies and service rates. The review will be conducted immediately upon the initial establishment of the account, and for a new activity or new rate methodology. The initial review of a newly established rate shall be of the methodology used to compute the rate. The Inspector General periodically will test the pricing policies, rates and methodologies of activities.

H. BUDGET DEVELOPMENT

1. Each June-July, all auxiliary trust fund group accounts must prepare operating budget requests for the next year.

The completed budget requests should be approved by the department chairperson and submitted to the office of Budget and Analysis via the on-line Budget Submission program called OPBN. The budget requests will be examined to ensure that the budget request is in accord with realistic revenue and expenditure estimates. Operating budgets will then be established in accordance with FSU Board of Trustees and Florida Board of Education approvals. University budgets are reviewed and approved by the Florida Board of Education in September. Once the originally submitted budget has been recorded at the account level, no budget amendments are done during the year. Budgets should be used as a comparison to monitor the actual performance of the activity throughout the fiscal year and as an aid to help make adjustments within the account's own resources.

In addition to the budget request information, account managers for all auxiliary accounts shall provide to the Office of Budget and Analysis on an annual basis:

a. up-to-date information on the purpose for the account with the completion of the Annual Auxiliary Information Form,

b. continuing or updated service rates and pricing policies (Note that Service Departments and Recharge Operations must also submit a copy to the Contracts and Grants Office.)

2. Rate changes resulting from changes in cost may be effected by the department in accordance with the previously approved pricing policy and rate methodology.

Any budget request which reflects a cash deficit will require approval by the Auxiliary Service Board, which will also approve the method of eliminating the deficit.

I. REQUIRED SUPPLEMENTAL FINANCIAL INFORMATION

1. Additional information will be required on an annual basis in order for University management to stay apprised of the total financial activity of all auxiliary accounts. In addition, this information will provide a mechanism for compliance monitoring with Federal Cost Principles for the Service Departments and Recharge Operations. This supplemental information must be provided to the Office of Budget and Analysis within 60 days after the fiscal year ends and should be completed on the Annual Auxiliary Information Form provided by the Office of Budget and Analysis. This information will supplement information available on SAMAS ledgers. Information to be provided will include:

1. cash,
2. the value of the inventory at June 30,
3. accounts receivable at June 30,
4. liabilities including accounts payable at June 30,
5. explanation of the ending cash balance if more than 15% of annual expenditures,
6. the value of E&G funds expended during the year in behalf of the activity,
7. the amount of restoration to E&G that occurred during the year.

2. Other Activities Auxiliaries, Service Departments and Recharge Operations must also explain June 30 cash balances if more than 15% of annual expenditures. Possible explanations for cash accumulations may include:

1. charges to external users that generated a surplus,
2. equipment depreciation charges creating a future equipment replacement,
3. general cash flow needs for a month or two (approximately 15% of annual expenditures),
4. unpaid encumbrances.

J. INVENTORY CONTROL AND VALUATION
Inventory cost of goods sold and year-end values are to be determined using an acceptable inventory valuation method such as:

• First-In, First-Out (FIFO)
• Moving Average Cost
• Specific Identification Cost
• Weighted Average Cost
• Last in First out (LIFO)

Auxiliary units that have inventories not addressed or identifiable above should contact the University Controller for assistance in establishing the appropriate method.

All inventories should be physically counted once each fiscal year, as of June 30. Where inventories are large in quantity, a perpetual inventory system should be used and the physical count may take place during the year. Significant discrepancies between the perpetual inventory and the physical count should be investigated and resolved. The University Controller will issue instructions each year concerning reporting of inventories for inclusion in the annual financial statements.

K. RESTORATION OF E&G FUNDS
It is important for the university to know of any E&G or other support provided to an activity in order to determine:

• if those costs are reasonable support costs,
• whether a reimbursement to E&G is appropriate or,
• whether the support costs should be paid from the auxiliary account and added to the rates.

Cash balances which accumulate in an auxiliary trust fund account operation may be used to reimburse the University to the extent that Educational and General funds were used by the auxiliary trust fund operation. Any cash balances remaining after any appropriate reimbursement may be used in a manner consistent with the purpose of the auxiliary unit, not an unrelated activity. Consideration will be given to the operating cash necessary for the continued operation of the auxiliary unit, such as one or two months of working capital for cash flow needs and the recovery of depreciation for equipment purchases.

L. AVAILABLE CASH BALANCE CHECKING FOR AUXILIARY ACCOUNTS
The university SAMAS available cash balance checking is in effect year round. From September 1 through June 30, disbursement and encumbrance checking is done based on the recorded budget by category at the fund level, not at the account level.

M. AUXILIARY OVERHEAD ASSESSMENTS
The ASB makes annual assessments for University indirect costs. The assessment represents the costs borne by central administrative units (such as Personnel, Controller, Administrative Computing, etc.) in support of auxiliary activities.

Most academic units are not assessed overhead unless the revenues are at least 51% from outside users. In those instances, a 1% assessment is made.

Business Services and Auxiliary Enterprise Operations are assessed the "full rate" (for instance, the 2000-2001 assessment rate was 3.2083%). The ASB also administers the assessment to the Athletic department, which is the full rate; and the .5% assessment to Contracts and Grants (paid from University Indirect Cost Recoveries, not charged directly to individual contracts and grants). In special cases, the ASB may approve a different assessment.

The assessments to the activities are based on actual cash basis expenditures from two years prior to the year in which the assessment is made (for example, 1999-2000 expenditures for the 2001-2002 assessment). The assessment is not made to OCO expenditures above $200,000. For new or relatively new activities, a more recent year may be used, or an estimate of expenditures.