Working with External Customers
Considerations when Accepting Work from External Customers
External rates should be set during your biannual rate review. This rate review will take into account:
Facilities and Administrative (F&A) Cost
When billing an external customer, the cost should include the internal UNC breakeven rate (the actual cost of the service rendered without any subsidies) plus the current UNC negotiated organized research F&A rate. It is not allowable to discriminate between customers (all users are charged the same rate). When an UNC investigator pays for services from a recharge service center with federal grant funds, the F&A portion has already been collected by the University at the time of the grant award. To be compliant with the requirement that all users are charged the same rate, the F&A needs to be collected from external customers on top of the UNC breakeven rate.
Although an investigator from another institution has most likely had F&A taken out of their grant to support the indirect costs of their home institution, that F&A does not come to UNC Chapel Hill to help support the indirect costs involved in maintaining a core facility here at Chapel Hill.
There is one exception only to the application of F&A to external rates; there is a Memorandum of Understanding (MOU) in place concerning usage between NCSU customers and UNC CH customers..
The MOU allows for each institution’s recharge research service centers to offer ‘internal’ rates to each other. To determine the correct rate to charge to NCSU clients, calculate the actual breakeven cost of the service. Do not include any institutional subsidies which offset any costs. The agreement waives the F&A rate which is normally added to the price for any external customer. Please contact the Office of Research Technologies with any questions.
Matching Market Rate
In addition to the minimum pricing requirement above, State law prohibits competing with commercial entities. This means that if there is a regional commercial source for the same or similar services, pricing should not undercut commercial sources and pricing should be set at the ‘market’ rate.
UNRELATED BUSINESS INCOME TAX (UBIT):
The University is required to file an Exempt Organization Business Income Tax Return with the Internal Revenue Service reporting any unrelated business income generated by the activities of its academic and support units.
The Internal Revenue Code states that a college or university is generally deemed to have unrelated business taxable income when it realizes gross income from any regularly conducted trade or business that is not substantially related to its educational and other exempt purposes.
Any business activity conducted by a college or university primarily for the convenience of its faculty, other employees, and/or students is not taxable, regardless of the nature of the activity. However, the sale of any goods or services to non-University persons or entities may be taxable. In order to determine whether an activity produces taxable income, the University Controllers Office has developed the Unrelated Business Income Tax questionnaire which is sent to departments to be completed on an annual basis.
SERVICE AGREEMENTS / CONTRACTS / PURCHASE ORDERS:
A service agreement or contract should be in place before beginning any work for an external client. Agreements should cover the scope of work, term and termination, liability clauses, etc.
The Office of Industry Contracting within the Office of the Vice Chancellor for Research handles all service agreements for external customers, whether from industry or academic. You can request a template agreement for your core. Once the Industry Contracting group has created a template agreement for your core, you can use this template for other external clients. If the project is complex and needs to cover additional potential issues or the client requires use of their institutional service agreement, OIC will work with you to create a custom agreement to meet the situation.
Detailed instructions: External Service Agreement Process (Updated May 2019)
Contact Office of Industry Contracting
Purchase Orders (PO)
A Purchase Order from the external client may provide additional protection in terms of ensuring payment since it generally means that the expenditure has been approved by a central office within the organization.
Customers on site
If the core has walk up instrumentation services, an additional agreement may be needed to cover any liability issues surrounding use of University resources by an external entity.
INVOICING AND PAYMENTS:
Invoicing and Payments
Invoicing should be done monthly if reasonable. Invoices should clearly state that payment is due within 30 days.
Be sure to include the core facility chart field fund, source, and department ID on your invoices.
Ask that incoming payments reference the recharge chart field string, both check payments and wire transfers.
This will assist Accounting Services ensure that the incoming funds are allocated to your facility.If Accounting Services does not know where to deposit incoming funds, they will sit in a University holding account until correct distribution is established. Best practice is to notify Accounting Services when expecting a payment, especially by wire transfer.
For most recharge cores:
Fund chart field will be 29519
Six digit department ID
The core facility Source chart field will be five digits beginning with 195_ _
Use revenue account 441911 Sales- Other Outside
Please check with your accounting staff or contact Annabelle Stein if you don’t know the Source chart field
for your facility.
External clients who want to pay by wire transfer:
If the core is a recharge account and has a chartfield string fund code of 29519, please use the bank information on this sheet
External clients who want to pay by credit card:
Credit card modules are active for both iLab and Infoporte, should your external customer prefer to pay using that method.
TRACKING AND USAGE OF EXTERNAL REVENUES:
Cores are expected to breakeven (revenues equal expenses) over a period of time.
When a surplus or deficit builds up over time, rates are adjusted upwards to recover the deficit or lowered to deplete the surplus.
If the core has external revenue, the amount of external revenue above the internal breakeven rate needs to be tracked so that it can be identified and removed from the fund balance calculation which dictates whether the account balance is too low or too high.
External revenue surplus is not subject to rate carry forward adjustments and can be set aside to be used by management solely for the benefit and improvement of service center operations. This includes purchasing equipment, subsidizing internal rates, and any allowable recharge expense. The use of external reserves to purchase capital equipment must be approved in writing by the OSR in advance of the purchase.