|To:||Henry Clay Owen|
|From:||Richard A. Barbella|
|Date:||January 9, 1998|
|Re:||Cost Accounting Standards - Recycling/Hazardous Materials Rate|
Beginning in fiscal 1995-96 the University has been funding the cost of a recycling and hazardous materials program through a charge placed on the purchase of most expendable items and equipment. The rate of the charge in fiscal 1995-96 and fiscal 1996-97 was developed to cover the cost of both the recycling and the hazardous materials programs. During this time both programs were managed by the Environmental Health and Safety Division of Fiscal Affairs.
In the current fiscal year several changes took place in the program that were initiated as a result of the University ensuring it conformed to cost accounting standards. Acting upon the advice of a consultant, the recycling and hazardous materials programs were separated and distinct rates were established for recycling and for hazardous materials.
The recycling program was to be funded by a charge on all expendables and equipment purchases except for three categories of purchases: gases, radioisotopes, and chemicals and laboratory supplies. The hazardous materials program would be funded solely from expenditures on the purchase of gases, radioisotopes, and chemicals and laboratory supplies.
At this same time the Vice President for Fiscal Affairs and Chancellor of the Lexington Campus agreed on the transfer of the recycling program to the Lexington Campus Physical Plant Division. Both sectors of the University, Fiscal Affairs and the Lexington Campus, independently developed charge rates based on the estimated purchases of items within the expenditure codes applicable to the separate programs.
Starting July 1, 1997 the separate rates in support of each program went into effect. Through the monitoring of expenditures it became readily apparent that there was going to be a problem with the hazardous materials rate. The rate was specific to three (3) categories of expenditures and significantly higher than the recycling rate which is charged to most other expenditures of supplies and equipment.
An examination of expenditure documents has revealed significant shifts in the use of expenditure categories. As a result, Environmental Health and Safety and Fiscal Affairs had to increase significantly the hazardous materials rate to cover estimated program expenses during fiscal 1997-98. Other options were considered, but a determination was made that they would not improve the situation and only add to the costs.
In order to resolve the problem for the benefit of the entire University, the Environmental Health and Safety Division of Fiscal Affairs and the Physical Plant Division of the Lexington Campus have agreed to a cooperative effort. Effective July 1, 1998 the Environmental Health and Safety Division of Fiscal Affairs and the Physical Plant Division of the Lexington Campus will:
- Cooperate in the establishment of one rate to be placed on the expenditure on supplies and equipment. This will require each program to determine needs, agree to a rate, and a distribution of that rate based upon the expressed needs of each program. This will take place during the preparation of the annual budget.
- Join in the establishment of one service center with separate cost centers for the recycling and hazardous materials programs. Both programs will remain with their respective units and sectors.
- Cooperate and agree, with prior consent, on any rate changes that might be required during any fiscal year for each or either program to meet expenses.
- Any balances remaining at the end of a fiscal year, consistent with cost accounting standards, would be redistributed as income in the new fiscal year based upon the rate distribution for the new fiscal year.
- Representatives from each sector will meet no less than quarterly, or as needed, to review the status of each programs revenue and expenses and determine if changes in the rate or rate distribution may be required for total balance in the service center.
Should there be any questions please do not hesitate to contact me.
|Cheryl Ann Newberry|