Handbook of Business Procedures

10.3.12. GLOSSARY

acquisition cost. Cost of the asset including the cost to ready the asset for its intended use. Acquisition cost for equipment, for example, means the net invoice price of the equipment, including the cost of any modifications, attachments, accessories, or auxiliary apparatus necessary to make it usable for the purpose for which it is acquired. Acquisition costs for software includes those development costs capitalized in accordance with generally accepted accounting principles (GAAP). Ancillary charges, such as taxes, duty, protective in transit insurance, freight, and installation may be included in or excluded from the acquisition cost in accordance with the non-Federal entity's regular accounting practices.

annual salary. Salary paid to an employee before any deductions.

applicable credits. Transactions that offset or reduce costs, such as purchase discounts, rebates, allowances, refunds, etc. For purposes of charging center costs to federally sponsored programs, applicable credits also include any direct federal financing of center assets or operations (e.g., the direct funding of center equipment by a federal program).

billing rate. An amount established to charge for a specific service or good. The billing rate may vary by types of users and/or the service or good. However, rates charged to federal or state funds, either directly or indirectly, may not subsidize nonfederal or state users or rates in any way. The rate is determined by dividing the costs of a particular service/product by the distribution base. Billing rates may also include surcharges to non-university users.

break-even period. Within a fiscal year an established period of time in which revenues and/or credits are expected to match expenses. Exceptions to the fiscal year include an approved long-term period.

capital equipment. Tangible personal property (including information technology systems) having a useful life of more than one year and a per-unit acquisition cost of $5,000

carry-forward. The over- or under-recovery of operating expenses resulting from billing  rates that do not recover expenses to operate the center.

competition. Businesses not affiliated with the university that offer the same goods or services. As it relates to the private sector, the university does not engage in the sale of a good or service to the public unless the activity is related to or a byproduct of the university's mission (instruction, research, or outreach).

cost accounting standards. A set of uniform cost accounting principles, developed by the Office of Federal Procurement Policy Cost Accounting Standards Board, which must be followed by the university as a recipient of federal funds.

deficit balance. The amount by which the costs of providing a service exceed the revenue generated by the service during a fiscal year.

depreciation. A method of allocating the capitalized cost of an asset over its useful life. Depreciation of donated equipment is calculated based on its fair market value at the time of the donation.

direct labor. All labor that is physically traceable to the finished good or service.

direct operating costs. All costs that can be specifically identified with a service provided by a center. For example, salaries, wages and fringe benefits of university faculty and staff directly involved in providing the service, materials and supplies, purchased services, depreciation, etc.

effective balance. Used to determine whether a center is operating on a break-even basis.

To calculate current year (CY) effective balance:

Current Year Income, less Current Year Expenses

Add Balance Forward, add Transfers

= Balance (if negative, center is in deficit)

Less accumulated equipment maintenance/replacement amount,

Less working capital

= effective balance  

effort. The time devoted to the center activity being measured, expressed as a percentage of the total time spent on all activities conducted under the terms of employment with the university.

external users. Entities or persons over whom the university has no fiduciary responsibility, regardless of the user’s relation to the university’s academic mission. External users include IHEs other than The University of Texas at Austin, for-profit entities, nonaffiliated not-for-profit organizations, other state agencies, students, and members of faculty or staff acting in a personal capacity.

facilities and administrative (F&A) costs. The costs of administrative and supporting functions of the university; such as executive management, payroll, accounting and personnel administration; operations and maintenance expenses, such as utilities, building maintenance and custodial services; building depreciation and interest associated with the financing of buildings; administrative and supporting services provided by academic departments; libraries; and special administrative services provided to sponsored projects.

fully burdened. Fully burdened costs include all direct and indirect costs. Direct costs include salaries (including fringe), equipment/maintenance reserve, and consumables. Indirect costs include but are not limited to administrative support and operating costs for facilities.

general accepted accounting principles (GAAP). GAAP has the meaning specified in accounting standards issued by the Government Accounting Standards Board (GASB) and the Financial Accounting Standards Board (FASB).

hours. Actual Hours Worked. Total hours for which an employee was paid less vacation, sick, and holiday hours.

hours, available billable. Only those hours that are directly spent and billed to a specific project.

hours, base. The total hours available for an employee in the year. For full-time employees, this are 2080 available hours (assumes a 40 hour workweek for 52 weeks). For employees working less than full time, the base hours are adjusted according to the percentage of employment. For hourly employees (LTEs, students, etc.) hours worked and base hours are the same.

hours, unbillable. The portion of time that an employee who is directly involved in a project (as opposed to administrative or maintenance employees for example) spends on matters not directly chargeable to a project (e.g., cleanup, departmental meetings, break time, reading mail, etc.).

indirect cost. Costs incurred for a common or joint purpose benefitting more than one cost objective, and not readily assignable to the cost objectives specifically benefitted, without effort disproportionate to the results achieved.

indirect labor. All labor that is not direct labor.

institutions of higher education (IHE). Refers to public or private colleges, universities, or community colleges.

internal users. Internal users are university departments represented by charges to accounts over which The University of Texas at Austin has fiduciary responsibility

rate documentation. All worksheets, spreadsheets, timesheets, analyses, calculations, and other paper work that support the computation of rate(s) charged for goods or services.

subsidy. Funds from a source other than funds generated by the center to cover the costs of a particular service.

surplus balance. The amount by which the revenue generated by a service exceeds the costs of providing the service during a fiscal year.

total salary dollars. Annual salary (or base period used) plus fringe benefit dollars. Costs of fringe benefits are a cost of the period during which they are earned, whether or not used during that period. Therefore, when calculating total annual salary dollars, the cost of all fringe benefits related to salary earned that year are included.

unallowable costs. Costs that cannot be charged directly or indirectly to federally sponsored programs. These costs are specified in Uniform Guidance. Common examples of unallowable costs include advertising, alcoholic beverages, bad debts, charitable contributions, entertainment, fines and penalties, goods and services for personal use, interest (except interest related to the purchase or construction of buildings and equipment), selling and marketing expenses.

unrelated business income tax. Federal tax assessed to a not-for-profit organization in lieu of federal income tax on income generated by the organization from activities not related to the organization's mission. For more information, see the Handbook of Business Procedures, 5.4. Unrelated Business Income Tax (UBIT).

useful life. Expected life of an asset expressed in years.

Part 10. Costing - Table of Contents