1.2 What is a Service Center?

A service center is an organizational unit which provides a specific service or product, or a group of services or products, to users principally within the Stanford academic and administrative community.

Policies and practices described in this Manual apply specifically, and solely, to service centers.


Questions about this policy can be answered by:

Siu, Christine

Financial Management Analyst RAPC

Policy and Compliance

(650) 723-9063

1. General Accounting Practices

A service center is an ongoing activity. It is not a one time distribution of expense. It is not a clearing account, now known as expenditure allocation, where actual expenses are distributed among benefiting units each month. (See below for a comparison of service centers vs. expenditure allocations.)

The cost of running the service center facility or providing the product is charged to users on a "rate" basis. Rates are generally formulated to recover the costs of operations such as salaries, benefits, equipment depreciation, materials, and supplies expense.

A service center recovers the cost of its operations through charges to its users. Dissimilar services operated by the same department, a computer facility vs. a copy center vs. a machine shop, must be established as separate service center entities, with separate accounts, budgets, and rates.

Back to top

2. Expenditure Allocation PTA

An Expenditure Allocation PTA, also known as a Clearing Account, are small-scale activities similar to a service center within an academic department. These accounts, which usually operate at less than $20,000 in annual expenses, are established to allocate expenses or salaries. If they are salary clearing accounts they may exceed the $20,000 maximum. The academic department is responsible for all control procedures. Charges for these activities/services should be to the activity specific expenditure code, if available. The Associate Director of RAPC is available for consultation regarding these activities, and will periodically check with the department on such known operations. Such activities may also be audited by external or internal auditors. The form for opening an Expenditure Allocation PTA, entitled Request for Expenditure Allocation PTA is located in the Related Items section at the bottom of the page.

Expenditure Allocation PTA formally known as Clearing Accounts (Award Range: AAQxx - AAZxx)

  1. Expenditure Allocations are used to accumulate specific costs whose final distribution cannot be determined at the time the cost is incurred. Do not request an expenditure allocation if allocation can be handled via direct charging.
  2. The department should clear each month's expense by the end of the following month.
  3. The expenditure allocation allocates labor or materials costs incurred each month. An expenditure allocation may NOT have both salaries and expenses. An expenditure allocation is restricted to salaries or expenses.
  4. If the allocation process starts at the beginning of the FY, there should be no balance forward at fiscal year end. Therefore if the Sept expenses are cleared in Sept, Oct expenses cleared in Oct, etc, then the PTA should be clearing each month. If the PTA is allocating a month behind expenses incurred, the carry forward will be approximately the difference between last month’s expenses to this month’s offset.
  5. Allocation methodology is reviewed by RAPC when the clearing account is established.
  6. A guarantee account is required in the event of any uncleared expenses at FYE when the PTA has posted 12 months of offset to 12 months of expenses.
  7. Accounts are opened and closed directly with RAPC.
  8. Usually a small number of users and fund sources are involved.
  9. With the exception of salary clearing accounts, expenses are usually less than $75,000.
  10. Few problems arise because operations normally are not large or complex.
  11. These accounts are not usually large enough to be included in the University annual Operating Budget process.
  12. These accounts are never allowed to direct charge any capital assets.

Service Center PTA (Award Ranges: ACAxx, ALAxx and AKAAF)

  1. Service center PTAs are intended to provide an efficient expense recovery mechanism for single or multiple services in a complex cost environment. Do not request a service center PTA if the expenses can be direct charged or allocated as an expenditure allocation.
  2. The allocation methodology is submitted with the next fiscal year’s budget to RAPC between August 1st through September 30th. RAPC must approve rate(s) in order to be officially charged to users.
  3. The department uses an approved rate, usually combining salary/labor and materials expense, to charge for the services actually provided each month.
  4. Net account balances within +/- 5% at year-end may be carried forward to the next fiscal year if administration service center. If academic service center or the VSC, ONR approved a +/- 15% break even range.
  5. RAPC budget review and rate approval is required every year. Even if the rate(s) or budget is forecasted to be the same as last year, an annual budget and rate(s) submission is required.
  6. A guarantee account is required because an academic service center is not allowed to end the FY with a greater than 15% loss. The center may choose to re-charge its users for the proportional amount in deficit or subsidize the loss at YE.
  7. RAPC reviews and approves accounts to be opened or closed.
  8. Usually multiple users and fund sources are involved.
  9. Budgets and expenses generally total above $75,000 to millions of dollars.
  10. Problems of complexity and size may require an experienced business manager and professional staff expertise.
  11. Some administrative service centers as well as the VSC are large enough that estimated fiscal year charges are required in their Operating Budget process.
  12. Service centers are allowed to include depreciation expense within their rate(s). Centers are never allowed to direct charge any capital assets. The asset must be purchased by the department’s gift/unrestricted account or commercial paper loan. The depreciation charges may then be posted to the service center.

Back to top

3. Annual Breakeven

Most service centers operate on an annual fiscal year break even basis, with rates based on budgeted projections of operating expenses and projected levels of activity or demand for the services or products to be provided during the budget period. Organizationally and for accounting purposes, service centers fall into one of two categories at Stanford University: "academic" or "administrative."

Back to top

4. Service Center Groupings

A. Academic Service Centers (Award Range ACxxx)

These are service centers within a school or department, usually serving specific client groups or needs, most often instruction and research. Most service centers are of this type, and are run on a fiscal year breakeven basis. These centers provide services ranging from shops and labs, to specialized computer facilities, to departmental radiology centers.

Departmental stores service centers are academic unit service centers which, for summer inventory timing and adjustment reasons, manage their operations on a calendar year basis (January through December), rather than on a fiscal year period (September through August). Departmental inventories are normally conducted in June, and there is not enough time to adjust service center rates, expenses, or volume levels to breakeven with an August year-end close. In this Manual, whenever "fiscal year-end" is referred to for the academic service centers, the policy or practice is equally applicable to the academic departmental stores service centers, with their calendar year framework.

B. University-Level, Administrative Service Centers (Award Range ALxxx)

These service centers provide varied and complex services to the Stanford community, with multiple sources of user funding. Because they provide services to auxiliaries and outside users, some of the policies and accounting treatments governing their operations vary from those applied to the academic service centers. The variation for including expressly unallowable costs in these service center rates is described in the "Policies" Section of this Manual.

5. Long Term Agreement

A service center may operate as a Long Term pricing or breakeven Agreement (LTA) service center. Because of its unique nature, initial large capital equipment and building costs, volume fluctuations, or market limitations on annual rate increases, such a center requires longer than one year to recover, or spread out, it’s operating costs. Long Term Agreements must be negotiated with the Government.

RAPC provides counsel and support in the development and preparation of an LTA proposal. In addition, RAPC either represents or accompanies service center management in negotiating an LTA. Currently there are no LTAs

Back to top

6. Specialized Service Facility

Federal regulations  define "specialized service facilities" as "institutional services involving the use of highly complex or specialized facilities such as electronic computers, wind tunnels, and reactors . . ."  Because the federal regulation language is not precise, the University has further defined a Specialized Service Facility (SSF) service center as one which meets all three of the following criteria:

  1. service center must incur annual expenses of at least one million dollars
  2. its business must "materially" affect Stanford's on-campus Organized Research F&A (indirect) cost rate
  3. its services must not be easily available from an outside vendor

Since FY95, University policy requires this type of center bear its allocable share of Facilities & Administrative costs (a.k.a. indirect costs). That means an SSF service center must recover both the direct costs of its operations and its share of the University's allocable F&A costs. A separate overhead rate may need to be negotiated with the Government for each SSF center. The rate is applied to all users of the facility, unless written approval to waive F&A (indirect) costs is received from the Office of the Vice Provost and Dean of Research, or from the Medical School Dean’s Office (for a School of Medicine service center).

Currently, only the School of Medicine's Veterinary Service Center VSC, (formerly the Division of Laboratory Animal Medicine, DLAM, Research Animal Facility) is a SSF service center with its own Animal Care Indirect Cost Rate (ACICR). The VSC is subject to the +/- 15% breakeven amount by the end of the fiscal year.  The VSC has been assigned its own specific award range AKxxx.

Note: "Materially" means by greater than one-tenth of a rate point.

Back to top

7. Auxiliary Activity

An auxiliary activity is a self-supporting entity that exists principally to furnish goods or services to students, alumni, or faculty and staff acting in a personal capacity, and charges a fee for the use of goods or services. Auxiliaries include Housing and Dining Services, Department of Athletics, and the Stanford University Press. Pricing for auxiliary services may be based on market rates, except when charging for service provided to federal awards. Auxiliary services are not subject to this service center policy.

Back to top

Go to SCM Chapter: