Fee for Service Activities
Section 315 of the Michigan State University Manual of Business Procedures (MOB) has been revised (effective February 2015) to provide guidance concerning the handling of sponsored projects, fee-for-service activities in academic settings, and gifts.
The fee-for-service in academic settings category is new. This category includes what was traditionally referred to as technical testing as well as other services. Prior to the MOB revision, MSU did not have guidelines covering this category of activity. With the assistance of faculty engaged in fee-for-service work, administrators, and review of policies at peer institutions, the guidelines were developed to provide standards that apply to all units at MSU.
A sponsored project is an activity defined in scope and goal generally undertaken by University faculty, often with the involvement of students and staff, utilizing University facilities and equipment and conducted with financial and/or other valuable support from an external sponsoring entity. Sponsored projects may include basic and applied research, scholarly activity, training, instruction and instructional design, public service and other creative endeavors. Sponsored projects include work which the University conducts to uncover new and different trends or facts leading to discovery. Sponsored projects, specifically research projects, are an investigation aimed at discovery and interpretation of facts, revision of accepted theories in light of new facts, development of new analytical and experimental protocols, or practical applications of such new theories, analysis, data gathering and experiments.
Fee-for-service activities in academic settings generally encompass service projects for which an external client requests a deliverable generated using known practical applications of standard procedures and established theories, methods and standard experiments using special or unique MSU research capabilities. Another form of fee-for-service is work for which the external client provides a detailed protocol for the project which must be performed as received by the University. The results of such work are of specific interest to the client and normally involve a set fee according to a published rate schedule routinely charged to all potential customers, off-the-shelf tools and established protocols. Fee-for-service work does not require original, creative, or scholarly analyses or non-standard interpretation of data sets by MSU faculty, staff or students engaged in the work.
A gift is a voluntary transfer of funds or property by a person or organization to Michigan State University without any valuable consideration or compensation to the donor, other than recognition.
The MOB provides guidelines to differentiate between a sponsored project and a fee-for-service activity. The MOB also provides guidance concerning other activities undertaken at the University that are not included in the new guidelines. Depending on the case, it may be difficult to distinguish a gift from support for a sponsored project or a fee-for-service activity.The MOB provides further guidance concerning the differences among the three types of awards.
If after a review of definitions, the intent and expectations of the funding source, and the nature of the funding agreement there remains a question about the type of award, the question should be discussed with the appropriate dean or designated associate dean, who will, if necessary, consult with the Vice President for Research and Graduate Studies (VPRGS), MSU Business- CONNECT, or University Advancement to make a final determination.
Note that in certain cases, the University may employ Fee-for-Service contractual arrangements other than those listed above as approved by VPRGS and MSU General Counsel.
The Office of the Vice President for Research and Graduate Studies is responsible for the final decision as to whether an award is a sponsored project, a fee-for-service project included in the guidelines, or a gift.
Section 315 of the MOB provides details that should be reviewed by all faculty and staff. The following is a list of a few key procedures, and additional comments, pertaining to fee-for-service.
- A distinction is made between individual faculty and staff who might occasionally engage in fee-for-service work with a client and groups of faculty and/or technical staff that operate a fee-for-service entity that routinely engage in, or even actively solicit, fee-for-service work with external clients. The latter activity provides a means to offset the costs of maintaining those facilities or centers for the benefit of University research.
- When occasional fee-for-service work is proposed, the Unit Administrator (Unit-Admin) reviews the Fee-for-Service Activity Form that the project activity leader must submit to the Unit-Admin before any work begins for an organization/client or is proposed to an organization/client. If assistance is needed to review and secure a University authorized signature, the central point of contact is Business-CONNECT when dealing with a for-profit client, and General Counsel for all other clients.
- University units have the option to provide oversight for routine/higher volume fee-for-service entities within the unit through a University approved Fee-for-Service Activities Officer (FSAO). A FSAO has limited delegated signature authority to engage in the fee-for-service activity as a self-directed operation. Contact the unit administrator (e.g., dean, associate dean for research, director) to find out if the unit has appointed a FSAO.
Further information concerning the appointment of a FSAO is found below.
- Business-CONNECT is delegated oversight responsibility by the Vice President for Research and Graduate Studies for all fee-for-service in academic settings entities.
- Each fee-for-service entity must have University approved billing rates. Billing rate information is available from Financial Analysis. Contact the unit FSAO or Business- CONNECT for assistance.
- Facilities and Administrative Costs (F&A) will be assessed to external revenues generated by a fee-for-service activity and distributed to units according to MSU policy.
- Billing and proper University accounting is the responsibility of the FSAO or the administrative unit for an entity whose unit does not have an FSAO.
- Proper University accounting and reporting includes:
- Use of DY(Designated Fund) accounts for all fee-for-service entities (see below for details on DY accounts).
- Use of approved and current billing rates for all entities.
- Utilizing appropriate University channels.
- Use of the MSU Fee-for-Service Activity Form for certain fee-for-service projects. This form allows a unit to determine if there are any conditions on the fee-for-service project that warrants University intervention. When used, the form must be kept by the FSAO or unit administrator for three years.
- Use of the MSU Standard Agreement Form. If the standard form cannot be used, or no agreement is submitted by the client, either in the form of a PO or executable document, accompanying a fee for service project, special guidelines apply. See Section 315 of the MOB for details.
- An Institutional Proposal (currently known as an eTransmittal) is required for all fee-for-service projects for which credit is given by the academic unit to the faculty/staff associated with the project.
- Proper University accounting and reporting includes:
- Note that in certain cases, the University may employ Fee-for-Service contractual arrangements other than those listed above as approved by VPRGS and MSU General Counsel.
Further information concerning accounting is found below.
- Students participating in fee-for-service work must be informed in writing, signed by the faculty/staff member in charge of the project prior to their work on a project
- that the samples and other material used and data generated MAY BE proprietary and MAY BE the property of the client
- that the work in which they are engaging in and of itself MAY NOT qualify as scholarly work that alone would satisfy degree requirements for thesis or dissertation; AND
- To the extent that the fee-for-service contract is permissive of public disclosure
- that a graduate student’s advisor/guidance committee will decide if, when, or how much of the work on a fee-for-service project can be incorporated into a thesis or dissertation,
- that a graduate or undergraduate student's course instructor or authorized unit administrator will decide if, when, or how much of the work on a fee-for-service project can be incorporated into any course project or undergraduate thesis.
- Any questions concerning the incorporation of fee-for-service work into a thesis or dissertation should be directed to the Associate Provost for Graduate Studies and Dean of the Graduate School.
Appointing a Fee-for-Service Activities Officer (FSAO)
The dean or head of an administrative unit desiring to appoint a FSAO must first contact Business-CONNECT. Business-CONNECT is delegated oversight responsibility by the VPRGS for all fee-for-service in academic settings entities. Business-CONNECT will provide assistance to the unit concerning the duties and responsibilities associated with a FSAO and determining what authority the FSAO will be awarded. The MOB contains details about the operation of the FSAO and should be reviewed before discussions with Business-CONNECT.
The VPRGS in consultation with CGA and Business-CONNECT will discuss with the dean or head of an administrative unit as to who will be the person that should be the FSAO and receive designated authority to sign off on fee-for-service projects that meet the requirements detailed in Section 315 of the MOB. This group can also determine if the FSAO may sign off on projects that exceed the current MSU limit of $5000 or if the FSAO will be restricted to sign off on projects that are below that limit.
Summary of Operational Details Concerning Accounting for Fee-for-Service Activities
Effective with the revisions of Section 315 of MSU’s Manual of Business Procedures, all Fee-for-Service activities in academic settings using research capacity (i.e. all people, places, or things used in research) will be subject to facilities & administrative (F&A) charges as a percentage of total revenue received from 3rd party/non-MSU customers, unless specifically exempt by the Office of the Vice President of Research & Graduate Studies (VPRGS).
To facilitate the administration of this new policy, a new account (DY – Fee-for-Service in Academic Settings) has been created, which will be used to track all revenues and expenses of qualifying service centers/units. This may include activity from on-campus clients (MSU grant accounts & other accounts) and off-campus clients (3rd party/non-MSU customers). Although the F&A charges will only be assessed on the off-campus client revenue, all operational revenues and expenses of the service center/unit should be accounted for in this new account. Contract & Grant Administration and Controller’s Office staff are available to assist units in evaluating the most effective and efficient account structure (including sub-account structure) to expedite college and University reporting requirements.
Once the DY account(s) have been established, approved billing rates for the services being rendered need to be on file. Please see details at Financial Analysis.
Similar to other F&A charges levied against sponsored projects, a certain percentage of the indirect charges will be redistributed back to units according to the current F&A allocation methodology.
Like other Designated and Auxiliary accounts, any remaining fund balance within DY accounts at the end of a fiscal year will automatically roll forward to the new fiscal year on a revolving basis. Account balances are subject to periodic reviews – specifically if the balance is overdrawn or if an excess balance appears to be accumulating.
CGA has information concerning accounting and processing details using the new DY accounts. If the VPRGS has approved a special waiver from charging F&A or a lower rate for a specific activity, CGA should be notified, via email, so that CGA can process a manual F&A adjustment.
Quick Reference Checklist for Implementation
- Review current activities and identify those activities that qualify as a Fee-for-Service in Academic Settings. Typically, this activity will currently be in “DS”, “XT”, or “RG” accounts. Please contact Contract & Grant Administration or the Controller’s Office (Office of Financial Analysis & Reporting) for assistance.
- Create DY account(s) for each service center/entity to properly track the activity. Contact Contract & Grant Administration or the Controller’s Office (Office of Financial Analysis & Reporting) for assistance.
- Initiate any HR/Payroll changes to move payroll expense to the new account.
- Submit any billing rates/recharge rates to the Controller’s Office for approval. Units should consider any potential impacts of Unrelated Business Income Tax (UBIT)* that may be generated from the services rendered. Please contact the Controller’s Office (Office of Financial Analysis & Reporting) for assistance.
- Update applicable purchase orders or shadow system data with new account information.
- Initiate account owner edits for any capital assets maintained in the finance system applicable to the old account.
- Close any accounts that no longer are being used.
- Deposit eligible revenue from 3rd party/off-campus customers using either:
- 4500 – Fee for Service – Industry
- 4505 – Fee for Service – Other
- Process revenue from on-campus customers (MSU grants or other accounts through IB’s or SB’s) using a revenue object code not listed above.
- Reconcile your accounts monthly.
*Unrelated Business Income (UBI) is income generated by the University from a trade or business that is regularly carried on and is unrelated to the University’s educational or research mission. Service centers that conduct testing services is an area considered by the IRS to be UBI and generally includes services provided to for-profit entities for a fee, whereby the University is prohibited from publishing the results of the testing to the general public (i.e. not providing a public benefit). Various other factors may be considered when determining whether an activity qualifies as UBI or not.