Service Center Procedures

Service Center Procedures

This document describes the management of UAB "major" or "minor" service centers which are distinguished based upon the size of their annual operating budget.
Effective Date:
Responsible Party:
None Assigned
Administrative Category:
Applies To:
Material Original Source:

Service Center Procedures


Service center activities can result in charges, directly or indirectly, to federal grants and contracts. In connection with the receipt of these funds, UAB must comply with the United States Government's Office of Management and Budget (OMB) Circular A-21, Cost Principles for Educational Institutions (A-21).

OMB Circular A-21 Section J.44 deals specifically with service centers. It states:

  1. recipients of federal funds are not to recover more than cost,
  2. and they are not to discriminate between federal internal users and other internal users in prices charged for services. The concept of non-discrimination, however, does not preclude the institution from charging external users higher rates for services.

Cost Accounting Standards

Research institutions must comply with the federal Cost Accounting Standards 501, 502, 505, and 506.  The four standards pertain to:

  1. consistency in estimating, accumulating, and reporting costs;
  2. consistency in allocating costs incurred for the same purpose;
  3. treatment of unallowable costs;
  4. cost accounting period.


Services - highly specialized, typical, or necessary functions provided by a unit to other units, principally within UAB. Often the services could not be purchased as effectively or efficiently from an entity external to the institution.

Service Center - an operating unit providing services or products to users for a fee. Service Centers are accounted for in Miscellaneous Unrestricted Accounts.

Major service centers - service center operations that:

  • have total annual expenditures exceeding $500,000;
  • or, which have total annual expenditures between $350,000 and $500,000 and which provide at least ten percent of their services to federal grants and contracts.

Minor service centers - service center operations that:

  • have $100,000 or more in total annual expenditures;
  • and, which are not classified as "major service centers".

Internal users - units within UAB (including academic, administrative, and auxiliary areas) that purchase services from other UAB units.

External users - legally separate organizations or individuals purchasing services which are not billed to a UAB account number. External users include students, faculty, or staff, if they are purchasing services in a personal capacity. The affiliated foundations and hospitals (such as Health Services Foundation and Children's Hospital) are external entities. Also, agency accounts (UAB accounts with a balancing segment beginning with a 9) are treated as external.

Non-discriminatory rates - all users are charged the same rate for the same level of services or products purchased in the same circumstances.


Rate Charges

Rates charged to internal users must be non-discriminatory, and all users must be billed for services received. Rates should not differentiate between users of the same services within the UAB community (which includes federal and non-federal sponsored projects). The use of special rates, such as for high volume work, for less demanding non-scientific applications, or for priority of delivery, are allowed; but must be equally available to all users of that special service.

UAB may wish to provide a service to a particular internal group of users at a lower rate (e.g. computer time for students as part of the instructional program) than other users. In those cases, the difference between the rate charged to the subsidized user group and the normal rate for the services used by that group should be billed to a subsidy account representing the appropriate direct cost activity (the instructional budget in the case of computer time for students).

Service centers are only required to apply non-discriminatory rates to internal users of the center's services. Rates charged to external users may be higher (but not lower) than those charged to internal users.

Unallowable Costs

Unallowable costs as defined by OMB Circular A-21 may not be budgeted or expensed in service center accounts and, therefore, cannot be included in the user rate calculations. Section J of OMB Circular A-21 (Appendix X) contains a list of unallowable expenses.


All service center activity must be documented and records maintained to support expenditures, billings, and cost transfers. Additionally, the service center is responsible for the maintenance of records of all service center charges and for answering inquiries concerning those charges. Service center charges are subject to audit as long as the grants or contracts that they have charged remain subject to audit. Each service center must retain the following:

  • work papers documenting rate calculation(s);
  • justification of the selected utilization base;
  • General Accounting or Dean/Department Head approval of rates;
  • records documenting and measuring use of the services or products.

Financial records and supporting documents pertinent to a service center's activity must be retained for at least seven years. If a litigation claim or audit is started before the expiration of this period, the records must be maintained until it is resolved or completed.