University departments and staff members generate funding from sources outside the university by two basic methods. One method comes through proposals in which the applicant pledges to investigate and to deliver something for which the funding agency is willing to pay. The actual funding agreement may take the form of a grant or a contract. Typically this method is used to fund applied and theoretical research activities which have educational improvement and professional development as their focus. 

A second method of generating outside income, Fee for Services/Materials, encompasses a wide variety of activities which are typically accounted for in the 128 appropriation. Examples at UW-Stout include special course fees, Auxiliary operations, installment credit plan, Corner III/Niche/fast food operations, library services, marriage and family therapy services, Vocational Development Center services, Research and Training Center workshops, Material Development Center sales, Placement Office service fees, and Teleproduction Center sales. The funding arrangement for these activities can take the form of a contract or a price list/cash register sales arrangement.

The University incurs numerous costs in administering funds generated from external sources. Funds from grants, gifts, and research projects are accounted for in the 133 and 144 appropriations. Specific guidelines and processes for recovering the costs associated with them are outlined in UW System General Administrative Policy Paper (GAPP) #2 and stout Policy #83-38: Collection of Indirect Costs. 

Numerous administrative costs which derive from Fee for Services/Materials activities must also be recovered, however. 

It is the policy of the University of Wisconsin-Stout to recover costs associated with Fee for Services/Materials activities in the 128 appropriation through an administrative cost assessment. The assessment will be at a rate established for each of three types of 128 appropriation activities. It will be made once each quarter based on gross revenues for the previous three months and deposited to a pooled account which is administered by the Chancellor. 

Annually, at approximately the same time as indirect cost projections are made, a projection of income to be generated from the administrative assessment will also be made. The Chancellor will solicit budget requests for funding allocations. Consideration of these types of activities is done on the basis that the assessment is made to recover cost for administrative support services provided to the self-sustaining activities. As part of the 102 and related funding "Operational Annual Budget Planning Procedure", the Chancellor will make allocations out of the pool. 

This policy specifically excludes research-type activities and gifts which are accounted for in the 133 and 144 appropriations.

The policy on administrative cost assessment will be applied to three main types of activities accounted for in the 128 appropriation. 

4.1  TYPE 1: Fee for Services/Materials Activities Exempted from Administrative Cost Assessment 
 

An activity which meets a criterion outlined below is exempt from an administrative cost assessment. 

(a)  The activity is an educational experience, limited to activities where the primary purpose is provision of laboratory or practicum opportunity for students participating in a credit-bearing course of study. The learning experience provided to students is the primary purpose, with the work provided by students being a concomitant outcome of the method of instruction. A member of the faculty or academic staff is assigned as part of his or her regular academic responsibilities to serve as organizer, instructor and evaluator of the students' work. 

(or) 

(b)  The majority of the revenue generated by the activity is derived from charging other university departments or is a clearing account for pass-through expenses. 

(or) 

(c)  The activity is (1) a reasonable university cost-shared public services function for the involved parties/department, (2) performed without disruption to the normal activities of a department, (3) of an unusual, short time and non-recurring nature, and (4) does not violate UW System or Stout policy. The criteria for public service activities are further explicated in the attached addendum: Guidelines for Defining Non-Instructional Public Services and the Accounting of Income Generated by Performing Such Services at UW-Stout. 
 

4.2  TYPE 2: Auxiliary Operations 
 
Stout subscribes to the definition of auxiliaries formulated by the National Association of College and University Business Officers: 
 
An auxiliary enterprise furnishes a service to students, faculty, or staff, and charges a fee directly related to, but not necessarily equal to, the cost of the service. The public may be served incidentally in some auxiliary enterprises. They are essential elements in support of the educational program, and conceptually should be regarded as self-supporting. Little or none of the revenue generated comes from educational and general sources, but in the case of housing and food services, there may be a limited amount of sales to the institution. 

For UW System and UW-Stout there are a designated group of auxiliary activities, all classified as Activity Code (AC) 8. Historically, these activities have contributed to administrative costs at Stout by providing funding support for 2.0 FTE positions in the University Business Office. The support of the 2.0 positions represents funding for a broad range of services such as personnel, payroll, security and general administration. 

4.2.1  Administrative Cost assessment Rate for Auxiliaries 
 

The administrative cost assessment rate for Auxiliaries is 0.5% of gross revenue for the previous three months. 

Auxiliary activities are virtually self-supporting in that they pay their own utilities, debt service, physical plant services, etc. Their administrative cost assessment rate, therefore, is set at a level which reflects that fact. The dollar value of the support provided for the 2.0 FTE positions equates to approximately 0.5% of their gross revenue. This historical record provides the basis for establishing the rate at 0.5%. 
 

4.3  TYPE 3: Fee for Services/Materials Activities Subject to an Administrative Cost Assessment 
 
All 128 appropriation activities conducted outside the University by University departments or staff members and not covered by Types 1 and 2 above would be assessed for administrative cost. The Dean for Curriculum, Research and Graduate Studies, as part of the grant and contract review process, will determine if the activity is a research-type activity subject to the conditions of GAPP #2 and Stout Policy #83-38. 

4.3.1  Administrative Cost Assessment Rate for Type 3 Activities 

The administrative cost assessment rate for Type 3 activities is 15% of gross revenue. This assessment is made on a quarterly basis, based on gross revenues for the previous three months. 

The rate is comprised of the total cost of the three components listed below which are most directly affected by Type 3 activities, divided by the total cost base: 


 

UW System Cost Data
General Administration	$17,733,092
Department Administration	4,380,434
Operation & Maintenance	36,425,416
	$58,538,942
Total Cost Base	$376,865,926
	$ 58,538,942 $376,865,916 = 15.5%


 
The assessed rate for Type 3 activities is set at a level which recognizes the additional costs incurred by the University in administering the activities. The rate level also reflects the fact that the activity is a narrowly defined service-type activity which does not fit within the spirit and intent of GAPP #2. The activity will not necessarily draw upon the resources of the library, student services, or System Administration. 

Building and Equipment Use is not included in the administrative cost assessment for Type 3 Fee for Services/Materials activities because it is already included in the direct cost rate. 

Addendum:  Guidelines for Defining Non-Instructional Public Services and the Accounting of Income Generated by Performing Such Services at UW-Stout