Auxiliary Enterprises Policy
Policy
1. Objective and Oversight
The DOA in collaboration with the Finance and Procurement Departments is responsible for the oversight of auxiliary enterprise operations (AEO) to ensure that they promote the University’s strategic mission and best leverage University resources.
The DOA approves the creation and dissolution of auxiliary departments, ensures compliance with University guidelines and regulatory requirements as determined by local laws and aids with budget development.
Also, the DOA assists auxiliaries to address operating challenges and identify opportunities for growth.
At all times, auxiliary activities must support the educational endeavor of the University and enhance its functioning.
2. Auxiliaries
Auxiliary enterprise operations are categorized by the type of goods and services they provide and the customers that are served. Following is a summary of the types of auxiliary operations at UD.
2.1 Auxiliary Operations for Students/Faculty/Staff
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Academic Auxiliaries
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For-Credit Academic Activities: These activities facilitate and supplement the academic learning experience for students receiving credit towards a degree, micro-credential or certificate program. The revenues in this category represent fees charged to students. Examples of such academic auxiliary activities at UD include:
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Remedial courses for undergraduate and graduate programs
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Self-supporting courses
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Online and distance learning courses
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Lab access or equipment use
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Study abroad programs
2. Non-Credit Academic Activities: Non-credit academic auxiliaries provide education without university credit. Examples of such academic auxiliary activities include:
B. Non- Academic Auxiliaries
Other Fee-Based Auxiliaries
Other fee-based activities benefit primarily students, faculty and staff in terms of costs, quality, timeliness or convenience. Examples are:
Contractual/commission auxiliaries produce revenue by charging a contractually agreed base rate and/or commission for the rental of space or for providing other services. Examples of these include:
Rates charged are negotiated with the vendor and should not be significantly less than the fair market value of similar operations outside the university. Fund balance surpluses may be used to maintain or enhance existing or surrounding facilities.
2.2 Auxiliary Operations for Non Student/Faculty/Staff
These enterprises provide services primarily to external parties. They promote the mission of the university by providing students and/or faculty with opportunities to gain real-life, practical skills to reinforce their educational experience or background. These auxiliaries may also generate revenues to the University through sponsorship, promotions and marketing partnerships. Examples are:
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Consulting agreements
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Cultural events
2.3 Self-Supporting Service Activities
These service departments provide a specific type of service to various university departments and are supported by cost-based charges to the benefiting departments. The departments in this category usually provide a service to other departments rather than individuals, although individuals and external users may be served in limited cases. Examples of Self-Supporting Service Activities include university copy centers.
3. Establishment of Auxiliary Departments
In establishing an auxiliary enterprise the University is mindful that the need for such goods or services exists and, if provided at a reasonable cost and at a convenient location, would enhance and support the University’s instructional, research, or public service programs. The plan to provide these goods or services through a University-operated or affiliated auxiliary enterprise must also take into account the availability, the price, and the quality of any such goods or services offered by the local business community. The department requesting a new auxiliary account will submit a request to the DOA, which includes:
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Description of goods/services to be provided
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User/customer mix
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Description of how the activity promotes the University’s mission
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Source of start-up capital
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Projected 4 year revenues including determination of the rate/price to charge per unit
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Estimated 4 year direct and indirect expenditures by type including justification of overhead fees
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Rate comparison of similar services charged by outside vendors, if applicable
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Location where the activity will take place
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Whether the activity already exists on campus
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Approval of the department manager and finance manager
Once approved, a new cost center number will be assigned to the activity.
4. Budgeting and Reporting
The primary responsibility for managing and operating each auxiliary shall rest with the department manager. Each department manager shall work with the finance manager to develop budgets and shall monitor the financial health of the unit. The finance manager is responsible for ensuring that annual budgets and forecasts are entered in the university’s financial system in a timely manner. The Finance Manager is responsible for performing quarterly variance analysis and providing those reports to the DOA. The DOA meets with the finance manager periodically to review the financial results of the auxiliaries and also conducts an annual review of any operating changes and plans.
5. Accounting Guidelines
5.1 Rate and Billing Guidelines
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Rates established by auxiliaries must be nondiscriminatory; all users/customers are charged the same rate for the same level of goods or services purchased under similar circumstances.
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The use of special rates, such as for high-volume work or for less demanding applications, is allowed but such rates must be equally available to all users/customers and communicated as such. Regulations require supporting documentation justifying the rate development methodology for special rates.
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All users/customers must be billed for goods and services received at the time of product/service delivery, but no later than the last day of the month in which the product/service is provided.
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Each auxiliary enterprise is considered an individual business. All revenues and expenses associated with the operation of the auxiliary business shall be assigned to that auxiliary’s specific department ID so that the financial results of that individual enterprise can be determined.
5.2. Components of Fees Charged
Fees charged for all individual auxiliary activities must incorporate the reimbursement of costs incurred in providing the services, including:
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Cost recovery of direct and indirect costs
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Reasonable working capital needs (normally, up to 60 days)
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Reserves for expected capital outlay or to service debt
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Fees charged for unrestricted activities can incorporate costs to:
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Fund new auxiliary opportunities at the unit/college level
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Fund discretionary activities at the unit/college level (e.g. adjunct salaries, travel, materials and supplies, dues and subscriptions, etc.).
Fees charged should not be significantly less than the fair market value of similar operations outside the university.
5.3. Components of Costs
Each auxiliary activity shall be accounted for as self-sustaining enterprises whether the service is operated by the university or by a private contractor under the university’s supervision. As such, all costs incurred by the auxiliary operation should be “fully loaded” into the rates charged, thus ensuring that costs required to generate revenues are matched against the actual revenue earned. These costs include:
A. Direct Costs
Direct costs are those that can be specifically identified with the execution or direct support of service delivery. Execution costs examples include overload salaries of professors teaching tuition-plus courses, materials and supplies used to deliver the service, etc. Direct support costs include salaries of administrative personnel, office supplies, property insurance, etc, involved in the operations of the auxiliary.
B. Indirect Costs
Indirect costs cannot be specifically identified with the unit of output or service, usually benefitting several activities. Examples of these shared costs include salaries and related costs of administrative, finance and marketing personnel supporting entire departments/colleges. Departments/colleges should allocate these shared costs to individual auxiliaries based on a methodology applied uniformly among all the activities. Examples of such methodologies include percentage of time dedicated to different activities or as a percentage of revenues. This methodology should be documented and kept on record by the College.
5.4. Fund Balance Management
Fund balances for activities will be reviewed during the annual budgeting process by the department manager who is responsible for providing a plan to utilize fund balances beyond those allocated for working capital and expected capital outlay needs. This plan aims to support the operations of the auxiliary in the future.
5.5. Components of Fees Charged
Fees charged for all individual auxiliary activities must incorporate the reimbursement of costs incurred in providing the services, including:
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Cost recovery of direct and indirect costs.
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Reasonable working capital needs (normally, up to 60 days).
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Reserves for expected capital outlay or to service debt.
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Fees charged for Unrestricted activities can incorporate costs to:
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Fund new auxiliary opportunities at the unit/college level.
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Fund discretionary E&G activities at the unit/college level (e.g. adjunct salaries, travel, materials and supplies, dues and subscriptions, etc.).
Fees charged should not be significantly less than the fair market value of similar operations outside the university.
In addition, an auxiliary management fee is charged to auxiliaries to address auxiliary use of university-wide resources, such as human resources, accounting, legal, etc. Auxiliary services may be housed in buildings that are financed from other sources except for self-supporting academic programs.