Internal Service Centers

An Internal Service Center is an operating unit within the University that exists to provide goods and/or services to other University departments, for a fee, at pre-approved rates, without earning a profit, on an ongoing basis.

Key Federal Compliance Requirements of Internal Service Centers

Internal Service Centers are governed by Federal Regulations, specifically OMB 2 CFR Par 200, Uniform Guidance sections 200.402 - 200.406 and 200.468.

Specific Requirements:

  • Profit is Prohibited - ISCs may recover no more than the direct cost of providing the good or service to the University customer (Cost Recovery model only).  ISCs exist solely to benefit the University.  ISC profit is an indication that University customers and Federal grants are being overcharged, and is strictly prohibited by Federal regulations.
  • Must Charge Same Price to ALL University Customers - Rates must not discriminate between internal customers, specifically customers purchasing with Federal funds.  Federal regulations require rates to be set to ensure that Federal grants are neither overcharged, nor undercharged, and that all University customers are charged the exact same price for the same goods or service.
  • Must Break-even over time - Rates charged to customers must be set and adjusted for the Internal Service Center to break-even over time, but not necessarily each year.  Rates should be adjusted each year to break-even, accounting for the prior year surplus/deficit.
  • ISC Surplus cannot be used to Fund other activities - ISCs should not have excess surpluses (profit).  Excess surpluses must be returned to customers on a pro-rata basis.  
    • ***IMPORTANT - Excess revenue/profit CANNOT BE MOVED OUT OF AN ISC to fund other University operations. 
  • Direct Costs Only - Only costs directly attributable to the operation of an Internal Service Center can be used to calculate rates.  Allocation of indirect costs to an ISC is not allowed. 
  • Equipment Depreciation Required - Equipment costing $5,000 or more must be depreciated in the calculation of ISC rates.  However, equipment purchased using Federal funds may not be depreciated or recovered with ISC rates.
  • Approved Rates must be Published - Internal Service Centers must maintain a published list of pricing for all University customers that has been approved by Unrestricted Accounting.

Contact the appropriate Financial Services accounting office for questions regarding establishing an internal service center, or developing and submitting rates for existing centers.