University of Illinois System
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22.7 Management and Accounting for Facility Use Agreements (FUAs) and Technical Testing Agreements (TTAs)

Policy Statement

Units must ensure that facility use agreements (FUAs) and technical testing agreements (TTAs) are properly managed and accounted for.

Reason for the Policy

To ensure accurate reporting for the University of Illinois System’s (system) audited financial statements as well as compliance with:

  • Federal costing principles applicable to service centers, as outlined within the Code of Federal Regulations (i.e., Uniform Guidance) and the State of Illinois’ Legislative Audit Commission (LAC) Guidelines;
  • IRS guidelines related to Unrelated Business Income Tax (UBIT); and
  • The system’s policies and procedures related to the proper execution of revenue-generating contracts and timely billing and collection efforts.

Applicability of the Policy

All units who generate revenue from FUAs or TTAs.

  • FUAs are fee-for-service agreements where the system provides access to facilities, equipment, and/or resources (such as research labs, specialized equipment, supercomputers, or event space within a system facility) to customers for their research and/or development purposes.
  • TTAs are fee-for-service agreements where the system provides specific types of testing services (such as genomic DNA sequencing, testing of biological samples, or mass spectrometry services) using its unique facilities on a contractual basis for customers (such as individuals, other institutions, or commercial entities).
  • TTAs typically have all the following characteristics and are further explained within Section 8 of the The General Rules Concerning University Organization and Procedure:
    1. The facilities and/or equipment required to provide the testing services do not exist elsewhere (or are not readily accessible) and cannot be feasibly obtained from a commercial entity.
    2. Only established, pre-existing testing methods are used, and the testing methods are routine and/or repetitive in nature and can be specified in advance.
    3. The testing results provided to the customer do not include any interpretation or analysis of the test results and pose no intellectual questions to the customer.
    4. The testing methods do not entail original, creative research and do not result in the creation of new intellectual property.
    5. The testing is often provided through a service center which has a developed service rate.

This policy does not apply to the following:

  1. Sponsored service activities (SSAs) which are accounted for within grant funds and typically have all the following characteristics:
    1. SSAs are unique services which require a high level of expertise from a skilled specialist.
    2. SSAs do not involve any type of routine or duplicative services.
    3. SSAs frequently have compliance requirements and protocols associated with them, since they frequently involve highly regulated areas such as testing on human subjects or animals.
    4. SSAs do not have established service rates, but rather an associated budget outlining all direct and indirect expenses.
  2. FUAs unrelated to research and/or development purposes for which customers are provided access to the system’s facilities, equipment, and/or resources (such as space within an auxiliary facility).
  3. FUAs which provide the system’s employees access to an external party’s facilities, equipment, and/or resources.

Procedure

To ensure that FUAs and TTAs are properly managed and accounted for, refer to the procedures below:

  1. Calculate a rate to charge customers for the services provided.
    • A separate rate may need to be calculated for internal and external customers. The rates charged to external customers may need to factor in the system’s overhead costs. This is done to make sure external customers are assessed for indirect costs similar to the way sponsored project customers within grant funds are assessed when purchasing the same type of services. This ensures that external customers pay overhead costs similar to sponsored projects (such as building and equipment depreciation, costs of administrative support services, etc.).
       
    • See the table below for guidance on when these overhead costs would need to be factored into the rates charged to external customers, and what the maximum allowed rate would be:
      Customer Base Include Overhead Assessment in Rates Charged to External Customers? Max Overhead Assessment Allowed in the Rate Charged to External Customers?
      Only Internal Customers, Including Grant Funds N/A – no sales to external customers N/A – no sales to external customers
      Only External Customers Allowed, but not required Any amount, not exceeding the applicable fiscal year’s Other Sponsored Activities (OSA) rate
      Mixed Customer Base, Not Including Grant Funds Allowed, but not required Any amount, not exceeding the applicable fiscal year’s Other Sponsored Activities (OSA) rate
      Mixed Customer Base, Including Grant Funds Required, since external customers cannot be given preferential pricing when compared to grant funds Overhead assessment charged to external customers must equal the greater of :(1) the applicable fiscal year’s Other Sponsored Activities (OSA) rate, or (2) the overhead rate assessed to the grant funds that are purchasing the same services as the external customers.
    • Overhead rates vary by fiscal year, and the current rates can be located at the Rate Schedules webpage. It is important to ensure that the proper overhead rate for the applicable fiscal year is utilized when calculating the rate to charge external customers.
       
    • For guidance on calculating accurate service rates, refer to System Government Costing's Service Activities resource page. If further guidance is needed, contact System Government Costing.
       
  2. Determine if there are Unrelated Business Income Tax (UBIT) implications from the TTAs or FUAs.
  3. Ensure that a proper TTA or FUA contract template is obtained and completed.
  4. Ensure that a proper self-supporting fund has been established to account for the applicable FUA and/or TTA activities.
    • If a new self-supporting fund is needed to account for the FUA or TTA activity, download a Banner Fund, Program, Index Code Request Form from UAFR’s Forms webpage. Complete the form documenting the request for a new self-supporting fund and submit the completed form to uas@uillinois.edu. If assistance is needed when completing this form, contact University Accounting and Financial Reporting (UAFR) for guidance.
       
  5. Ensure that all receivable and billing activity for TTA and/or FUA activities sold to external customers is managed through the system’s Banner Accounts Receivable (Banner AR), unless an exemption from using Banner AR has been granted by the University Bursar.
  6. Bill the customer for TTA and/or FUA services provided. In accordance with good business practices, these billings should occur monthly, but no less than quarterly.
     
  7. Ensure that sales revenue from the sale of TTA and/or FUA services is properly credited to the applicable revenue account code within the related self-supporting fund.
    • Sales revenue from the sale of TTA services to internal customers (including grant funds) should be credited to either one of the following revenue account codes:
      • 307850, Testing & Analysis Services Revenue, or
      • 307851, Testing & Analysis Services Revenue – Internal University Customers.
    • Sales revenue from the sale of TTA services to external customers up to the amount of the internal rate should be credited to either one of the following revenue account codes:
      • 307850, Testing & Analysis Services Revenue, or
      • 307852, Testing & Analysis Services Revenue – External University Customers.
    • Sales revenue from the sale of FUA services to any type of customer (either internal or external) up to the amount of the internal rate should be credited to the following revenue account code:
      • 304400, Rental and Lease Revenue
    • Sales revenue from the sale of either TTA or FUA services to external customers exceeding the internal rate (i.e., the upcharge to cover the system’s overhead costs) should be credited to the following revenue account code:
      • 307921, Sales Revenue – Incremental Upcharges to External Customers for Overhead Expenses.
         
  8. Ensure that expenses posted to the related self-supporting fund are appropriate (i.e., related to the revenue-generating activity) and accounted for with proper expense account codes.
    1. For self-supporting funds which upcharge external customers for the system’s overhead costs, an assessment must be made to charge that self-supporting fund for those overhead costs.
    2. This overhead assessment will: (1) debit expense account code 198590, Assessment for Overhead Expenses Charged to External Customers within the self-supporting fund and (2) credit revenue account code 308908, Administrative Allowance Revenue – Overhead Assessments to SSFs for External Customers within an educational and administrative allowance CFOP managed by the applicable university’s budget office.
    3. The amount assessed to expense account code 198590 must equal the amount credited to revenue account code 307921.
    4. The Banner transaction to post this overhead assessment can be completed either: (1) manually via a unit-generated journal voucher or (2) automatically via UAFR’s Allocations and Assessments (ALAS). To request the use of ALAS, send an email to uas@uillinois.edu detailing the request.

Related Policies and Procedures

The General Rules Concerning University Organization and Procedure

5 Receivables

18.13 Unrelated Business Income Tax (UBIT)

19 Contracts

19.2.1 Standard Contract Templates

22.1 Contracts for Revenue Generating Activities

IRS Publication 598, Tax on Unrelated Business Income of Exempt Organizations

Article VIII of the Illinois Constitution

Banner Account Codes

Technical Testing Services Agreements (TTAs) and Facility Use Agreements (FUAs)

Last Updated: August 10, 2023