IFAS Internal Management Memoranda

Reviewing Annual Fees and Charges

EFFECTIVE DATE: June 6, 2003

INTERNAL MANAGEMENT MEMORANDUM NUMBER: 6C1-6.40-24

SUBJECT: Reviewing Annual Fees and Charges

  1. Purpose & Definition

    The objective of charging fees for goods and/or services provided by IFAS is primarily to recover costs. In this regard each IFAS unit should assess its activities to determine if any of them incurred charges might fall in the category of a cost recoverable expense.

    A cost recoverable expense is defined as a good or service that inures a specific benefit to the user or one that is prohibitive to provide to the general public because of its expense. Examples of these expenses include soil testing, some publications and special programs.

    In the soil testing case, the information provided is directly related to the recipient's situation and needs. Other examples of this nature are plant diagnostics, insect identification, and bull testing. The benefit to IFAS to provide these services is the collection of information and possible alerts to pests, diseases, or invasive species. These services also provide opportunities to educate individuals and the public on best management practices.

    With regard to publications, there is a demand for high quality publications that utilize color and graphics that help the reader more readily comprehend the subject matter and assist with informing or helping the reader better understand the content. The high production quality, however, comes at a high price with increased costs, and makes mass distribution too expensive even though the benefits may inure to the public at large. In these cases, a reasonable means to of providing the information is to recover the cost of the publication. Fortunately, most of the IFAS publications are freely available to the public via the Internet, but for those users who wish to have a written copy; cost recovery provides a reasonable alternative.

    In addition to services and publications, there are some educational programs that lend themselves to cost recovery. These programs are primarily industry- specific programs where there are regulatory requirements to operate or provide a service. Examples include certification of food handlers for food safety, pesticide applicators licenses, or landscape work. These industries or organizations have a specific need for training and need certified trainers to provide educational programs to their workers or management to comply with a regulatory agency requirement. In these cases, educational programs developed by IFAS with the approval of the certifying or regulatory agency and the relevant industry should recover all costs associated with delivering the programs. No recovery should be sought for personnel time that is fully paid for from state general revenue sources.

    The purpose of this memorandum is to set forth the procedures for annually evaluating prices charged by IFAS Programs for goods and services incidental to the IFAS mission. These goods and services include soil testing, publications, pest identification among other sales or services.

  2. Determining Costs

    Each unit that charges for goods or services shall annually evaluate prices charged for these services to ensure that out-of-pocket expenses for these items are covered by the sale price or fees charged. Units shall include the costs of supplies, materials, annualized equipment replacement costs, and OPS labor.

    Costs for state-paid faculty and support staff time should be calculated and identified in the analysis as educational input, but should not be factored into the price. Exceptions may be made when a product or service is specialized and requires extraordinary inputs from faculty and/or staff in the unit and where the benefit of these goods or service accrues to a narrowly defined audience. Exceptions shall be granted only by the Vice President for Agriculture and Natural Resources or his/her specified designee.

    The following spreadsheet is provided as an example for calculating price:

    Charges for Products or Services

     

    UNIT: Diagnostic Unit

     

    Item

    Annual Cost % related to function Operating Cost Educational Input
      $  

    $

     

    Salary

     

    faculty

    0   0 62,000

    staff

    0   0 45,000

    OPS

     

    student help

    0 100% 0 0

    professional ops

    41,516 100% 41,516 0

    general ops

    19,460 100% 19,460 0

    Operating Expenses

      0 0

    supplies

    9,640 100% 9,640 0

    travel

    573 100% 573 0

    maintenance

    6,986 100% 6,986 0

    Equipment

      0 0

    new equipment

    3,310 100% 3,310 0

    replacement equipment

    4,726 100% 4,726 0
     

    Totals ---->

    $86,211   $86,211 $107,000
     

    Estimated Unit Sales ---->

    6,792 Estimated Price----> $12.69  
     
    Value for the "Estimated Unit Sales" is the recent 2-yr average (see sheet=cost per sample)  


    The annual review of charges shall take place between March 1st and May 31st of each calendar year. The first year of these reviews will be 2003.Upon completion, a copy of the review should be submitted to the IFAS Business Services Office.

  3. Price Changes

    After determining unit costs, each unit shall be responsible for adjusting prices to provide for cost recovery equal to the expenditures for the production and delivery of the product. This adjustment may or may not require an immediate increase in charges for goods and services. The factors that should be considered before introducing price changes should include an estimation of the effect of raising prices on total revenue, the cost of changing printed materials, and the timeliness of implementing the change. However, when costs exceed price by 25% or more, immediate action should be taken to either increase price or reduce costs to bring these factors into equilibrium.

  4. Prices Charged for County Programs/Services

    County Extension Offices do not charge for educational programs, except as noted in section 1..Counties, however, may charge for incidental expenses related to educational programs. These charges include costs of supplies, refreshments and other incidental costs related to program delivery. Funds generated from these activities must be handled in accordance with the Guidelines For Handling Money In Counties. In these cases, the concept of cost recovery still applies as indicated in the example above.

    Charges for statewide services that are pass-throughs from the counties (plant diagnostics or soil testing, as examples) should be consistent with those at the state level. Prices for services handled wholly within the county office are determined by the county.