Other Income Producing Activities FAQ

Other income-producing activities provide goods or services to a wide range of customers that include non-UC users, students, faculty, staff and other campus departments. There may be an overlap with the definitions of auxiliary enterprise, service enterprise and academic support activities categories. Due to strict federal costing principles, other income-producing activities, except conferences, publications and certain rentals of space, should not have any recharges to federal funds/sponsored research projects.

These activities include but are not limited to:

• Sales of surplus property
• Intercollegiate Athletics
• University Events ticket sales
• Theatre and Music ticket sales
• Orientation programs 
• Publications
• Academic course material
• Royalty, copyright, material transfer agreements and other similar agreements negotiated by Technology Transfer and Intellectual Property Services (TTIPS)
• Campus recreation class fees and intramural sports participant fees
• Recharges assessing Imprints for use of Library space for copy machines (income sharing distribution from approved recharge activity)
• Service Agreements that are not part of approved recharge activities        

• Conferences
• Editorship of professional organization journal/newsletter/magazine (cannot be used for editing service contracts)
• Short term/Day use space rentals
• Long term real estate rentals

A service agreement is a written legal agreement between the university and an external source containing terms and conditions under which goods or services are to be furnished by the university. In most cases, the university buys services/goods from vendors outside the university.  In cases where the university provides services/goods, the outside buyer must sign a university service agreement. A service agreement is approved by the BFS Procurement & Contracts Office or their designee. Service agreements are normally issued by approved recharge activities (service enterprise and academic support) for ongoing, continuous goods/services. However, the service agreements that are described in this document are for one-time or occasional sales of goods/services. 

The fund number ranges are anywhere between 60000a-69999z except 63xxxx. Activities that are academic support and service enterprise are also in these ranges. Those activities have been discussed in the Academic Support and Service Enterprise Activities sections. In addition, funds that are not income-producing are included in these ranges, e.g., STIP funds, Work-Study funds, Contract and Grant Administration Funds. This document will not cover these types of activities.

There must be a need for the goods or services to be provided by the activity. The benefits, including relative prices and quality, of the proposed activity providing goods or services must be weighed against the benefits of obtaining similar goods or services from commercial sources or other University sources. 

Goods or services should not be sold to the general public unless the goods or services are unique or sales will not compete with commercial sources. If services are to be provided by the activity, they should be unique or specialized, as opposed to general administration or other institutional support services. 

If it is anticipated that the activity may generate unrelated business income, e.g., related to the sale of goods or services to the general public, the potential tax liability must also be considered in planning and budgeting for the activity.

The originating office submits to the Department Chair or Administrative Unit Head an other income-producing activity proposal to establish the activity. 

The activity should be approved prior to the start date. However, in some instances the proposal may be retroactively approved to a date not preceding the beginning of the fiscal year.

The proposal should include a business plan describing the goods/services and the funding sources for anticipated or unanticipated operating deficits.  In addition,

• Smaller activities (under $200,000) must provide a "Request to Establish a New Activity or Modify Rates/Services for an Existing Activity for Other Income-Producing Activities". The business plan may be a statement describing the goods/services and the expected income and expenses.
• Larger activities (over $200,000) must provide: (1)"Request to Establish a New Activity or Modify Rates/Services for an Existing Activity for Other Income-Producing Activities," (2) rate methodology and (3) projected statement of operations.

Rental of space may include short term or long term rentals. Because federal restrictions allow space rentals to be market-driven, rentals follow a different methodology from other income-producing activities. 

Short term rentals or day use space rentals must comply with federal Office of Management and Budget Circular A-21, paragraph J43. Rental of space is allowed for all buildings except buildings constructed with federal funds or partially constructed with federal funds. A rental of space would include renting within the division/department, to other divisions/departments, and non-UC users. 

Each department that wants to rent out space must provide a "Request to Establish a New Activity or Modify Rates/Services for an Existing Activity for Other Income-Producing Activities" and a business plan in accordance with A-21 and should following:

• Listing of comparable local rentals.
• Listing of proposed rental rates.
• If the plan proposes different rates for different customers, it must accurately describe each group and briefly indicate why some are charged less.
• Proof of insurance.
• An agreement approved by BFS-Procurements & Contracts Office

There is language in A-21, Section J43-Rental costs of buildings and equipment that allows rental rates to be based on rental costs of comparable property. Since rental rates are market driven, the rate charged for all short term rentals to non-UC users will include the current overhead cost recovery rate, a.k.a. differential income, in order to recover indirect costs related to rentals. For example, if the rate is $100 per day, the overhead would be calculated as follows: The $100 includes both regular income and differential income. If x is regular income and .45 is the current overhead cost recovery rate, then x + .45x = $100 and regular income is $100 divided by 1.45, or $68.97. Differential income is $100 minus $68.97 which equals $31.03. 

The rental plan must be submitted and approved at the proper levels prior to the start date of a new rate or activity. In some instances the activity may be retroactively approved to a date not preceding the beginning of the current fiscal year. The plan should include a statement describing the goods/services and the expected income and expenses and should be sent to Financial Analysis Office, which will retain the plan as part of the inventory of campus rental practice. 

Those rental activities that include services and/or rental of equipment will need to file a separate recharge rate proposal for the services and/or rental of equipment. Refer to the Academic Support Activities and Service Enterprise Activities documents. 

Long term rentals of space are handled by the UCSD Real Estate Development Office. Prior to the start date of a new rental activity, the Real Estate Development Office will provide a brief description of the new rental activity, including the expected income and expenses to BFS-GA at SelfSupportAct@ucsd.edu. In some instances the activity may be retroactively approved to a date not preceding the beginning of the current fiscal year. 

The proposal is sent to the Department Chair or Administrative Unit Head of the activity for approval and signature. The signed copy must be maintained by the department. For smaller activities (under $200,000 annual revenues), the proposal is forwarded by the Department Chair or Administrative Unit Head to Business Financial Services-General Accounting (BFS-GA) at SelfSupportAct@ucsd.edu. For larger activities (over $200,000 annual revenues), the proposal is sent to the activity’s Vice-Chancellor or designee who will send to BFS-GA at SelfSupportAct@ucsd.edu. Service agreements follow the steps at the BFS Procurement and Contracts Office website. For royalty, copyright, material transfer agreements and other similar agreements contact Technology Transfer and Intellectual Property Services (TTIPS).

For smaller activities (under $200,000 annual revenues), only the Department Chair or Administrative Unit Head reviews and approves. 

For larger activities (over $200,000 annual revenues) in addition to the department Chair or Administrative Unit Head approval, the activity’s Vice-Chancellor or designee should review and approve. 

For the following type of activities, the review and approval will be:

• Service agreements by the BFS Procurement & Contracts Office or their designee. 
• Royalty, copyright, material transfer agreements and other similar agreements are approved by TTIPS

After the required departmental approvals, BFS-GA will approve.

Rates must be sufficient to recover all costs to be charged to the activity, including the overhead cost recovery rate for non-UC users. Goods sold to the general public may be subject to California sales tax. Therefore, sales tax, if applicable, must also be recovered. However, because federal restrictions allow space rentals to be market-driven, rentals follow a different methodology from other income-producing activities.

The overhead cost recovery rate is the rate applied to sales to non-UC users of activities in order to recover the indirect costs related to the activity. The activities must, at a minimum, charge non-UC user the standard differential income rates.

Certain activities are assessed an administrative overhead recovery recharge by the campus, instead of the differential income overhead assessment. Select this link to view the current rate.

If an external entity prohibits payments for overhead, the activity must produce documentation that demonstrates this exemption. The administrative overhead recovery exemption request which includes documentation from the external entity is submitted to the Recharge Rate Review Committee Chair or Designee for review and recommendation, with final approval by the Vice Chancellor for Resource Management and Planning and must be renewed at end of the agreement.

For new activities, the classification process will determine the appropriate overhead rate, if any.  If an external entity prohibits payments of overhead, the activity must send the supporting documentation to the Recharge Rate Review Committee Chair that demonstrates this exemption.

The standard differential income rates are for:

• Campus - If a sales/service activity is located in campus space, the campus differential rate will be added to sales to the general public.
• Off-Campus - If a sales/service activity is located in space that is not owned or maintained by UC, an off-campus differential rate will be added to sales to the general public.
• Ship Use - If a sales service activity is affiliated with the ship-use operation, with no space costs and all departmental support costs factored into the charge rate, a ship use differential rate will be added to sales to the general public.

Generally, waivers requests are approved for the activity’s Vice-Chancellor’s (Departmental Support) portion only. The central administration portion must still be collected and remitted.

A differential income waiver is only for the activity’s Vice-Chancellor’s (Departmental Support) portion. It is submitted to the activity’s department head for review and recommendation, with final approval by the activity’s Vice-Chancellor.

A differential income exemption is for both the activity’s Vice-Chancellor’s (Departmental Support) portion and the administrative Vice-Chancellors’ (Central Administration) portion. If an external entity prohibits payments for overhead, the activity must produce documentation that demonstrates this exemption. The differential income exemption request which includes documentation from the external entity is submitted to the Recharge Rate Review Committee Chair or Designee for review and recommendation, with final approval by the Vice Chancellor for Resource Management and Planning and must be renewed at the end of the agreement.

The Recharge Rate Review Committee is comprised of a Chair and a member of each of the Vice Chancellor areas. See a current listing of the members.

Rates are based on the current negotiated research rate for the campus, less four components: Equipment Depreciation, Sponsored Project Administration, Library, and Student Administration & Services. In the case where a particular sales/service activity involves the resources of, or results in administrative burden/cost to, Sponsored Project Administration, Library, or Student Services, the affected components should not be excluded. The rates may change after a Federal audit. For current rates, refer to Overview of Self Supporting Activities.

At the discretion of the activity’s Vice-Chancellor, unrestricted funds may be used to subsidize the activity.

Costs incurred and assigned to the activity must be essential to the purpose for which the activity was established, also known as (a.k.a.) direct costs. These costs include but are not limited to wages, wage-related costs, supplies, materials and equipment. 

The funds balance for most other income producing activities will be operated on a no-gain/no-loss basis. Some activities are allowed to accumulate a surplus balance at the discretion of the activity’s Vice-Chancellor. Deficit balances must be corrected immediately.

All activities must notify BFS-GA at SelfSupportAct@ucsd.edu of surplus or deficit balance by October 1^st following the fiscal year. For activities that are allowed to have a surplus balance, a confirmation that the balance has been approved by the activity’s Vice-Chancellor is required. For activities that have a deficit balance, a timeline to correct the overdraft is required. 

Those activities that have an unacceptable surplus or deficit balance as June 30^th and have not sent an explanation to BFS-GA by October 1^st following the fiscal year, will be reported to the respective Vice Chancellor. 

To change/modify rates or rate methodology of established activities, or to add rates for new goods or services of established activities, complete the “Request to Establish a New Activity or Modify Rates/Services for an Existing Activity for Other Income-Producing Activities” and follow the same procedures and approvals as for establishing a new activity.

Unrelated business income is a type of other income resulting from sales of goods or services to individuals or non-University entities. If sales are not substantially related to University educational or research purposes, proceeds from the sales are considered to be unrelated business income and are subject to Federal income tax reporting requirements. Examples include income from sales of recreation cards to the general public and sale of patron tours for the Stuart Collection.

Upon approval by the Department Chair or Administrative Unit Head, an email with all the supporting documentation is sent to the activity’s Vice-Chancellor who will send the request to BFS-GA at SelfSupportAct@ucsd.edu. 

Upon receipt, BFS-GA will establish a unique or shared fund number in the appropriate Chart of Accounts series. Income/revenues, recharges and costs are recorded in the fund assigned to the activity. In some instances, such as conferences, a single fund may be shared by departments from the same Vice-Chancellor. 

A revenue/income account code will also be established.  Generally, the revenue account code is a 5 in front of the fund number. 

Either an existing organization code or a new one will be established. The program code is normally the one already associated with the department. 

An index code will be associated with the above COA elements, a.k.a. IFOP = Index, Fund, Organization and Program. 

Recharges are generally recorded in expenditure account code 693900 as a credit.

Costs are recorded in the appropriate expenditure account codes that categorize the type of expense.

Operating fund is the accounting mechanism used to record operating costs, UC recharges and income.

Income/Revenue is receipts from the sale of goods or services to an organization not affiliated with the University or to individuals regardless of their affiliation. Occasionally, revenue/income may be received from the sale of surplus assets sold via the campus surplus sales office.

The revenue/income is recorded in the revenue account code which is generally a 5 in front of the fund number.

In general, a recharge reflects the sale of goods or services by one department or unit to another. 

For University financial reporting, a recharge is considered to be cost redistribution. Therefore, it appears as a credit in the expenditure account code 693900.

Costs for other income producing activities are expenditures, benefiting a single period, which are necessary to conduct normal business. Examples of costs include but are not limited to supplies and equipment maintenance. Go to expenditure account codes for a listing.

Expenditures for the operations are recorded in the Index, Fund, Organization, Program (xxx030) codes using appropriate expenditure account codes that categorize the type of expense.   

A budget must be established for each activity in accordance with campus budget procedures. The department requests an “xxBDxxx” index from the budget office. The department prepares a Transfer of Funds to record the expected revenues and recharges.

A differential income reserve fund is the accounting mechanism used to segregate and accumulate overhead cost recovery (differential income rate) from sales of goods or services to non-University individuals or entities. A differential income fund (75xxxx) may be established if it is expected that sales to outside users will be made. A differential income fund is not allowed to have a deficit balance.

Listed below in the tables are the standard Differential Income calculations. Consult your Vice Chancellor if an additional Vice Chancellor Differential Income overhead portion needs to be remitted.

*Please note that the table on minimum Differential Income calculation lists only the minimum Differential Income that is required for central administration.  Each Vice Chancellor area may also require a minimum Differential Income portion to be remitted to the Vice Chancellor responsible for the activity.  Consult your Vice Chancellor’s office for more information.

As an example, if your activity is on campus and total revenue recorded in account 5xxxxx is $100,000 and the overhead factor is 16% to campus administration and 29% to departmental support:

The differential income to campus administration is (Total Revenue/1.45) x .16 or (100,000/1.45) x .16= $11,034.48

The differential income to departmental support is (Total Revenue/1.45) x .29 or (100,000/1.45) x .29= $20,000.00

As an example, your activity is on campus and your Vice Chancellor allows your activity to waive the departmental support differential income portion. The campus portion must still be collected and remitted. The total revenue recorded in account 5xxxxx is $100,000 and the overhead factor is 16% to campus administration while the departmental support portion is waived:

The differential income to campus administration is (Total Revenue/1.16) x .16 or (100,000/1.16) x .16= $13,793.10

The differential income to departmental support is none since this portion has obtained differential income waiver approval.

Please note that the sample calculation list only the minimum Differential Income that is required for central administration. Each Vice Chancellor area may also require a minimum Differential Income portion to be remitted to the Vice Chancellor responsible for the activity.  Consult your Vice Chancellor’s office for more information.

The standard distribution for overhead cost recovery generated is as follows:

In most cases, the Differential Income is to be distributed in two parts:

(1) central administration and (2) departmental support or to the Vice Chancellor responsible for the activity.  When an activity has obtained approval from its Vice Chancellor to charge the minimum overhead rate for non-UC sales, the central administration portion must be remitted annually.

*The table on minimum Differential Income distribution lists only the minimum Differential Income that is required for central administration.  Each Vice Chancellor area may also require a minimum Differential Income portion to be remitted to the Vice Chancellor responsible for the activity.  Consult your Vice Chancellor’s office for more information.

Overhead cost recovery, a.k.a. differential income, in excess of the standard rate will be distributed to, or as directed by, the Vice Chancellor responsible for the activity that generated the overhead cost recovery. 

In certain circumstances, such as collaborative programs, there may be multiple differential income rates for profit and non-profit entities. However, the differential income rate cannot be less than the standard differential income rate.

Funds representing overhead cost recovery, which are distributed to an activity's differential income reserve (funds 75xxxx), may be used to fund non-operating costs, such as equipment and capital improvements of the activity. With the approval of the cognizant Department Chair or Administrative Unit Head, such funds also may be used for operating costs of the department or unit, other than those of the activity itself.

Other income-producing activities are allowed to accumulate funds in funds beginning with 75xxxx for differential income. Following are the financial entries to record differential income

            Debit (+):       index, operating fund, organization, transfer account code 720702

            Credit (-):       RMGDIFI, reserve fund, organization, transfer account code 720702

            Credit (-):       index, reserve fund, organization, transfer account code 720702

                                            Rule class FB08

During the year, the cash balance of all UC funds participate in the Short-Term Investment Pool (STIP). Distribution of the interest earned (surplus balances) or charged (deficit balances) will be in accordance with the procedures set forth in Business and Finance Bullet-in A-60, Short-Term Investment Pool Distribution of Income. Current campus procedures dictate that the STIP be recorded in the respective Vice Chancellors’ STIP funds.

Activities that have non-UC users must use ISIS billing services by completing a detail code and/or category code and submitting to Student Billing Services. Billings must be recorded no less than monthly.

There may be specific fiscal closing entries that are required. An instruction document is prepared each fiscal year, “Recharge & Other Income-Producing Activities Fiscal Closing Special Items Instructions.^" The document is available by the end of April. All other income-producing activities must refer to this document for entries that may be required.

When an activity is no longer in operation, you must notify the BFS-GA at SelfSupportAct@ucsd.edu  to coordinate the closing of the fund. The fund needs to zero-out prior to inactivating the index and fund numbers. It is imperative to close the fund to avoid additional charges.

UC and Federal Policies:

Business and Finance Bulletin A-47, University Direct Costing Procedures

Business and Finance Bulletin A-59, Costing and Working Capital for Auxiliary and Service Enterprises

Business and Finance Bulletin A-60, Short-Term Investment Pool Distribution of Income

Business and Finance Bulletin A-61, Procedures for Determining Unrelated Business Income and Expenses

Business and Finance Bulletin BUS-29, Management and Control of University Equipment

Office of Management and Budget (OMB) Circular A-21, Cost Principles for Educational Institutions, Section J43

UCSD Information:

• Account Code Overview
• Cash Handling Overview
• Sales Tax Overview
• UCSD Cost Accounting Standards Board Disclosure Statement (CASB DS-2)  
• Other Income-Producing Activity Policy

Responsibilities include but are not limited to:

• Submit to the Department Chair or Administrative Unit Head an other income-producing proposal.
• Participate in resolution of comments, questions, and objections to proposal.
• Submit requests for differential income waivers, differential income exemptions or administrative overhead recovery recharge exemptions to the department chair or administrative unit head.
• Provide documentation that the external entity prohibits payments for overhead when submitting a differential income or administrative overhead recovery recharge exemption request.
• Conform to approved cash-handling, credit card compliance, billing and recharge procedures.
• Maintain records to substantiate recharge and other billing transactions, including requisitions, purchase orders, or similar written verification of individual user requests for goods or services.
• Provide users with a receipt or similar written confirmation for each sale of goods or services at the time the sale is made. In addition, recharge users will be provided a detailed monthly statement for each Index Number recharged.
• Initiate recharge or other billing transactions when goods and services are provided.
• Ensure activities will not initiate recharge or other billing transactions in advance of providing goods and services. Progress recharges or billings may be made for jobs in process. 
• Ensure recharges to federal funds/sponsored research projects  are not processed except for conferences, publication and certain rentals of space.
• Notify BFS-GA of unacceptable surplus or deficit balance by October 1^st following the fiscal year and provide an explanation and a business plan to correct the balances.
• Process differential income transfers.

Responsibilities include but are not limited to:

• For smaller activities (under $200,000 annual revenues), review, approve and electronically submit to BFS-GA at SelfSupportAct@ucsd.edu the proposal and supporting documentation to establish or modify activity.
• For larger activities (over $200,000 annual revenues), review, approve and electronically submit to the activity’s Vice-Chancellor the proposal and supporting documentation to establish or modify activity.
• Review and approve requests for differential income waivers, differential income exemptions or administrative overhead recovery recharge exemptions
• Forward requests for differential income waivers, differential income exemptions or administrative overhead recovery recharge exemptions to the department’s Vice-Chancellor.
• Ensure that notification is sent to BFS-GA at SelfSupportAct@ucsd.edu of unacceptable surplus or deficit balance by October 1^st following the fiscal year.
• Responsible for any unfunded deficits of the activity.

Responsibilities include but are not limited to:

• For larger activities (over $200,000 annual revenues), review, approve and electronically submit to SelfSupportAct@ucsd.edu the proposal and supporting documentation to establish or modify activity.
• Review and final approve differential income waivers
• Review and approve requests for differential income exemptions or administrative overhead recovery recharge exemptions
• Forward requests for differential income exemptions or administrative overhead recovery recharge exemptions to the Recharge Rate Review Committee Chair or Designee
• Ensure that notification is sent to BFS-GA at SelfSupportAct@ucsd.edu of unacceptable surplus or deficit balance by October 1^st following the fiscal year.
• Responsible for any unfunded deficits of the activity.

Responsibilities include but are not limited to:

• Review and approve differential income exemptions or administrative overhead recovery recharge exemptions
• Submit recommendation for differential income exemptions or administrative overhead recovery recharge exemptions to the Vice-Chancellor of Resource Management and Planning for review and approval

Responsibilities include but are not limited to:

• Review and approve detail codes and category codes for billing to non-UC users.

Responsibilities include but are not limited to:

• Review, approve rate methodology procedures.
• Participate in resolution of comments, questions, and objections to proposal. 
• Provide COA elements distribution for new activity.
• Send after October 1^st a listing of all those activities not in compliance to the activity’s Vice-Chancellor and the activity’s financial contact. 
• Ascertain whether activities are subject to unrelated business income tax and if applicable, submit financial worksheets to UCOP for inclusion in the consolidated income tax return.

Responsibilities include but are not limited to:

• Provide final approval of differential income and administrative overhead recovery recharge exemption requests