blog posts System Government Costings Monthly Facts and Reminders Dec 16, 2022 10:00 amAccounting and BudgetingBuying and ContractsFY 23Special procedures are needed when services are provided to external customers. Therefore, the service activity must determine if a customer is internal or external. An external customer is a person or business whose funds originate from outside the University of Illinois System. Internal customers pay for services using a U of I System C-FOP, while external customers use another form of payment including cash, checks, or credit cards. Grants and sponsored projects are considered internal customers. University of Illinois System employees (faculty, staff, or students) paying for services with their personal funds are considered external customers.If service activities have external customers, at a minimum, they must charge external customers the fully-costed rate plus the applicable Facilities and Administrative (F&A) rate. Since C-FOPs are not used for external customers the applicable F&A rate cannot be automatically assessed. Therefore, the appropriate F&A rate needs to be added on top of the service rate charge. This is done so the external customers pay their fair share of overhead costs and ensure our federally sponsored projects are not subsidizing our external customers. There are three Federal F&A rates, Research, Instruction, and Other Sponsored Activities. The F&A rate that most closely aligns with the activity that is being conducted should be used.For external customers, a market rate may also be considered. The University of Illinois System should not provide services which compete with for-profit businesses or other industry. The service activity cannot charge external customers a rate that is lower than the fully-costed rate including the F&A overhead rate. Therefore, if the market rate for a service is higher than the fully-costed rate plus the F&A rate then the market rate may be charged.Revenue received from external customers in excess of the internal rate should be coded to a separate Banner revenue account code. This portion of the revenue, or external differential, should be coded to account code 307921 (3E Storeroom & Service Revenue - Incremental Upcharge to External Customers).ContactFor questions, please refer to “Service Activity Rates” on Government Costing’s “Who to Ask” list.