Background

The University of Kansas (KU) has a variety of external service fees, which are inherently different from those imposed on a unit by another unit within KU. Interdepartmental charges are covered by the University's Service Center and Recharge Center Fee Policy and are reviewed by the appropriate campus office [University of Kansas Lawrence Campus Financial Reporting Services (KULC); University of Kansas Medical Center Control and Reporting (KUMC); University of Kansas Center for Research Fiscal Affairs (KUCR)]. Goods and services must align with the mission of the University and must be for activities for which the University has not already allocated funds.

Scope of the Policy

For the purposes of this document, any fees for goods or services which are collected from students, faculty, staff, or the general public are designated as an external service fee. The policy of the University is that no applicable external service fee shall be collected, instituted or increased without procedural approval as outlined below.

Any unit that charges students, faculty, staff, or the general public regardless of the amount should contact the appropriate campus office prior to the initial charge. The unit and the appropriate campus office will then (1) review the proposed fees to ensure the rates set for the charges are supported by the underlying cost structure, (2) evaluate any Unrelated Business Income Tax considerations, and (3) establish sales tax collections and submissions processes, as applicable.

The policy and procedural guidance set forth in this document applies to all external service fees except those excluded under one of the following categories:

• Required student and wellness fees and other fees approved by the Kansas Board of Regents (KBOR);
• All fees or charges for activities of the following separate corporations: the Kansas Memorial Unions, the Kansas University Athletic Corporation, the Kansas University Alumni Association, and the Kansas University Endowment Association;
• Fees for educational or training workshops and seminars sponsored by a unit through Jayhawk Global. However, these units may be asked to provide an explanation of the methods used to establish the fees for such activities;
• Fees by auxiliary services, such as residence halls, campus dining, parking services, university health services; and 
• Course charges through third party vendors that are handled on an individual basis through the Office of the Provost and Executive Vice Chancellor.

All external service fees not covered by one of the above exclusions must follow the guidelines set forth below. Questions in regard to the application of this document to specific fees should be directed to the appropriate campus office.

General Guidelines

The guiding philosophy is that no student, faculty, staff member, or the public should be charged for services which the University would be expected to provide without charge. External service fees are appropriate when KU experiences significant or unusual costs, which cannot be reasonably covered by appropriated funding. In those instances, the purpose of the external service fee is to reimburse a unit for the actual cost of providing goods or services beyond the funded portion of its budget. Additionally, KBOR policy on Sales of Products and Services (II.D.11) requires that the provision of goods and services to the public does not inappropriately or unfairly compete with the private sector. The single most important criterion under KBOR policy is that the provision of goods or services must be a legitimate function of the University's instructional, research, or public service mission. This document on external service fees is intended to promote compliance with KBOR policy as well as University policy.

Unrelated Business Income Tax

Unrelated Business Income Tax (UBIT) is federal tax imposed on any not-for-profit organization for activities not substantially related to its mission. The tax determination is a complex process requiring knowledge of both the tax code and the circumstances under which the income is generated. As a result, each revenue source must be considered on a case-by-case basis to determine if income is taxable or exempt. It is also important to note that the need of an organization for the funds or the use of the income once generated have no bearing on the tax determination. The purpose of UBIT evaluation, which is accomplished through the Office of the General Counsel in cooperation with the University’s Tax Analyst and the  appropriate campus office, is not to limit funding options but to ensure compliance with recordkeeping and reporting requirements if revenue is taxable.

External Fee Evaluation

The proposal for establishing a fee (or changing a fee) must present a clear and compelling argument for its implementation. External fees should be set, at a minimum, to recover the actual costs of providing the goods or services plus applicable overhead charges. Additionally, any rates set may include any mark-ups as long as they do not inappropriately or unfairly compete with the private sector. Units wishing to impose or change a fee regardless of the amount must prepare a detailed justification and submit it through appropriate administrative channels. The proposal and justifications are sent to the appropriate campus office.

Proposal data should include, but not be limited to, the items listed below. Answers to the questions should be as full and precise as possible.

• How is this proposed external service fee related to the instructional, research or public service mission of the University?
• Why is the fee being implemented or changed?
• Was this service/good previously provided?
• How was the amount of the fee determined? (Include specific calculations)
• What service/goods will be provided for that fee?
• How much money will the fee generate per year?
• How will the fee income be spent?
• Source of funds for capitalized startup costs?
• Who will be the likely customers and what is the anticipated fiscal impact on them?
• What is the overall benefit to the proposing unit?
• What is the cost/benefit to the University as a whole?

In general, the appropriate campus office and the appropriate campus authority will look favorably on fees, which have the following features:

• The request is for an increase in an existing (approved) fee that is justified by increased cost of provision;
• The fee is for a service provided as part of the mission of the University but for which unusual costs are incurred. (i.e., field trips, recreational events, etc.); and
• The service is a convenience to the customers and part of the University's academic, research or public service mission.

At a minimum, the appropriate campus office will review all external fees every two years at KULC/KUCR and annually at KUMC. Existing fees will be allowed to continue unless, but not limited to:

• Requested by the unit to change the fee;
• Fund performance warrants a change in fee;
• Challenged and if, upon review, the Appropriate Campus Authority approves modification of the fee; or
• Other considerations for changes to a fee may apply as determined by the appropriate campus office.