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Department of Health and Human Services

Office of Inspector General -- AUDIT

"Report on Proposed Changes to the Office of Management and Budget Circular A-21 Regarding the Financial Management of Recharge Centers," (A-09-96-04003)

March 5, 1997

Complete Text of Report is available in PDF format (1.4 MB). Copies can also be obtained by contacting the Office of Public Affairs at 202-619-1343.


This report discusses ways to clarify guidance provided in the Office of Management and Budget (OMB) Circular A-21 regarding the financial management of recharge centers at universities. A recharge center operates as an in-house enterprise that provides goods and services to individual users and other operating units on a cost reimbursement basis. The objective of this report is to recommend changes to Circular A-21 based on an evaluation of the Office of Inspector General (OIG) reviews of recharge centers.

Generally, Circular A-21 requires each center to operate as a closed, self-adjusting system. By closed, we mean that all allowable expenses and revenues related to operating a center should be recorded in the center's accounts. By self-adjusting, we mean that the fund balance should accumulate the surplus or deficit of the operation of a center such that the billing rate can be adjusted to keep the fund balance within a reasonable range. However, we found that inadequate policies and controls over recharge centers at the 15 universities we visited resulted in $1.9 million in overcharges to the Federal Government. The $1.9 million related to 21 of the 87 recharge centers reviewed. Specifically, recharge centers:

The ambiguity and lack of specific instructions in Circular A-21 may have contributed to the significant diversity in practice at universities. As such, we believe that the starting point for improving university oversight of recharge centers is to revise Section J.44 of Circular A-21 in a manner similar to the recently revised OMB Circular A-87, " Cost Principles for State, Local and Indian Tribal Governments." Thus, we identify ways to clarify the criteria in Circular A-2 1 regarding the financial management of recharge centers. This would include the creation of criteria for developing and reviewing billing rates, and accounting for and applying surplus and deficit balances.

The Deputy Assistant Secretary for Grants and Acquisition Management (DASGAM) concurred with our recommendation to have the Assistant Secretary for Management and Budget (ASMB) request that OMB incorporate our proposed criteria into Circular A-21. We also received comments from the Council on Governmental Relations (COGR) which comprises 140 research-intensive universities in the United States and helps develop policies and practices related to the administration and conduct of Federal research and training. COGR generally agreed with our findings and recommendations and offered to assist in publicizing the report's recommendations.