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BUS-72, Establishment and Review of Auxiliary EnterprisesMay 1, 1981
I. REFERENCES
A. President Saxon to Chancellors and Members, President's
Administrative Council, letter dated April 6, 1981, Policy on
Establishment and Review of Auxiliary Enterprises.
B. Accounting Manual Policy A-783-1, Auxiliary Enterprises.
C. Planning and Budget Manual, Operating Budget Amendments, Chapter
4010, VII.B.4. and VIII.B.4.
D. Business and Finance Bulletin A-47 Revised, University Direct Costing
Policy.
II. INTRODUCTION
As the number and variety of University-sponsored business activities
serving students, staff, and faculty have increased in recent years,
questions have been raised regarding the extent and appropriateness of
the University's involvement in commercial-type activities, especially
when such activities; may compete with nearby off-campus enterprises
operated within the private sector. The Policy on Establishment and
Review of Auxiliary Enterprises has been developed to define the
legitimate purposes of such activities and to provide a uniform basis
for evaluating existing and proposed University auxiliary enterprises.
III. SCOPE OF POLICY
The Policy on Establishment and Review of Auxiliary Enterprises is
applicable to all auxiliary enterprises operated by the University, or
by organized groups affiliated with the University which are authorized
to operate auxiliary enterprises. Service activities (including
computer centers) operated by the University which primarily provide
goods and services to University departments and whose costs are
primarily recharged to departmental budgets are excluded from the
scope of this policy. Academic support units and the incidental sales
and services income of academic units also are excluded from this
policy.
IV. CHARACTERISTICS OF AN AUXILIARY ENTERPRISE
Auxiliary enterprises are self-supporting activities which provide
non-instructional support in the form of goods and services to students,
faculty, and staff upon payment of a specific user charge or fee which
is at least equal to the full direct and indirect cost of providing the
goods and services. The general public may be served only incidentally
by these enterprises. Examples of auxiliary enterprises are housing
operations, non-housing food service operations, parking operations,
bookstores, student centers/unions, and child-care centers. Any
accumulated surplus produced by an auxiliary enterprise, other than by
indentured activities, after all the needs of the activity have been met
is used for University purposes in accordance with University policies
and pursuant to any implementing guidelines established by the
Chancellor.*
* The Vice President-Agriculture and University Services has
equivalent authority within appropriate areas of jurisdiction.
V. RATIONALE FOR ESTABLISHMENT AND OPERATION OF AUXILIARY ENTERPRISES
A. Need and Cost-Effectiveness
The need for certain goods and services shall be identified which, if
provided at a reasonable cost and at a convenient location, would
enhance and support the University's instructional, research, or
public service programs. The plan to provide these goods or services
through a University-operated or affiliated auxiliary enterprise shall
take into account the availability, the price, and the quality of any
such goods or services offered by the local business community. When
such goods or services are reasonably available under favorable
commercial terms and conditions, the determining factor in the
decision to operate the particular auxiliary enterprise must be the
demonstration of the greater benefit which would accrue to the
instructional, research, or public service programs of the campus
from University operation.
B. Direct and Indirect Costs
Auxiliary enterprises bear all direct costs and, to the extent
required, a share of their own costs of utilities, custodian
services, and other maintenance and business services. On an
exceptional basis, Chancellors may subsidize, from the University
Registration Fee or other non-State revenue sources,
student/ASUC-operated enterprises and/or child-care
centers if the operation of the enterprise requires subsidy.
C. Clientele
Auxiliary enterprise operations shall be conducted in a manner to
serve primarily University students, faculty, and staff, and such
operations may only incidentally serve members of the general
public. Bookstores and snackbars are examples of activities
directed primarily toward the University's educational community,
but which also may serve the surrounding community,
VI. CRITERIA FOR ESTABLISHMENT OF NEW AUXILIARY ENTERPRISES
A new auxiliary enterprise can be established by a campus only upon
written determination of need by the Chancellor after analysis of at
least the following criteria:
A. the need for the proposed auxiliary enterprise, the type or types of
goods and services to be provided, the primary clientele to be
served, and the methods of customer solicitation to be used;
B. the availability of the intended goods and services in the local
business community;
C. the costs and benefits of providing the intended goods and services
by the University rather than by the local business community,
including a comparison of prices and quality;
D. the proposed budgets, operating statements, and balance sheets for
the first three years, including funding source(s) required to
establish the auxiliary enterprise and to enable its continued
operation on a self-supporting basis and the proposed pricing
policies; and
E. all other factors at the campus which are pertinent to the
establishment and operation of the proposed auxiliary enterprise,
After the decision is made to start a new auxiliary enterprise, the
enterprise shall be formally established in accordance with the
provisions of the Planning and Budget Manual, Operating Budget
Amendments, Chapter 4010, VII.B.4. and VIII.B.4. Documentation
sustaining the determination of need shall be available as
requested for review by the Vice President-Financial and Business
Management.
VII. REQUIREMENT FOR REVIEW OF EXISTING AUXILIARY ENTERPRISES
All existing campus auxiliary enterprises shall be reviewed periodically
by each Chancellor, but not less frequently than once every five years,
to assure that each enterprise continues to serve an important
University need, is cost-effective considering business community
alternatives, and serves the University community as its primary
clientele. Each evaluation shall result in a written
report which justifies the decision by the Chancellor to continue or
discontinue the enterprise. Documentation of this decision shall be
available as requested for review by the Vice President Financial and
Business Management.
Attachment
Office of the President
BERKELEY, CALIFORNIA 94720
April 6, 1981
CHANCELLORS
MEMBERS, PRESIDENT'S ADMINISTRATIVE COUNCIL
Dear Colleagues:
Policy on Establishment and Review of Auxiliary Enterprises
The following Policy on Establishment and Review of Auxiliary
Enterprises is effective immediately.
It is the policy of the University of California to operate, or to
authorize organized groups affiliated with the University to operate,
auxiliary enterprises which support and enhance its instructional,
research, and public service programs. Accordingly, auxiliary
enterprises shall be conducted primarily for the convenience of
University students, faculty, and staff, and may only incidentally serve
members of the general public.
A decision to establish an auxiliary enterprise must include
consideration of the possibility of obtaining the intended goods or
services through alternative means, such as commercial services
available in the community. Specific factors which must be considered
include:
(a) the degree to which the University must retain the control of the
enterprise in order to achieve University program purposes;
(b) the comparative convenience, cost, and quality of the goods or
services from alternate sources; and
(c) the availability of long-range continuing resources to support the
enterprise.
Vice President Lamson will issue guidelines, in the form of a Business
and Finance Bulletin, for implementing this policy.
Sincerely,
David S. Saxon
President
cc: Laboratory Directors
Principal Officers of The Regents
Director Gross
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