deltek insight 2010: indirect cost pools keys for success

CP-236: Indirect Cost Pools: Keys for SuccessDelivered by:

Traci Rowland, Baker Tilly / Beers + Cutler

Christine Trunnell, Baker Tilly / Beers + Cutler

1

Overview

• The set up, maintenance and processing of indirect cost pools and service centers in Costpoint are integral for accurate and timely reporting

• Defined procedures can be followed throughout the year to increase efficiencies around cost pool processing

Copyright © 2010 Deltek, Inc. 2

Objectives

• Discuss the importance of sound controls around cost pool set up and maintenance

• Tips on streamlining cost pool and service center processing during month-end and year-end close

• The importance of reconciling cost pools and service centers to the General Ledger on a routine basis


Agenda

• Cost Pool Set up and Maintenance

– Controls

– Set up and maintenance

• Period-end Pool Processing

• Reconciliation

– Reconciliation to the General Ledger

– Common Issues Encountered


Cost Pool Set up and Maintenance

• Controls

– Limit access to maintain cost pools and service centers

– Provide training to users

– Establish controls/approval process



Cost Pool Set up and Maintenance (cont.)

• Set up and Maintenance

– Consider outlining pool and service center set up in an offline tool (e.g. Excel) prior to set up in Costpoint

– Whenever possible, use the YTD method for pool and service center processing

– Use the wildcard functions in the Cost and Base Creation Set up Screens to make all changes to pools and service centers

• Additions/deletions to the Pool Cost easily flow to the cost pools and service centers.

• Additions to the Pool Base can be easily made; however, deletions to the Pool Base must be executed using certain steps

– Ensure the sequencing of pools and service centers is consistent with flow of allocations


• Set up and Maintenance (cont.)– “Smart code” debit and

credit allocation accounts to better track where pool allocations are coming from and where they are going to• This is helpful when

following the trail of allocations when reconciling the debit and credit allocation accounts and the allocation accounts to the total cost and base

• Examples:

Example Pools and Service Center:

Pool #10 = Fringe Pool

Pool #50 = Facilities Service Center

Pool #100 = Overhead Pool

Pool #150 = G&A Pool

Allocation Accounts – Pool #10:

Credit = CR-0010-000

Debit = DR-0010-050 (Allocation of Fringe to the Facilities SC)

Debit = DR-0010-100 (Allocation of Fringe to the Overhead pool)

Debit = DR-0010-150 (Allocation of Fringe to the G&A pool)

Debit = DR-0010-DIR (Allocation of Fringe to Direct Labor)

Allocation Accounts – Pool #50:

Credit = CR-0050-000

Debit = DR-0050-100 (Allocation of Facilities to the Overhead pool)

Debit = DR-0050-150 (Allocation of Facilities to the G&A pool)




• Set up and Maintenance (cont.)

– Reclassification (“Reclass”) pools should be considered for instances where a pool is comprised of costs from multiple organizations that differ from the credit allocation organization identified during pool set up—this is due to the limitation of having one credit allocation account/org combination

• The use of reclass pools eliminates skewed organization-level financial results from allocation posting

• Common Examples:

– Reclass pools are often used when an organization incurs fringe, OH or G&A costs across their entire organization

– The costs (or debits) are aggregated from multiple organizations, but a single organization receives the credit from the allocation of the fringe, OH or G&A pool


• Set up and Maintenance (cont.)

– Manual vs. Automatic Service Centers

• Manual service centers can be difficult to execute and reconcile in Costpoint

• Automatic service centers can be used in lieu of manual service centers

– Using Statistical Accounts (e.g. dummy accounts), the same unit of measurement can be used (headcount, square-footage, etc.)—a journal entry will be made to enter the current period unit amounts each month

– The Statistical Accounts and respective orgs will be added to the Base Creation Set up screen

– This method creates a better audit trail of the base amounts for each period

– The Check Pool Account/Org Set ups utility is a useful tool to run after pool and service center set up


Period-end Pool Processing

• Task a small group of individuals with responsibility for periodic pool and service center processing

• Follow a defined set of pool and service center processing procedures every time pools are processed

– All steps are integral and should be processed in the correct sequence

• Create an approval process to ensure each step was executed correctly before finalizing the pools for a period

• Consider establishing Process Managers in Costpoint that will be manually executed during periodic pool processing

– Doing this does not necessarily eliminate the steps in pool processing; it bundles steps together to ensure certain steps are not inadvertently omitted during processing


Reconciliation

• Cost Pool Reconciliation to the General Ledger

– Process

• All pool/service center cost and base amounts should be reconciled to the General Ledger

• All allowable indirect costs in the General Ledger should be included in the cost of pools and service centers

• The total pool or service center cost should equal the amount recorded to the corresponding credit allocation account

• The debit and credit allocation accounts for a pool or service center should zero out each period


Reconciliation (cont.)

• Cost Pool Reconciliation to the General Ledger (cont.)– Method

• Summary

– Depending on the cost pool and service center set up, perform a high-level reconciliation of all pools and service centers.

– If all Fringe accounts begin with a “5,” run the Trial Balance at account and org level “1” for accounts that begin with “5”

– Compare the total on Trial Balance to the Fringe pool cost

• Detail

– Reconcile the Statement of Indirect Expenses (SIEs) and Service Center Cost Allocation Reports at account and org level “0” to the detailed Trial Balance at org level “0”

– All indirect expenses should be included in the cost of the pools and service centers

– Frequency• Every period close

– If pools are YTD and target rates are used, it is not necessary to reconcile prior to closing the period

– If pools are Current Period, reconcile prior to closing the period to ensure all costs are captured correctly

• At year-end, reconcile prior to closing the year


Reconciliation (cont.)

• Common issues encountered during reconciliation:

– Accounts are removed from the base of pools and service centers without “clearing” the pool first

– Accounts are removed from a Project Account Group (PAG)

– Allocation and variance accounts are not linked with the organizations specified in the pool set up screens

– Deletions of pool cost and/or base accounts are made in the subtasks of the Cost Pools screen instead of the Cost and Base Creation Set up screens

• When the Create Pool Links process is run, the deleted account/org combinations will be created again for those pools


Questions


Speaker Contact Information


• Traci Rowland, Director, Baker Tilly

– Direct Dial: 703-923-8218

– Email: [email protected]

• Christine Trunnell, Manager, Baker Tilly

– Direct Dial: 703-923-8217

– Email: [email protected]

mailto:[email protected]

mailto:[email protected]

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