Procedures for Closing the Cost Center by Program Type From: "Alice A. Sabatini" Message-Id: <970625223411.ZM10270@sabatinipc> Date: Wed, 25 Jun 1997 22:33:57 -0500 Received: from mailrcamnl.wr.usgs.gov (dcrcamnl.wr.usgs.gov [130.118.33.2]) by qvarsx.er.usgs.gov (Geomail 1.2.3) with ESMTP id NAA08988 for ; Tue, 24 Jun 1997 13:00:19 -0400 Received: from localhost (dcrcamnl [130.118.33.2]) by mailrcamnl.wr.usgs.gov (Geomail 1.2.3) with ESMTP id KAA25931 for ; Tue, 24 Jun 1997 10:03:48 -0700 X-Mailer: Z-Mail 4.0 (4.0.0 Aug 21 1995) To: "AO - All Administrative Officers" Subject: Procedures for Closing the Cost Center by Program Type Cc: ais.cmb@qvarsx.er.usgs.gov, "Catherine L Hill, ACH/Operations, Reston, VA" , "B - Branch Chiefs and Offices", "DC - All District Chiefs", "Emma H Miller, Computer Assistant, Reston, VA" , "Stephen F Blanchard, Deputy ACHO, Reston, VA" Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii In Reply Refer To: Mail Stop 442 June 25, 1997 MEMORANDUM To: Administrative Officers From: Alice A. Sabatini /s/ Division Administrative Officer, Water Resources Division Subject: Procedures for Closing the Cost Center by Program Type This memorandum provides implementing instructions for the use of the program type feature in the Administrative Information System (AIS) and supplements the policy contained in the Water Resources Division (WRD) Memorandum No. 96.07. The referenced WRD Memorandum discusses cost accounting requirements for fixed-price and reimbursable agreements. The AIS program type was developed to expedite the tracking of actual expenses in project accounts and to balance surpluses and shortages in accounts for the cost center. Implementation of the recommendations contained in the audit report on the Federal-State Cooperative (Coop) Program resulted in the ability and authority to enter into fixed-price agreements for the Coop program. With this change, it became necessary to examine the source of all funds, determine whether agreements were negotiated as fixed-price or reimbursable, and designate them as such in the AIS. Fixed cost accounting implies that the customer will be billed for the total amount of the agreement regardless of the amount of the actual work effort. Surpluses from fixed-price agreements, where the actual costs incurred are less than the amounts billed, are available to fund other work efforts or cost overruns. Reimbursable cost accounting implies that the customer will be billed for actual expenses; that is all we are authorized to collect. If the agreement is underspent, it should be modified to reduce the funding so the expenses, the funding, and the billing all match. Under this concept, there would be no surpluses from reimbursable agreements available to offset cost overruns in other projects. Additionally, using surpluses from reimbursable agreements to offset other project shortages could result in an audit finding requiring repayment of the surplus to the customer. In order to implement this process, and monitor our accounts to insure funding from fixed-price agreements is available to cover project shortages or unfunded work efforts, funding sources have been defined as one of five Program Types. They are: AIS PROGRAM FUNDING SOURCE TYPE ----------------------------- ------------------------ Coop fixed-price C CBR - OFA and Coop accounts 001 - 007. D These have also been designated as fixed-price FED - All Federal projects including F accounts 001 - 007. These funds are not reimbursable but can be considered fixed-price Overhead - This includes WOTSC and DOTSC O and applies to accounts funded by assessment income (e.g. 00900, 88800) Reimbursable - This includes all OFA funding R other than CBR, and coop funding that is not CBR or fixed-price. WCF - Working Capital Fund accounts W Note: The program types W and O will be combined into one when a requested AIS change has been implemented. Debit and credit accounts for tracking publications (97300 and 97400) and vehicle costs should be coded F (Federal). This is because these accounts have no funding and will default to the federal program default customer (Customer 0001X). For ease of use program types C, D and, F can be combined. Surpluses from accounts tagged with Program Types C, D, and F can offset cost overruns in any other type of account. Conversely, surpluses from accounts tagged with Program Types R, O, and W cannot offset cost overruns for other account regardless of program type designation. The negotiation of cost accounting terms takes place at the time the agreement is finalized and is a characteristic of the agreement. However, because of large agreements with major State customers often fund multiple projects and/or accounts in a cost center (CBR, investigative studies, etc.) and the customer may require cost accounting on the investigative projects but not on the data projects, it was determined infeasible to require that separate agreements be negotiated with this State customer for accounting convenience. For this reason, it was determined that the program type designation would be recorded at the parent account level rather than the agreement. The parent account was chosen rather than the subaccount because of the Federal Financial System (FFS) funding and cost distribution processes. WRD records funding in the FFS at the parent account level because it is not possible to distribute costs differently within the same account; in other words, an account cannot be conducted on both a reimbursable and fixed-price basis because it is impossible to separate the costs that must be billed to the customers in the FFS. In order to differentiate between fixed-price and reimbursable programs, it is necessary to establish program types for each parent account. The Program Type is entered into AIS in the Account Request frame. (See the attached screen print for placement on the frame--distributed hard copy only). An AIS setup was run to associate all existing accounts to a program type when this functionality was released last year. Existing account numbers require editing to ensure the correct program type was assigned. New account numbers require the assignment of a program type when they are established. Designation of a program type is mandatory, and there is no default. There are Funding and Expenditure Reports by Program Type, as well as Budget vs Actual Expenditure Reports by Program Type available in the Program Planning module of AIS to assist in determining the balance for each Program Type. Additional reports are also being developed. Examples of these reports are attached to this memorandum (distributed hard copy only). Some rules of thumb for closing by program type: - Regardless of the type of cost accounting, there is a requirement to track actual project costs. Actual costs of a work effort must be recorded in the project account for which they are incurred. This is true even when the costs significantly exceed the amount of funding available or in instances where no funding is available to cover the completion of work. - Although surpluses from fixed-price agreements and other fixed-price funding sources (AIS Program Types, C, D, and F) can be used to cover cost overruns in other fixed-price agreements, only in rare circumstances should fixed-price surpluses fund shortages in overhead and reimbursable agreement accounts. Reimbursable agreements should be renegotiated whenever possible to increase funding to cover shortfalls. Surpluses and shortages in overhead accounts should be managed through an adjustment of the cost center assessment rate. If the assessment rate needs to be adjusted after the common service plan has already been approved, the plan should be modified to reflect the new rate, and submitted to the appropriate member of the Senior Staff for re-approval. The use of fixed-price agreements is not mandatory. If a cost center has sufficient expertise to plan for costs to the degree that each account will balance at the end of the fiscal year without arbitrarily shifting costs among accounts, there may not be the need to utilize this tool. Questions on the use of program type should be addressed to your Regional Administrative Officer or to me. Questions on the use or features of the AIS (frames or reports) should be addressed via email to ais.help. Attachments (distributed hard copy only) Copy to: District Chiefs Branch Chiefs Assistant Chief Hydrologist for Operations AIS Configuration Management Board -- Alice A. Sabatini (aasabati@usgs.gov) Division Administrative Officer Water Resources Division, U.S. Geological Survey 703-648-5027; fax 703-648-5295