Cost Pools: How to Swim and Not Sink
David Zalcmann, UTRS, Inc., Chief Financial Officer
GC-67
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Session focus
Cost pool overview
Pre-setup up considerations
Pool account-org structure
Hierarchy and cascading
Agenda
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Welcome to the Pool
Disclaimer
Cost pools – 50 shades of grey
Audience Poll
Welcome to the Pool
Cost pool – grouping of costs that are allocable within
an organization
Direct cost – attributable to a single final cost
objective (project)
Indirect costs – not attributable to a single final cost
objective
Burdening – process of allocating indirect expenses
to direct expenses
Welcome to the Pool
Indirect Rates:
___Numerator = cost pool (grouping of indirect costs)___
Denominator = base (costs/units that absorb pool allocation)
Cost pools reside within a single fiscal year
Provisional vs. target vs. actual rates
Welcome to the Pool
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Preparing to Swim
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Pool setup starts well before you click Cost Pools in
CP
Driven by dependent architecture and processes
Proper consideration, understanding and setup
imperative to pool functionality and administration
Begin with the end in mind
What pools need to be established?
Final or intermediary?
Future needs?
Preparing to Swim
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• Pool data resides
• Account-Org driven
• Data compressed
General Ledger
• Burdening occurs
• Details storedProject Ledger
Preparing to Swim
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Design Account and Org structure to support pools
Considerations:
Onsite vs offsite
Employee classes/benefit plan
Business units
Allocations are combo-driven
Avoid a “wild” goose chase by using logical groupings
for wildcarding
Preparing to Swim
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Inputs
Onsite Labor
Engineering ArchitectureOffsite Labor
Preparing to Swim
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• Org 2• Acct 2
• Org 1• Acct 1
Onsite Eng.
Arch.Offsite
Preparing to Swim
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Entering the Pool
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Map out pool architecture
Visual representation –
list, flowchart, diagram, et
c…
Identify accounts needed
Determine account-org
combos
Hierarchy and timing
Fringe
Facility
Intermediary
Final Pools
Entering the Pool
Hierarchy Example
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Pool account setup
Accounts are for system generated pool
computations only
Two accounts required for each pool
Allocation Debit (AD) Account
Receives the allocation
Can have multiple AD accounts per pool
Allocation Credit (AC) Account
Offset of allocation
Only one per pool (could result in needing reclass pool)
Entering the Pool
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Optional pool accounts (final pools only)
Cost Variance (CV) Account
Captures rate variance between target/actual during revenue posting
Shifts GL from an actual to target position
Receivable Variance (RV) Account
Offset of CV account Capitalizes variance on B/S
Financial Statement Reclass Accounts (RD & RC)
Used to shift expenses and indirect burden during cost transfer process between performing to owning to org
Entering the Pool
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Considerations for setting up pool accounts
Isolate on CoA – start with alpha characters
Embed pool type within account code
Embed pool number within account code
Embed allocation type within account code
Obviously limited by account structure
The more info you can embed, the easier to follow
the flow of pools through the system and leverage the
allocation data
Entering the Pool
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Base Account Type
Pool Number
Pool Account Type AD/AC
100
DL OH
200
DL
Entering the Pool
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Each account that impacts pools needs to be
assigned to an org
Use existing orgs, no special pool orgs needed
Can use mirror orgs for AD accounts
AC account must have org assigned
One AC account per pool,
meaning only one org
May need reclass pools to
keep integrity of FS by Org
Entering the Pool
Account Org 1 Org 2
Original Expense $300 $500
AD-100-DL $150 $400
AD-100-OH $150 $100
AC-100-00 ($800) ($0)
Total ($200) $1,000
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Pool structure will determine sequence of pool
processing
Sequence is absolutely critical to ensure that
allocations cascade through the system properly
Mismanagement will result in improper final rates and
circular references
Entering the Pool
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Ultimate goal of
setup, design an
architecture file outlining
pools
Identifies accounts needed
Identifies account-org
combos
Arrange in sequence
Will provide tool for setup
and ongoing administration
Pool Cost
Pool Cost Allocation Credit
60-100-10 C.%.%
AC-100-00 C.9.9960-200-10 C.%.%
61-%-% C.%.%
Pool Base
Pool Base Allocation Debits
50-100-10 C.%.% AD-100-DL
50-100-20 C.%.% AD-100-DL
50-200-10 C.%.% AD-100-DL
70-100-10 C.%.% AD-100-OH
80-100-10 C.%.% AD-100-GA
Entering the Pool
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Pool account structure will offer added visibility
Extremely helpful in pool setup/reconciliation
Scalability
Allow for bucketing of allocated costs in presentation
of managerial financial statements
Entering the Pool
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Time to Swim
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General overview on cost
pools
For more
information, examples, se
tup files, tips, etc…
please contact David at
856-667-6770 x162 or
Call to Action
Thank You!