General Accounting

Policy

FIACCT 02-03_00 General accounting- Cost accounting-components overview

Effective: March 16, 1998
Revised: September 1, 2006
Reviewed: 

Purpose

This policy provides state departments with an overview of the Cost Accounting capabilities that are part of FINET. These capabilities are in addition to and used in conjunction with the normal appropriation, expense budget, revenue budget, and financial accounting features and controls.


Policy

Policy
It will be the responsibility of department cost accounting users to input and maintain the applicable cost accounting tables.

It will be the responsibility of department cost accounting users to ensure that the appropriate cost accounting element(s) are entered on transactions.


Background

The FINET Cost Accounting capabilities cover a variety of needs, some of which are:

 To plan and budget for alternate fiscal years and for multiple fiscal years, independent of the state fiscal year and to record revenues and expenditures by year for the length of time the cost accounting entity exists,
 To record all applicable costs and revenues to jobs, projects, and grants so that full costs can be matched to revenues for each accounting period and over the life of the entity; and
 To provide management with total costs and associated revenues to assist in the decision making process, so that limited resources can be used more cost effectively.

Department of Transportation:
Many special cost accounting capabilities have been included in FINET to meet the specific requirements of the UDOT. Since these capabilities are specific to UDOT and are not used by other state departments, they are not discussed in this manual. A separate manual is being developed to discuss the UDOT specific usage of FINET.

FINET Cost Accounting:
The Cost Accounting capabilities in FINET are based upon three primary concepts:
 User-Defined Tables
 FINET Coding Data Elements
 System-Specific Functions/Components

Each concept is described below.

A. User-Defined Tables
There are a series of user-defined and updated tables. Most are defined at the specific agency level, which are used to identify basic structure(s) and hierarchy relationships between and among cost accounting data. These tables are used both for reporting and for editing data integrity on transactions and on associated tables. Since these tables are user-maintained, and except for the tables that identify basic FINET coding elements, they can be changed whenever needed without impacting the data integrity. The user-defined tables that are specific to each cost accounting area are covered in the subsequent sections of the manual.

B. FINET Coding Data Elements

When the above FINET Coding Data Elements are entered on transactions, both the financial and cost accounting tables and ledgers are updated. The data fields Fund, Agency, Appropriation Unit, Organization, Object/Revenue Source, and Activity are normally associated with appropriation, revenue and expense budget accounting and controls. Reporting Category, Project, Job, and (in some instances) Activity are the data elements normally associated with cost accounting. The use of these data elements for cost accounting is discussed in this manual in the applicable sections.

C. System-Specific Functions/Components
There are a number of cost accounting functions in FINET. The primary components are discussed below. The section in this manual where each is discussed in greater detail is listed at the end.

1. FINET Activity
Activity is a statewide data element which will require Finance to assign a range of numbers for use by each state department. The definition and usage of activity will be at the discretion of state agencies and will not be mandated by Finance. Activity can be included in the expense budget or can be defined as an independent data element for reporting purposes only.

The Activity field in FINET is the level at which data is input and captured. Activity has a five level reporting structure hierarchy that can be established to combine like activities into meaningful reporting entities. The reporting levels are:
 Activity Group
 Activity Type
 Activity Category
 Activity Class
 Activity

Other than the master tables related to the above structures, transactions processed that include an activity are updated to the basic FINET tables and ledgers. The discussion of the FINET Activity is in the GENERAL ACCOUNTING section of this manual.

2. FINET Function (This field is not used).
Function is a statewide data element which will require Finance to assign a range of numbers for use by each state department. The definition and usage of function will be at the discretion of state agencies and will not be mandated by Finance. Function can be included in the expense budget or can be defined as an independent data element for reporting purposes only.

The Function field in FINET is the level at which data is input and captured. Function has a five level reporting structure hierarchy that can be established to combine like functions into meaningful reporting entities. The reporting levels are:
 Function Group
 Function Type
 Function Category
 Function Class
 Function

Other than the master tables related to the above structures, transactions processed that include a function are updated to the basic FINET tables and ledgers. The discussion of the FINET Function is in the GENERAL ACCOUNTING section of this manual.

Federal Aid Management (Grant Accounting)
The Federal Aid Management feature in FINET establishes grants as unique entities apart from the organizational structure. Each state department can define within the structure a method for grant accounting that is specific to their needs. Federal Aid Management has been developed to support the additional requirements of federal funds management, which includes providing:
 A budgetary control structure for grants independent from appropriations, including funds control of expenditures for each grant,
 An automated mechanism of recording both direct and indirect costs and the associated revenues,
 A method to consolidate and assist in meeting the requirements for federal draw downs, and
 Grant reporting, both current period and inception to date, that is separate from financial
and organizational reporting.

There are system-maintained tables that are updated as grant related data is processed. These tables contain descriptive data, budgets, encumbrances, expenditures, revenues, and balances for each grant. In addition, the grant ledger maintains inception to date detail transactions for each grant. The FINET policies and procedures for Federal Aid Management (grants) are in GRANT ACCOUNTING section of this manual.

Project Accounting
The Project Accounting component in FINET maintains project related data independent from the
organization structure. Each state agency can define the project structure usage that is specific to their agency; and can divide projects into sub divisions (sub projects), and account for sub projects by defined phases. Project accounting is used for:
 The aggregation of all project related data,
 Multi-year inception to date budgeting and the recording of costs and related revenues for the life of the project, and
 Budgetary and funds control of expenditures for each project at the sub project and phase level.

There are a number of system-maintained tables that are updated as project specific data is processed. These tables contain descriptive data, budgets, encumbrances, expenditures, revenues, and balances for each project, sub-project and phase. In addition, the project ledger maintains inception to date detail transactions for each project. The FINET policies and procedures concerning project accounting is in the PROJECT ACCOUNTING section of this manual.

Job Cost Accounting
The policies and procedures in this manual for jobs will be divided into two sections – Non- Billing Job Accounting and Job Full Cost Accounting.

The Job Cost Subsystem in FINET is used for the collection of costs and the application of overhead rates for the calculation of full costs and subsequent automated billing and reimbursement of these costs. Jobs can be established and related to a project for the capture of full costs associated with a capital project. The process of establishing, charging, costing, billing, and closing jobs is performed with the following functions:
 Job control allows jobs to be set up, modified and removed when completed,
 Job charging accumulates expenses and revenues associated with a specific job, and allows for the charging of indirect costs, when applicable,
 Job costing applies overhead rates to specified direct costs charged to a job to calculate full costs,
 Automatic job billing charges the full costs to the appropriate organization by automatically generating intra-governmental payment vouchers or invoice transactions, or reports the charges that would have been billed if automatic billing is not wanted, and
 Job clearing and purging closes a job and purges it from the system.

Job-related transactions update the Job Table with accumulated totals for each job. As transactions are processed referencing a job, or as the Job/cost functions are performed, they are posted to a series of job ledgers. The ledgers are:
 Job Ledger
 Current Period Full Cost Ledger
 Job-to-date Full Cost Ledger
 Purged Job Ledger
 Selected External Billing Ledger
 External Billing Invoice Ledger

Labor Distribution
There are five functions that are part of the Labor Distribution process. Three functions are provided through or from the State Payroll System, and two are provided within FINET. The five functions are:

Payroll System related:
1. Time sheet direct hours input and distribution
2. Excess Leave/Compensatory Earned Pool (mandatory agency participation)
3. Termination Leave (Retirement Earned) Pool (mandatory agency participation)

FINET System related:
4. Leave Usage Additive Process (optional agency participation)
5. Indirect Cost Additive Process (optional agency participation)

Each of these functions is described below.
1. Time sheet direct hours input and distribution
Each state entity will identify the FINET organizational level to be used for grouping time sheets. The State will be using detail expense budgets to monitor payroll costs, and will not encumber payroll costs. Detail labor costs can be charged to each cost accounting data element identified on the time sheet distributions, so that these costs can also be monitored and controlled at this level of detail.

Hours in the Payroll System can be automatically distributed or manually distributed to FINET coding blocks. For the manual distribution, all hours are entered on the Charging Time Entry Screen with their corresponding FINET coding.

2. Excess Leave/Compensatory Earned Pool
The accumulation of excess leave or compensatory hours by employees represents departmental liabilities that must be recognized at the department level, and the costs charged against budgets when earned. Excess leave occurs when leave is taken and extra hours are worked in a payroll period for both exempt and non-exempt employees. Compensatory time occurs in a week for non-exempt employees, when more than forty hours are worked.

An excess comp pool will be established for each department. When excess or comp time is earned, the department budget will be charged and the offset will be to the excess/comp leave pool. This charge will occur each payroll cycle. When comp or excess time is used, the pool will be charged instead of the department budget. All departments are required to participate in this pool.

3. Termination Leave Pool
The accumulation of termination leave benefits will be accomplished by a benefit rate applied to payroll costs. The benefits that are being accumulated are primarily vested annual leave for terminated employees and vested annual leave and sick leave converted, sick leave cashout, and health and life insurance premiums for retiring employees. These benefit accumulations will be charged to department budgets along with regular payroll costs.

The offset to the department charges will be to one of four statewide pools – State Office of Education Pool, Department of Public Safety Pool, Department of Transportation Pool, and Rest of State Government Pool. At the time of termination, the termination payout will be made from the appropriate pool. All departments are required to participate in this pool.

4. Leave Usage Additive Process
The Leave Usage Additive Process is a function within FINET. It allows departments to add a predetermined percentage to labor and fringe benefit costs that will be posted as a labor usage additive expense in FINET. The primary usage for this process is to charge (debit) the budgets for the expense of vacation and other leave when earned to the same distribution (except object) that received the payroll costs and to offset the charge (credit) to a department specific activity, grant or project pool. When the vacation or other leave is taken, the charge is debited to the pool. Department usage of this additive process is optional.

5. Indirect Cost Additive Process
The Indirect Cost Additive Process is a function within FINET. It allows departments to add a predetermined percentage to labor and fringe benefit costs as an additive to cover indirect or administrative costs. The additive costs are charged (debited) to the budgets using the same distribution (except object) that received the labor and fringe benefits charges. The offset (credit) is to a department-specific pool activity, grant or project. Department usage of this additive process is optional.

The policies and procedures concerning FINET labor distribution is in the LABOR DISTRIBUTION section of this manual.

Cost Allocation
The cost allocation component of FINET will not be implemented on July 1, 1994. There will be a specific section in this manual for cost allocation when the component is implemented.

Planning
The planning component of FINET will not be implemented on July 1, 1994. There will be a specific section in this manual for planning when the component is implemented.