Cost Accounting Split Routine

Cost accounting entities (programs, projects, grants, etc) have a key setup option of whether or not the entity is reimbursable. When defined as reimbursable, some portion or all of the funds for the entity are billed to from one or more funding sources. Sources are most often a mix of internal and external funding; however, there is no requirement that there is a mix.

Reimbursable cost accounting entities have two choices in the timing of how costs are "split" between the various funding sources. The first, Front End Split (FES), is where the system takes costs in real time as spending documents are processed and splits them out by funding source on the document posting lines. The second, Back End Split (BES), is where the system uses a batch process to take costs accumulated since the last running of the process and create documents to split them out.  In addition to real time splitting of costs, the FES option allows for the system to assign different chart of accounts (COA) to each funding source. Each funding source, front or back end, is defined by a cost accounting COA, but the FES option allows for other COA to be assigned on the spending document’s posting lines for tracking costs separate at a central budget level.  

Both types of splits rely on a special type of budget structure – Reimbursable. Before this budget is completed, reference pages are setup for special funding COA: Funding Profile, Funding Priority, and Funding Line (definitions below). The combination of these COA codes forms what is called the “reimbursement arrangement”.

Funding Profile allows the establishment of a high-level code that captures billing characteristics (for example, standard billing, administrative costs, and ineligible). It identifies funding relationships within a Major Program.

Funding Priority is a subset of the Funding Profile, defining one or more sequential billing ceilings according to the agreements with funding sources.  It specifies the "stages" of billing for a Funding Profile. Priorities are defined in sequential, numerical order to ensure proper progression through the agreements.

Funding Line is a subset of the Funding Priority, providing information related to each internal or external funding participant within the associated funding agreement. It identifies the billing information related to a specific Customer within Funding Profiles. Line numbers are sequentially assigned by the application.

Formula for Splitting Against Reimbursable Budgets

A configurable field called Reimbursement Budget Availability (REIM_BUD_AVAIL), stored on the Application Parameter (APPCTRL) page, contains the Control ID associated with the budget formula utilized to control the types of funds considered for splitting. Transaction processing (for example, Automated Disbursement or Encumbrance) will trigger the split logic that reads this field to determine the formula utilized for reimbursement budget availability. Examples of the formulas that can be utilized are:

• Reimbursement Constraint #1 (ID 13)

(Awarded + Revenue Credits) - (Cash Expenditures + Accrued Expenditures + Encumbrances + Pre Encumbrances + Charges + Back End Split Charges) >= 0

• Reimbursement Constraint #2 (ID 14)

(Awarded + Revenue Credits) - (Cash Expenditures + Accrued Expenditures + Encumbrances + Charges + Back End Split Charges) >= 0

• Reimbursement Constraint #3 (ID 29)

(Awarded + Revenue Credits) - (Cash Expenditures + Accrued Expenditures + Charges + Back End Split Charges) >= 0

In the example above, Control ID 14 includes Encumbrances, Control ID 13 includes Pre Encumbrances and when calculating the available budget amount whereas Control ID 29 does not include Encumbrances. There is a part of the split logic that uses a calculation called Total Costs, which is the 'spending' portion of any Reimbursement Budget Availability budget control.  To remove the non-spending portion of the Reimbursement Budget Availability control, an Application Parameter (APPCTRL) called Reimbursement Budget Total Costs (REIM_BUD_TOT_COSTS) lists the bucket IDs that are not spending.        

Reimbursement Budget Total Costs (REIM_BUD_TOT_COSTS) lists the bucket IDs that are not spending from the selected formula in the REIM_BUD_AVAIL parameter.  Typically the amounts removed are Awarded and Revenue Credits.

When a site is configuring Reimbursement Budget Availability the following guidelines should be followed:

• Reimbursement Budget Availability formula must be event-driven buckets, and cannot include formula buckets. (Pending buckets are still event-driven.)

• Once you start splitting and reserving, you need to continue doing it for the rest of the spending chain.

• Reimbursement Budget Availability formulas cannot have a “greater than” or “less than” sign.  (For example, greater of Collected Revenue or Awarded.)

As outlined above, the budget formula utilized is completely configurable utilizing the controls established on the Budget Control Administration (BCADM) page. The appropriate Control ID should be analyzed and updated in APPCTRL prior to implementing the Cost Accounting Reimbursement Model.

Below are two sample scenarios utilizing each of the example Control IDs identified above – further outlining the impact of this configurable functionality:

• Scenario 1 – Control ID 29

• Scenario 2 – Control ID 14

 Scenario 1

The following example shows a scenario using Control ID 29 identified above (that is, does not include Encumbrances).

Step 1: Funding Setup

• $1,000,000.00 of federal funding is available; any spending past $1,000,000.00 must be funded by the agency.

• Priority 10 has an Awarded amount of $1,000,000.00 that infers the Federal Trust (Fund 0890).

• Priority 99 (Overflow) – infers the State Highway Account (Fund 0042).

Step 2: $1,000,000.00 is encumbered on a contract.

• The contract posts to Priority 10 and infers fund 0890.

• Available budget did not change because Encumbrances do not “reserve” available award.

Step 3:  An unencumbered $300,000.00 payment occurs.

• The cash expense posts to priority 10 regardless of the encumbrance and infers fund 0890.

Step 4: The second payment is made against the contract for the entire $1,000.000.

• The cash expense splits across the two priorities:

• 700k in priority 10 (Fund 0890); $300k in priority 20  (Fund 0042)

• The cash expense infers a different fund than the encumbrance. Part of the payment exceeds federal reimbursement funding, despite how the encumbrance posted.

• Encumbered totally in fund 0890; Cash Expense split between funds 0890 and 0042.

Scenario 2

The following example shows a scenario using Control ID 14 identified above (i.e., includes Encumbrances)

Step 1: Funding Setup

• $1,000,000.00 of federal funding is available.  Any spending past $1,000,000.00 must be funded by the agency.

• Priority 10 has an Awarded amount of $1,000,000.00 that infers the Federal Trust (Fund 0890).

• Priority 99 (Overflow) – infers the State Highway Account (Fund 0042).

Step 2: $1,000,000.00 is encumbered on a contract.

• The contract posts to Priority 10 and infers fund 0890.

• This makes zero dollars available to any additional split funds so any new Encumbrances, Accrued Expenses, Cash Expenditures or Charges will be taken from Priority 99.

Step 3:  An unencumbered $300,000.00 payment occurs.

• The cash expense posts to Priority 99 overflow with a deficit FES since it was not a payment on the encumbered contract (fund 0890) and priority 99 infers fund 0042.

Step 4: payment is made against the contract for the entire $1,000.000.

• The payment on the Encumbered contract uses Priority 10 and infers fund 0890.