Internal Cost Allocations at Johns Hopkins University, Study notes of Financial Management

Download Internal Cost Allocations at Johns Hopkins University and more Study notes Financial Management in PDF only on Docsity! Chapter 10: Internal Cost Allocations This chapter explains secondary cost elements and internal cost allocations. In this chapter you will learn: What secondary cost elements are and how they are used to track internal postings such as service center purchases, transactions within JHU, and transactions between JHU and JHHS. How cost element numbering conventions may be used to identify service center, intra- and inter-entity transactions. Which BW reports and ECC transaction codes are most useful when reconciling secondary cost elements (SCE’s). Overview of Secondary Cost Elements Secondary Cost Elements Explained At Johns Hopkins, there are many situations where business units purchase services or supplies from another unit, or where costs are initially paid by one unit and redistributed across many business units. For example, you may purchase services from Design and Publications or supplies from the Core Store. You may be charged for telephone expenses, for post docs’ medical insurance or to fund sponsored cost overruns. In situations such as these, where financial transactions occur within and between Hopkins entities, the postings are recorded using secondary cost elements, as opposed to primary cost elements. By posting JH internal activity to secondary cost elements instead of primary cost elements, the SAP system simplifies annual financial statement preparation and allows us to easily exclude internal activity from the ledgers. To reconcile postings to secondary cost elements, you should understand the following:  types of business activity that post to secondary cost elements.  numbering conventions used when posting to secondary cost elements.  SAP transactions that may be used to post secondary cost allocations. Reconciliation Guide 10-1 Chapter 10: Internal Cost Allocations Types of Business Activity Posting as Secondary Costs At the Johns Hopkins institutions secondary cost elements are used for postings related to: 1. Service Center purchases. 2. Revenue and expense transfers within JHU business areas (intra-entity). 3. Revenue and expense transfers between JHU and JHHS (inter-entity) 4. Overhead allocations Numbering Conventions for Secondary Cost Postings Understanding the numbering conventions used when posting secondary costs will simplify the account reconciliation process. There are distinct numbering conventions for Intra-entity transfers, Inter-entity transfers, and Service Center postings. Table 1. Intra-Entity - Secondary Cost Elements Number Description and Blocking Ranges 94xxxx Intra-Entity Revenue  940000 - 940099 Patient  940100 - 940199 Tuition  940200 - 940299 Sponsored  940300 - 940399 Contrib.Rev  940400 - 940499 Investment  940500 - 940599 Other Rev.  940600 - 940699 Affiliates 96xxxx Intra-Entity Expense  960100 - 960199 Salaries  960200 - 960299 Fringe Benefits  960300 - 960399 Supplies  960400 - 960799 Services  960800 - 960810 Bad Debt  960820 - 960829 Depreciation  960830 - 960834 Interest Expense  960835 - 960839 Prinicpal Expense  960840 - 960849 Travel  960900 - 960949 Other  960950 - 960999 Other1 90xxxx Other Revenue and Expenses 10-2  Reconciliation Guide Reconciliation Guide 10-5 http://www.sapathopkins.org/support-contact-list-2/ (as of 12/31/2011) at: a list of current secondary cost elements, please see Secondary Cost Elements in SAP For more information on the secondary costs element blocking ranges, and to get postings, as they always use a number range other than 492xxx and 692xxx. using the 49xxxx or 69xxxx numbering convention. These are not secondary cost Note, in some instances, converted balances were posted to commitment items Overview of Secondary Cost Elements Research Compliance department in the JHU Finance Office. Postings involving 14xxxxxxxx. Postings to sponsored accounts are approved by the Financial All postings using this transaction have a 10-digit document number of the format departmental cost objects. purchases all lab supplies and then disburses the expenses to appropriate redistribute expenses to another cost object when, for example, one department charges for services such as copier, fax, telephone or van charges, or 2) to Non-recurring cost allocations may be used by: 1) service centers to post original elements, while non-recurring cost allocations post to secondary cost elements. transaction. Expense, revenue and equipment transfers all post to primary cost process transfers in SAP. Users may initiate four types of transfers using this The non-payroll cost transfer transaction (ZSGM_COST_TRANSFER) is used to Non-Recurring Cost Allocation, Intra-Entity Sponsored accounts. See Chapter 11, Expense Transfers for more information. Accounting. The KB15N should never be used for correcting charges on is in the 94xxxx or 96xxxx series, the KB15N should be sent to JHU General If the transfer is between University cost objects and the secondary cost element http://finance.jhu.edu/depts/ga/ga_staff.html listing of the AR shared service staff members can be found at: the “Created By” person is an Accounts Receivable Inter-Entity staff member. A Users can identify these postings when the document number is 14xxxxxxxx and SAP using the KB15N transaction in SAP. aware of the transaction being processed. Inter-Entity posts approved transfers to e-mail contains both the sender and receiver contacts so that both parties are and JHU Service Centers using the 92xxxx Secondary Cost Element Range. The Inter-Entity reviews, approves and processes all transfers between JHU and JHHS Accounts Receivable Inter-Entity Shared Services unit detailing the transfers. secondary charges. In this format, users submit Excel spreadsheets to the Transfers via KB15N uploads are the most frequently used method for posting KB15N Uploads Transactions Used to Post Secondary Costs Chapter 10: Internal Cost Allocations sponsored accounts can be identified by reviewing the “Created By” field in the Revenue and Expense detail report. The user name of the Research Compliance staff who approved the transfer will be listed in the “Created By” fields. A current listing of Research Compliance staff members is available at: http://ssc.jhu.edu/sponsoredprojects/contact.html Postings that do not involve sponsored accounts are approved within each division. These transfers involving non-sponsored accounts will have “Created By” values of the divisional/departmental users who submitted and/or approved the transfers. The exception to this would be 94xxxx, revenue postings. If these are initiated through KB15N’s, on the CO Allocations report, you will see the name of a staff member from JHU Finance, General Accounting. If a non- recurring cost allocation involving a 94xxxx SCE is processed at the divisional level, it will generally route to General Accounting staff for approval. The non-recurring cost allocation allows users to enter descriptive text explaining the transfer. Users are encouraged to use this functionality whenever possible as it will simplify account reconciliation in the future. For additional information explaining how to enter descriptive text so that it displays on your BW reports, please see the Non-Payroll Cost Transfer job aid located at: http://orchid.hosts.jhmi.edu/hopkinsone/welcome/non-payrollcost.ppt Internal Service Providers There is a custom SAP transaction that was created as an online replacement to the legacy M&S form. This transaction may be used by service center staff to process charges for purchases made from the service center. Secondary postings created using this transaction can be identified as follows:  Document number is of the format 14xxxxxxxx.  Created by the person placing the order, or by Service Center staff  This transaction is managed by ARSS Inter-Entity. School of Medicine Costing Sheets Costing sheets are processed each month by JHU General Accounting staff to record clinical revenue, clinical trials and gift taxes to cost objects in the School of Medicine business areas (170-175 and 920). This activity may be identified as follows:  Document number is of the format 13xxxxxxxx.  Posts to secondary cost elements 940201, 940007, 940305, 940306, 960919  Maintained by School of Medicine Divisional Business Office (DBO)  Questions regarding flagging of cost objects for costing-sheet related taxes should be directed to School of Medicine DBO, and not General Accounting. 10-6  Reconciliation Guide Essential Information for Reconciliation of Secondary Cost Elements Essential Information for Reconciliation of Secondary Cost Elements Useful BW Reports and ECC Transactions To reconcile secondary cost allocations, use the following BW reports and ECC transactions.  BW Revenue & Expense Summary and Detail Reports - the sponsored and non-sponsored revenue and expense summary and detail reports provide inception-to-date and year-to-date totals and monthly detail for all activity, including secondary cost postings. The sponsored and non-sponsored detail reports are quite helpful in reconciling secondary cost elements provided certain Free Characteristics, which aid in reconciliation, are added.  In the case of Service Center charges, the Commitment Item in non-spon- sored or Sponsored Class in the sponsored, will start with a 6, while the G/L Account will begin with a 9. You will not be able to reconcile and/or transfer these kinds of charges without seeing the G/L account.  In the detail reports (both sponsored and non-sponsored) adding free char- acteristics, such as CO Header Text and Created By will supply needed infor- mation. Used in conjunction with fields such as Reference Doc Number and Item Text, many times users are able to get the information needed without pulling the CO Allocations report.  CO Allocations Report - this BW report includes the sending and receiving cost objects, the transfer amount, descriptive header text and the userid of the person who initiated the transfer. This report is very useful when reconciling non-recurring cost allocations for the following reasons:  the report includes, if added as a Free Characteristic, the sending and receiving cost object, which can be helpful in identifying where/how the charge originated.  the report includes the userid of the person who initiated the transfer, while the detail report lists the userid of the person who approved the transfer. This can be very useful, as it allows users to identify transfers initi- ated by their own staff, as opposed to those initiated by other units. KSB5 - this ECC transaction allows users to obtain detail for a specific transaction using the reference document number from the BW report.  ZSGM_COST_TRANSFER - this ECC command allows users to drill to specific detail and explanatory text related to cost transfers. Reconciliation Guide 10-7 Chapter 10: Internal Cost Allocations 1. First, we’ll note that the field CO Header Text has been added to the report, which is very useful because it provides more insight as to origination of the posting. For example, while the reconciler would know (by using the Inter- Entity Secondary Cost Elements Ranges table) that transactions posting to 97XXXX were Miscellaneous Revenue/Expense postings from JHHS, the user would see that these are for telecom charges from the Item Text, but would not know that Telesoft was the originator of the charges, unless the CO Header Text field had been added. 2. Typically 14 docs uploaded by ARSSC Inter-Entity staff members are initiated by the department using KB15N’s and are for services. The Student Medical Insurance charges (G/L 960306/Sponsored Class 654014) are an example of this. Normally, 96xxxx charges on Sponsored accounts are initiated through Non-Recurring Cost Allocations, as shown below in Display 10-4. The CO Header Text shows the cost transfer number and because it is a sponsored account, it was approved by Sam Mobry from Financial Research Compliance. Display 10-4. Typical Intra-Entity 96xxxx Charges are posted by NPCT (Non-Recurring Cost Allocation) 3. Now, going back to Display 10-3, we will look at postings to 921200, 921294, 921316, and 921317. These postings can be processed through 92xxxx interfaces, or KB15n’s. These particular Service Center charges have been posted through non-recurring cost allocations. Again, we know this because the CO Header Text field allows us to see the cost transfer/journal transfer number that originated the charges, and we see the JHED ID in the Created By field are all names of staff in Financial Research Compliance. The cost transfer numbers will allow us to drill down using transaction code ZSGM_COST_TRANSFER for further research. 4. Charges to 921271 are also Service Center Charges, but are processed directly by the Core Store, as referenced in the CO Header Text field, through a 92xxxx interface. We know this is an interface by the FIAUTO in the Created By field. 10-10 Reconciliation Guide Account Reconciliation Example - Sponsored So, postings created by FIAUTO are typically done by a service center using an interface, whereas postings that show Created By ARSSC Inter-Entity Staff members are posted by KB15N’s, and postings showing Cost Transfer numbers, along with Financial Research Compliance staff members as Approvers are non- recurring cost allocations (these to a sponsored internal order), which route to Compliance as part of workflow. If you are reconciling a non-sponsored cost object, you will not see the names of Financial Research Compliance staff as they are not a part of workflow for non- sponsored accounts. Keep in mind that the Created By field in Sponsored Detail populates with the Approver and not the actual Initiator. Display 10-5. CO Allocations Report The CO Allocations report is simply another view of the same transactions, which users may find more helpful. The differences are the Created By field shows the JHED ID of Initiator, along with the sending and receiving cost objects, if added as free characteristics.  CO Document Number is the same as Reference Doc Number from the Sponsored Detail. Item Text has become CO Doc Line Item Text, Created By field is now the Initiator and not the Approver of the transaction, and you can see Partner Cost Center and Partner Order.  By using JHED to research the JHED ID’s in the Created By field, you can now contact the initiator if the charge is unfamiliar, or if additional documentation is needed. If the animal charges to 921316 and 921317, for instance, are unfamiliar, you can use the JHED ID, LDOMINA1, in JHED, to see that the contact is Laura Domina, an Administrative Program Coordinator, with Financial Management for Oncology, and contact her. If you are familiar with these charges, have backup documentation, and recognize this as a typical monthly posting, you can check it off as a valid expense during reconciliation.  From the CO Allocations report, you can also see the Partner Cost Center, or Partner Internal Order, or the other side of the transaction. While the Reconciliation Guide 10-11 Chapter 10: Internal Cost Allocations sponsored program 90039477 is being charged (is the receiver), the credit is going to (the sender) 80012326.. Using ECC to Research Internal Cost Allocations Whether you choose to reconcile internal cost allocations with the monthly detail report or the CO Allocations report, you may want more information about the original transaction. If you do not bring in some of the Free Characteristics referred to earlier in the reporting section, you may not have all of the information that you need in order to validate the expense. Another method of researching these postings, is to drill down on the original transaction, using either the ZSGM_COST_TRANSFER or KSB5 tcodes in ECC.  ZSGM_COST_TRANSFER - this tcode can be helpful in seeing more information about the non-recurring cost allocation. If, for example, you want more information about Doc Number 1400676159, for Animal Care charges in the amount of $798.56, you could use the Cost Transfer number (146811) to find out more details (see Display 10-6 below). You will only find this number from CO Header Text in BW or while using KSB5 in ECC. Display 10-6. Using ZSGM_COST_TRANSFER to Drill Down in ECC In Display 10-7 you can clearly see the explanation given by the originator is Oncology Animal Care Billing CRB2 January 2012. You also see that LDOMINA1 initiated the non-recurring cost allocation, and that it was approved in the department by KWOLFE3, and because it is posting to a sponsored program, it ended with approval in Financial Research Compliance with SSTEWAR6. 10-12 Reconciliation Guide