Cost Accounting is the tracking of accounting events that are associated with a special purpose. The purpose could be defined by funding received from an outside entity (for example, a Federal award or third-party award) or the purpose could be grouping costs together for internally defined reasons (for example, for a special spending initiative or specific costs incurred to provide a service). In many cases, Cost Accounting activity is tracked for purposes of billing an outside entity to reclaim some or all of the costs (reimbursement).
Cost Accounting in Arizona Advantage encompasses the establishment of cost structures for and reimbursements associated with projects and grants.
Cost Structures are established to provide a means to track expenditures and revenues associated with projects and grants. Projects are internally and externally funded. Grants are externally funded. Both can have a timeframe ranging from a few months to several years. Project and grant accounting in Arizona Advantage supports the creation and financial management of projects and grants as part of the cost accounting process, using cost structures, and provides all of the functionality necessary for the management and prompt reimbursement of project and grant costs. Some key functions and features include:
- Internal governmental billing (tracking and billing of internal customer type work).
- Identification of funding participation.
- Redirection of accounting journal postings to the proper funding through the use of the front- end split process.
- Budget establishment and maintenance.
- Periodic tracking and reporting.
- Overhead rate process.
FHWA (Federal Highway Administration) Billing tracks reimbursements for grants funded by the FHWA and generates the billing file to be submitted for reimbursement. FHWA Billing is a process used by Arizona Department of Transportation and:
- Records FHWA billing related receivables of the statewide financial system.
- Creates FHWA billing in report only format to verify billing correctness before generating the FHWA billing file.
- Allows for the generation of both receivable and cash receipts as a result of FHWA billing without manual intervention.
- Utilizes an automated proven FHWA billing “cleanup” process in the event of an error in the final FHWA billing file rather than manual file adjustments.
Cost Allocation allows a flexible, end-user-defined allocation of costs or revenues. Users define an allocation structure from which the system computes and posts the allocation of costs or revenues to the resulting accounting distributions (for example, Fund, Agency, Organization, Activity, Program, etc). The Cost Allocation method is driven by the concept of allocating costs and revenues from end-user-defined pool accounting distributions to end-user-defined base accounting distributions. At the time indirect costs are initially recorded in the system, the programs to which those costs should be recorded are not always known. Instead, those costs are initially recorded against 'pool’ accounting distributions. At a later stage, those costs can be re-allocated to the actual programs that should be charged.
Cost Accounting and Cost Allocation - Criteria for Measuring Success:
- Cost allocation processes are integrated with the general ledger and can be used to support financial management reporting (e.g. program cost accounting).
- Automatic generation of receivables and cash receipts for the reimbursable portion of expenditures associated with a grant or project.
- Projects are recorded and project transactions are processed in one system minimizing the use of manual spreadsheets and processes.
- Process to set-up multi-year projects with user defined periods that represent the project funding period exits.
Examples: How it might affect you …
|Current Process||Statewide Process|
|In AFIS, the project can only be setup at Project and Project Phase level and linked to PCA or Index to track the expenditure/revenue.||Arizona Advantage allows project setup for complex funding structures with unlimited number of funding sources and the ability to estimate costs for projects.|
|AFIS does not have the ability to allow users to enter a single funding stream that will expand into multiple funding lines based on a pre-established configuration. As a result, some agencies have developed various work-arounds which includes using systems other than AFIS to perform this function.||Arizona Advantage has an automated front-end split component that will streamline the processing of funding splits. Arizona Advantage allows a single accounting line containing Program/Phase Codes to create multiple posting lines based on front-end split configuration.|
|Receivable information related to FHWA bills is recorded and maintained in an external system and is not available within the central system.||Arizona Advantage calculates the FHWA receivable information within the application, generating receivable and cash receipt documents and tracking the receivable balances within Arizona Advantage.|