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Deltek Insight 2012: Interpreting the Statement of Indirect Expenses

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GCS Premier’s Statement of Indirect Expenses (SIE) is critical to fully understanding your indirect rates and rate structures. Attend this session and unlock the mysteries of the SIE! Advanced Level.

GCS Premier’s Statement of Indirect Expenses (SIE) is critical to fully understanding your indirect rates and rate structures. Attend this session and unlock the mysteries of the SIE! Advanced Level.

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  • Explain on a high level what the SIE report doesThey will have a handout of the SIE.
  • Talk on a high level about each of the components that we will go into further detail later in the session. Stay at a very high level. This is only to give them an idea of how to read the SIE and where things are located.Review the items that are included in the legend.Explain the baseThey don’t understand what the descriptions areMention that we will have a tip at the end to correct the descriptionsThey should be more specific on the descriptions in the contract suffix file
  • There are two ways to run the SIE. Co-Wide or Divisional. We will discuss when you will run each type. You don’t have both. You either have a Co-Wide setup or a Divisional setup. You should not be running both. This could give you inaccurate results in some cases.Talk about the options when running the report. Show them that the interpool allocation step is included in the Divisional pool report screen. Not sure why it is here but it is.Running the Co-Wide report is easy. If you have a Co-Wide rate setup you don’t have any detail questions to think about you just run the report.If you have a Divisional Indirect Rate Structure there is more to think about. You will likely have to run a Interdivsional and Interpool allocation before printing the Divisional SIE. We will talk about these steps as we go thru the presentation.
  • We hear this question a lot on support. If you are new to GCS Premier or Indirect Rate Calculations you may find yourself asking this question.To answer this question I thought we would use some examples.
  • Remind them that you can have 7 pools per division and you can have up to 99 division. Divisions are used to organize your company and build structure around the indirect rate calculation. This is what the diagram is representing.If you only have one Division then you have a Co-Wide setup. Pretty easy you just run the Co-wide option and don’t need to do anything else.
  • Same rate will be applied in each division.If this was our setup up what type of report would we run? Co-wide or Divisional? Co-Wide is the right answer.We have the same indirect rates across all divisions.If all the rates are the same across all divisions then you have a Co-Wide setup even if you have multiple divisions.You can collect (or charge) the pool costs to each division, the system doesn’t care where the costs are charged. When it runs the SIE it adds up all the costs across all the divisions. It will add up all the costs in each pool across all the divisions.Let’s take a look at another example.
  • In this setup we have the same number of divisions but something is different. Does anyone see any difference? The rates are not the same across all divisions. Hit the mouse to bring in the highlights.Look at the bolded items. Now we can see that each division has its own overhead rate. The rate is different in each division.Some of the rates are the same across all divisions but some rates are unique for each division.Now what type of report do you think we need to run? Co-Wide or Divisional? Divisional is the correct answer.
  • Make sure that if you are running a co-wide report and have multiple divisions that you have all the pools set up in division 1.Each pool number that uses a company-wide rate needs to also exist in Division 1 even if costs are not collected in the Division 1.
  • Talk thru the slide. Stress why you would collect the costs in one division. It makes it easier on the person charging the costs. They don’t have to break out the pool costs by division.Note: Interdivisional accounts are included in the rate calculations.
  • Let’s go back to one of our examples. This was our example of a Co-Wide setup. In this example let’s say we collected all the costs in Division 1. But we want the G/L or Income statement for the Navy and Air Force divisions to show their respective indirect costs. How do we do this?We could have charged the costs to those divisions to begin with but they would have been time consuming for the AP person and accountants. So we collected all the costs in division 1. Now we need to allocate some of those costs to div 2 and div 3. We need to perform an interdivisional allocation.
  • You will need to run this for each pool that you want to move costs to other divisions. Don’t forget to post the journal entries.In most cases you will check the box to include expenses charged to this pool in other divisions.Don’t post anything to the inter-divisional accounts. Only let the system post to these accounts.
  • Must set the accounts up in the COA. They all need to be unique. Type I accounts.
  • How many people understand what I mean when I say the tiering process? How many people understand that the concept of grouping like type costs?Fringe is applied to the OH labor and moved into the Fringe pool.Fringe is also applied to the G&A and B&P/IR&D labor and moved into the G&A pool.OH is applied to the B&P/IR&D labor and moved into the G&A pool.
  • Co-Wide – Optional. If they want to see the posting on the income statement they can run the inter-pool and post the JE’s.
  • You will see fringe being applied into the OH pool. This is the grouping of like-type costs. It’s the fringe that is being applied to the Comp overhead labor.Point out the overhead labor on the SIE.Another place you can track this back to is page two on the SIE. This is the base of the Fringe pool. In the base of the fringe pool you will see the Comp overhead labor. This labor gets fringe applied to it. You can trace this fringe from the base of the fringe pool into the overhead pool.
  • Talk about how the G&A pool gets tiering from the fringe pool and the overhead pool.
  • Focus on the tiering for the B&P labor.The steps we just went thru on the SIE outlining the tiering process are reflected on the income statement when you post the inter-pool journal entry.
  • How do we accomplish this tiering process on the SIE and post the amounts to the G/LWe run the inter-pool allocation step. Remember to post the JE’s.How does this affect the Income Statement – Maybe have an Income Statement example
  • Putting it all together. When do you run the inter-divisional and inter-pool allocations.Start with the Tier 1 pools and run an inter-divisional allocation.Then run an inter-pool allocation.Then run an inter-divisional allocation for the tier 2 pools.Then run an inter-pool allocation.Then run an inter-divisional allocation for the tier 3 pools.Remember to post the journal entries between each step.
  • Example on the SIE handout – This provides you with the rate variances for your company.Talk about the base of the target rateHow is this calculatedCustomers always ask why the bases are not the sameTalk about the revenue posting. The variance accounts are used for the posting.
  • Example on the handoutTalk about the base of the target rateHow is this calculatedCustomers always ask why the bases are not the same
  • The Contract Receivable variance account and the contract cost variance accounts are used to post the variances to the income statement and balance sheet.
  • Transcript

    • 1. Interpreting the Statement ofIndirect ExpensesStacey McCarver, DeltekGC-298
    • 2. Abstract GCS Premier’s Statement of Indirect Expenses (SIE)is critical to fully understanding your indirect rates and ratestructures. Attend this session and unlock the mysteries ofthe SIE! Topics on the agenda include a discussion on thedifferences between Company-Wide and Divisional Reports,tiering, variances and unabsorbed amounts. A Deltekexpert will provide tips and tricks and reveal the power behindthis valuable GCS Premier report.2 ©2012 Deltek, Inc. All Rights Reserved
    • 3. AgendaStatement of Indirect Expenses (SIE) OverviewCompany-Wide or Divisional SIE ReportInter-divisional AllocationsThe Tiering Process & Inter-pool AllocationsUnabsorbed AmountsTarget vs. Actual Rate ComparisonTIPS3 ©2012 Deltek, Inc. All Rights Reserved
    • 4. Statement of IndirectExpenses (SIE) Overview
    • 5. Statement of Indirect ExpensesWhat is the Statement of Indirect Expenses (SIE)?  A report that provides the calculations that derive your company’s indirect rates.Each pool contains two pages.  Page 1 – Detailed listing of all accounts assigned to the pool (the numerator). Basically this shows you the pool costs.  Page 2 - Shows what cost elements are included in the base (the denominator) and how the costs are applied. Basically this shows you the pool base.Pool Costs divided by Pool Base = Indirect Rate5 ©2012 Deltek, Inc. All Rights Reserved
    • 6. Statement of Indirect Expenses SIE Legend Section Line Color Company Wide or Divisional SIE Actual Costs Budgeted Costs Base Amounts Indirect Rate Applied Amounts Unabsorbed amounts Target vs. Actual variance Tiering6 ©2012 Deltek, Inc. All Rights Reserved
    • 7. Statement of Indirect Expenses Co-Wide SIE Divisional SIE7 ©2012 Deltek, Inc. All Rights Reserved
    • 8. Company-Wide orDivisional SIE Report
    • 9. Company-Wide or Divisional SIE ReportHow do I know if I should run the Co-Wide SIE or theDivisional SIE?9 ©2012 Deltek, Inc. All Rights Reserved
    • 10. Company-Wide or Divisional SIE Report Army-Div1 Fringe 32.0% Open Co OH 35.14% Cust OH 27.13% MH 5.32% Sub H 4.97% G&A 16.73%10 ©2012 Deltek, Inc. All Rights Reserved
    • 11. Company-Wide or Divisional SIE Report Army-Div1 Navy-Div2 Air Force-Div3 Fringe 32.0% Fringe 32.0% Fringe 32.0% Open Open Open Co OH 32.14% Co OH 32.14% Co OH 32.14% Cust OH 27.13% Cust OH 27.13% Cust OH 27.13% MH 5.32% MH 5.32% MH 5.32% Sub H 4.97% Sub H 4.97% Sub H 4.97% G&A 16.73% G&A 16.73% G&A 16.73%11 ©2012 Deltek, Inc. All Rights Reserved
    • 12. Company-Wide or Divisional SIE Report Army-Div1 Navy-Div2 Air Force-Div3 Fringe 35% Fringe 35% Fringe 35% Open Open Open HQ OH 76% HQ OH 76% HQ OH 76% Army OH 34% Navy OH 92% Air Force OH 88% Pentagon OH 45 % Open Edwards OH 56% M&S 3% M&S 3% M&S 3% G&A 14% G&A 14% G&A 14%12 ©2012 Deltek, Inc. All Rights Reserved
    • 13. Company-Wide or Divisional SIE ReportGeneral GuidelinesIf you only have 1 division - Co-Wide SIEIf you have multiple divisions and:  Rates are the same for all divisions – Co-Wide SIE  Rates vary by division – Divisional SIEWhen you run a Co-Wide SIE  Division 1’s pool structure is used as a template for entire company13 ©2012 Deltek, Inc. All Rights Reserved
    • 14. Inter-divisional Allocations
    • 15. Inter-divisional AllocationsWhat does the Inter-divisional allocation do?  The inter-divisional allocation transfers amounts from a pool in one division to all pools with the same pool number in other divisionsThe inter-divisional allocation is a horizontal allocation acrossdivisions.It allows you to collect pool costs in one division and allocatethem to other divisions in the G/L.JE’s are prepared. You must post these JE’sDoes my company need to perform these allocations?15 ©2012 Deltek, Inc. All Rights Reserved
    • 16. Inter-divisional Allocations Army-Div1 Navy-Div2 Air Force-Div3 Fringe 35% Fringe 35% Fringe 35% Open Open Open HQ OH 76% HQ OH 76% HQ OH 76% Offsite OH 43% Offsite OH 43% Offsite OH 43% Open Open Open M&S 3% M&S 3% M&S 3% G&A 14% G&A 14% G&A 14%16 ©2012 Deltek, Inc. All Rights Reserved
    • 17. Inter-divisional Allocations17 ©2012 Deltek, Inc. All Rights Reserved
    • 18. Inter-divisional Allocations18 ©2012 Deltek, Inc. All Rights Reserved
    • 19. The Tiering Process andInter-pool Allocations
    • 20. The Tiering ProcessTiering is a process used to group “Like Type Costs”GCS Premier offers 3 tiers  Lower pool numbers can tier to higher pool numbersTypical Tiering setup is:  Tier 1 – Fringe, pool numbers 1 - 2  Tier 2 – Overhead, pool numbers 3 - 6  Tier 3 – G&A, pool number 7Inter-pool JE’s are prepared to post the tiering amounts to theG/L.20 ©2012 Deltek, Inc. All Rights Reserved
    • 21. Inter-pool AllocationsDoes my company need to perform the inter-pool allocations?  If you have a Divisional SIE – Yes  If you have a Co-Wide SIE - Optional  If you want the tiering to be reflected on the Income Statement – YesThe inter-pool allocation transfers amounts between pools inthe same division  Think of it as a vertical allocationRemember to post the inter-pool journal entries21 ©2012 Deltek, Inc. All Rights Reserved
    • 22. Inter-pool Allocations Army-Div1 Fringe 35% Open HQ OH 76% Offsite OH 43% Open M&S 3% G&A 14%22 ©2012 Deltek, Inc. All Rights Reserved
    • 23. The Tiering Process Fringe is applied to Overhead Labor23 ©2012 Deltek, Inc. All Rights Reserved
    • 24. The Tiering Process Fringe is applied to G&A Labor Fringe & Overhead is applied to B&P Labor24 12/11/2012 ©2012 Deltek, Inc. All Rights Reserved
    • 25. 25 ©2012 Deltek, Inc. All Rights Reserved
    • 26. Inter-pool Allocations26 ©2012 Deltek, Inc. All Rights Reserved
    • 27. Inter-pool Allocations27 ©2012 Deltek, Inc. All Rights Reserved
    • 28. Inter-divisional & Inter-pool allocations Army-Div1 Navy-Div2 Air Force-Div3 Fringe 35% Fringe 35% Fringe 35% Open Open Open HQ OH 76% HQ OH 76% HQ OH 76% Army OH 34% Navy OH 92% Air Force OH 88% Pentagon OH 45 % Open Edwards OH 56% M&S 3% M&S 3% M&S 3% G&A 14% G&A 14% G&A 14%28 ©2012 Deltek, Inc. All Rights Reserved
    • 29. Unabsorbed Amounts &Target vs. Actual RateComparison
    • 30. Unabsorbed AmountsUnabsorbed amounts are on page 2 of the SIEOnly a concern if they are large amountsTruncating the rate to four decimal points creates small“unabsorbed” amounts SIE Legend Section Line Color Unabsorbed amounts Target vs. Actual variance30 ©2012 Deltek, Inc. All Rights Reserved
    • 31. Target vs. Actual Rate comparisonThis tells you what the rate variance is for each pool.  Located on the second page of each pool calculationWhy is the Pool Base different for the G&A Pool  See page 12When posting revenue the system will ask you if you want topost the variances to the IS and BS31 ©2012 Deltek, Inc. All Rights Reserved
    • 32. Target vs. Actual Rate comparison32 ©2012 Deltek, Inc. All Rights Reserved
    • 33. Target vs. Actual Rate comparison33 ©2012 Deltek, Inc. All Rights Reserved
    • 34. TipsDescriptions on the SIE Toggling between Co-Wide  Where do the descriptions come vs. Divisional SIE from?  Can you do this?  Identify /Change descriptions in  When it doesn’t make sense to the contract suffix file run both reports  Put the suffix number in the First run the inter-div description – i.e. Direct Labor 39 allocation then run the inter-Remember to reconcile the pool allocations by tierSIE back to your G/L each  Rate calculation should bemonth across-down-across-down- across34 ©2012 Deltek, Inc. All Rights Reserved
    • 35. Questions? www.twitter.com/deltek www.facebook.com/deltekinc www.linkedin.com/company/163414 www.youtube.com/user/deltekinc35 ©2012 Deltek, Inc. All Rights Reserved