FI108 Umoja Cost and Management Accounting Overview. Umoja Cost and Management Accounting Overview Version 13 1

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1 FI108 Umoja Cost and Management Accounting Overview Umoja Cost and Management Accounting Overview Version 13 Copyright Last Modified: United 14-Aug-13 Nations 1

2 Agenda Course Introduction Module 1: Umoja Cost and Management Accounting Module 2: Cost and Management Accounting Master Data Module 3: Cost and Management Accounting Processes Course Summary Course Assessment Course Survey 2

3 Course Overview The purpose of the Umoja Cost and Management Accounting Overview course is to introduce the cost and management accounting concepts and corresponding Master Data elements. This course will also explain how cost and management accounting can be used in efficient management of resources. Prerequisite Review You should have completed the following prerequisite courses: Umoja Overview Umoja Master Data & Coding Block Overview Course Duration: 2 hours 3

4 Course Objectives After completing this course, you will be able to: Describe the Cost and Management Accounting process Describe the benefits of cost and management accounting Name the elements that constitute the cost and management accounting Master Data Describe the purpose of cost allocations 4

5 Agenda Course Introduction Module 1: Umoja Cost and Management Accounting Module 2: Cost and Management Accounting Master Data Module 3: Cost and Management Accounting Processes Course Summary Course Assessment Course Survey 5

6 Module 1 Objectives After completing this module, you will be able to: List the key roles and responsibilities in cost and management accounting Describe the benefits of Umoja cost and management accounting Describe the Cost and Management Accounting process within Umoja 6

7 Key Terminology Cost Controlling Key Term Cost and Management Accounting Financial Accounting Description Expense associated with materials and services used to produce a programme or activity. A cost can be: Cash relevant or non-cash relevant (such as, depreciation) Budget consuming (real) or non-budget consuming (statistical) Module within Umoja ECC that consists of all Master Data, configuration and reporting required to analyze costs and revenues of the organization A branch of accounting that establishes the actual cost (or true cost) of operations, products or services and the analysis of variances. This information is used by the management to plan, evaluate, control and ensure the appropriate use and accountability of resources within an entity A branch of accounting that involves preparing and publishing financial statements for disclosure to stakeholders 7

8 Roles & Responsibilities The following roles are involved in the Umoja Cost and Management Accounting process: Financial Accounting Senior User Creates and maintains cost and management accounting allocation rules Runs the batch that will post the billing documents coming from the Sales and Distribution module Inserts a long-text description for incoming payments for voluntary contributions Creates and posts General Ledger (G/L) documents that are not subject to workflow, such as accruals, reversals and recurring entries Clears G/L documents 8

9 Roles & Responsibilities The following roles are involved in the Umoja Cost and Management Accounting process: Financial Accounting Closing User Responsible for the Year-End Closing process to close the financial year at the company code level Runs the fixed asset depreciation and financial accounting revaluation, which is an International Public Sector Accounting Standards (IPSAS) requirement Reclassifies the receivables and payables and balances the carryforward processes on an annual basis Manages the Special Period documents Runs the revaluation of Purchase Orders (POs) and earmarked funds, as well as other closing processes in Funds Management 9

10 Umoja Cost & Management Accounting The cost and management accounting concept is new to UN. Umoja cost and management accounting enables the following: It lays the foundation for results-based management It generates information for internal users, specifically for internal cost recovery It allows UN to optimize the process of cost management, enable expense prediction and assist in key decision making 10

11 Benefits of Umoja Cost & Management Accounting Unlike legacy systems, Umoja provides the capability to capture expenditures as they are incurred. This enhances the organization s ability to have a better view of costs and provides a basis to make informed decisions for efficient use of limited resources. Cost management will result in efficient utilization of resources and enhance reporting to the Senior Management and legislative bodies Organization will be able to recover full cost for the services provided to outside/internal entities and allocate costs to voluntary funded projects Umoja s cost measurements will enable better budgeting and reporting on costs for each component/programme. It will lead to result-based management It will standardize the cost allocations across the organization 11

12 Cost & Management Accounting: Example The following is an example of how cost accounting could be used in the organization for management reporting and decision making. Example Throughout the fiscal year 2012, the Aviation section operates air services in the mission. Using the Controlling module, the section will allocate the cost of helicopter hours to military, political and administration, enabling ascertainment of the true cost of those components. Similarly, for training conducted by the Integrated Mission Training Center (IMTC), training costs could be allocated from IMTC to various sections/components who utilized the training services. The usage and application of cost and management accounting will be decided by the organization based on the Management s reporting needs. 12

13 Cost & Management Accounting: End to End Process The Cost and Management Accounting process begins with the maintenance of Master Data. Cost allocation methods are then used to move costs from the section that collected the cost to the section that incurred the cost. The end-to-end Cost and Management Accounting process flow is depicted below: Maintain Master Data Analyze Cost Allocation Requirement Update CO Master Data Perform Cost Allocation Post Allocation/ Update Monthend Activity Schedule 13

14 Umoja Main Ledgers The Controlling Ledger is integrated with the other three Umoja ledgers. These ledgers are linked to each other through the coding block. The four Umoja ledgers are: General Ledger (maintained in the Financial Accounting module) Budgetary Ledger (maintained in the Funds Management module) Grants Ledger (maintained in the Grants Management module) Controlling Ledger (maintained in the Controlling module) General Ledger (G/L) The G/L only records actual postings. Every financial transaction conducted in Umoja has a corresponding posting within the G/L. Budgetary Ledger The Budgetary Ledger records budgetrelevant transactions such as budget allotments, budget consumption, etc. Grants Ledger The Grants Ledger records grantrelevant transactions (trust funds). Controlling Ledger The Controlling Ledger records postings used for internal cost allocation. 14

15 Umoja Controlling Module Cost accounting is undertaken in the Controlling module of Umoja. This module Captures the costs as they are incurred Is highly integrated with Financial Accounting (Expenses entered into the G/L are automatically posted to the Controlling Ledger) Is integrated with Funds Management and Grants Management enabling simultaneous entries in these modules Allows the organization to move costs internally known as allocate costs, to the responsible programmes, components and operations to ascertain their trust cost of operation 15

16 Postings to Controlling Ledger The postings to the Controlling Ledger also originate from other modules. The diagram below illustrates the postings within Umoja. PS Project Systems MM/SRM Material Management SD Sales and Distributions RE Real Estate Progen Actual Postings Galileo FI Financial Accounting Umoja ECC CO Controlling (Cost Accntg) FM Funds Management GM Grants Management 16

17 Flow of Financial Information The diagram below explains the type of entries that are posted in various modules. In Controlling only the internal cost allocations are initiated, which are then posted to other modules. Accounting transactions are always entered into FI Revenue and expense transactions FI Financial Accounting Balance Sheet transactions CO Controlling (Cost Accntg) GM Grants Management Internal cost allocations FM Funds Management Budget transactions are only entered into FM and GM. GM only covers budget for voluntary contributions 17

18 Controlling Ledger Posting Example Here is an example of the postings created in various ledgers when purchasing goods from a vendor: Procure to Pay Process 1. Purchase Requisition FI FM CO No Posting Pre-commitment No Posting 2. PO from Req. No Posting Commitment No Posting 3. Goods / Services Receipt(GR) DR Expense CR GR/IR Clearing Expenditure with GR status Actual 4. Invoice Receipt (GR) DR GR/IR Clearing CR Vendor Expenditure with invoice status Update expense if required 5. Payment DR Vendor CR Cash and Bank Expenditure with payment status No Postings 18

19 Learning Checkpoint 1 Which of the following are the benefits of Umoja cost and management accounting? Select all that apply. A. Standardization of cost allocation processes across the organization B. Efficient utilization of resources C. Decreased accountability D. Indirect integration with Supply Chain/Procurement/Logistics E. Indirect integration with FI, FM and GM processes 19

20 Learning Checkpoint 1 Which of the following are the benefits of Umoja cost and management accounting? Select all that apply. A. Standardization of cost allocation processes across the organization B. Efficient utilization of resources C. Decreased accountability D. Indirect integration with Supply Chain/Procurement/Logistics E. Indirect integration with FI, FM and GM processes Options A and B are the correct answers. Standardization of cost allocation processes and efficient utilization of resources are the benefits of Umoja cost and management accounting. 20

21 Learning Checkpoint 2 Where do the financial postings in the CO module come from? Select the correct option. A. GM Module B. FI Module C. FM Module D. Cash Accounting Module 21

22 Learning Checkpoint 2 Where do the financial postings in the CO module come from? Select the correct option. A. GM Module B. FI Module C. FM Module D. Cash Accounting Module Option B is the correct answer. The actual postings in the CO module come from the FI module. 22

23 Module 1 Summary The key points covered in this module are listed below: Umoja cost and management accounting allows UN to optimize the process of cost management, enable expense prediction and assist in key decision making The CO module maintains the Controlling Ledger for cost and management accounting purposes The CO module allows the user to move costs internally, or allocate costs, to the responsible programmes, components and operations to show their trust cost The actual financial posting is done in FI. Corresponding elements are created in CO, FM and GM 23

24 Agenda Course Introduction Module 1: Umoja Cost and Management Accounting Module 2: Cost and Management Accounting Master Data Module 3: Cost and Management Accounting Processes Course Summary Course Assessment Course Survey 24

25 Module 2 Objectives After completing this module, you will be able to: Describe the elements that constitute Cost and Management Accounting Master Data 25

26 Key Terminology Key Term Cost Element Cost Object Description A cost or revenue item that is linked one-for-one to an expense or revenue G/L account. It is divided into primary cost element and secondary cost element. A primary cost element originates as a G/L account A secondary cost element is used only for secondary cost allocations within the CO module An object within CO that collects costs and revenues, such as: Cost Center: Identifies the areas of ongoing cost responsibility within an organization s overall organizational structure Internal Order: Collects costs and revenues of a specific event or simple project that has defined start and end dates, is usually temporary (unique) in nature and where costs should be segregated from other events or on-going operations to enable more detailed monitoring WBSE (Work Breakdown Structure Element): Represents a project with its structure (Covered in the Umoja Project Management course). 26

27 Key Terminology Key Term Profit Center Activity Type Activity Rate Statistical Key Figure Description It is an attribute of cost objects (Cost Center, Internal Order, WBSE) that allows reporting of costs by organizational function (for example, Medical, HR and IT). In revenue-producing areas, it supports reporting on product and services. It is a form of productive output by a cost center having a fixed rate per unit used for allocating costs of internal activities from the providers of the activities to the users of the activities. It is a rate that calculates the cost of performing an activity type. All rates in Umoja are defined in USD. This refers Is a quantity (for example, helicopter hours or square meters in a building). It can be used for reporting purposes or for cost allocations. 27

28 Master Data Review The diagram below illustrates the various cost and management accounting Master Data elements. There are a separate set of users who maintain and update the Master Data. Day-to-day data that depends on accurate master data E.g. Cost Allocations Key Reference Data Master Data Defines system bounds Defines system bounds E.g. Controlling Currency E.g. Controlling Area, (USD) Controlling Currency (USD) Fundamental business data common and applicable across UN E.g. Cost Elements, Cost Objects, Profit Centers Only as good as underlying information E.g. Operational, Statutory Transactional Data (Documents) 28

29 Master Data: Cost Element Cost Element Cost Center Internal Order Profit Center A cost element represents a cost or revenue item. There are two types of cost elements in CO: Primary cost elements are linked one-to-one to revenue and expense accounts from FI. It originates as a G/L account. For example, a mission hires a consultant through IMTC to provide training on handling hazardous goods to Aviation and MOVCON sections. The cost of this service is charged to the G/L account Training Consultant Substantive Skills in the IMTC cost center. The account exists in CO as a primary cost element. Secondary cost elements only exist in CO, and are used for internal transactions. They may not have a G/L counterpart. For example, staff members from mission Aviation and MOVCON sections attended the above training. UN will internally reallocate the training cost from IMTC to Aviation and MOVCON sections based on the number of people from each section. This can be done using a secondary cost element account Internal Allocation Statistical Training. This would reflect the true cost incurred by both the sections. 29

30 Master Data: Cost Element Cost Element Cost Center Internal Order Profit Center The cost that is captured as secondary cost elements is either real (budget consuming) or statistical (non-budget consuming). Real posting consumes a budget in Funds Management (FM) Statistical posting does not consume a budget in FM. In FM these postings are only for information purposes and cannot be further allocated. Statistical posting uses cost elements and FM commitment items that end in the letter S. For example, if IMTC allocates the previous training cost to Aviation and MOVCON sections, this can be done regardless of whether Aviation/MOVCON have the budget to receive this cost. A statistical (non-budget consuming) posting reflects the true cost of managing these sections 30

31 FI & Corresponding CO Accounts The FI accounts and corresponding CO accounts are as follows: GL Accounts in FI Cost Elements in CO Balance Sheet Accounts 1xxxxxxx Current Assets 2xxxxxxx Non Cur Assets 3xxxxxxx Cur Liabilities 4xxxxxxx Non Cur Liab. 5xxxxxxx Net Assets Revenue and Expense Accounts 6xxxxxxx Revenue 7xxxxxxx Expense Primary Cost Element 6xxxxxxx Revenue 7xxxxxxx Expense Secondary Cost Element 85xxxxxx-budget consuming 85xxxxxS-non budget consuming 31

32 Introduction to Cost Object Cost Element Cost Center Internal Order Profit Center While the cost element defines the cost incurred, the cost object explains who is responsible for incurring the cost. It is important to understand that every expense posting in FI must go to a cost object in CO. The following cost objects, which are Master Data elements, are used in Umoja: Cost Center Internal Order WBSE (Covered in the Umoja Project Management course) Though these cost objects are essentially cost collectors, Umoja also uses them to collect revenue. This is because Umoja does not define separate revenue collectors, given UN s limited revenue-generating activities. 32

33 Master Data: Cost Center Cost Element Cost Center Internal Order Profit Center A cost center represents an area/unit of the organization that collect costs and revenues of on-going operations or functions. It is: An organization unit with financial responsibility for costs and budgets A cost collector for more detailed cost monitoring requirements within an organizational unit A service or product of internal service providers In our previous example, IMTC is responsible for training costs. IMTC is an example of a cost center. A cost center can be as small as UNIFIL Aviation, or as large as the mission UNIFIL. Cost centers are part of a cost center hierarchy that follows the organizational hierarchy. 33

34 Cost Center Example Below is an example of the UNIFIL cost centers and the cost center groups: 34

35 Master Data: Internal Order Cost Element Cost Center Internal Order Profit Center An internal order is always linked to a cost center. Within Umoja, an internal order is used: To collect costs and revenues for short-term events, one-off events or projects To collect costs for small capital projects for subsequent capitalization As a cost object to capture costs of support service customers For small grant-funded activities (otherwise WBSEs are used) 35

36 Master Data: Internal Order Example Cost Element Cost Center Internal Order Profit Center Various examples where internal order can be used are: Specific task/job of a department Voluntary funded events or projects Capital projects Specific task/job Capital projects Costs Internal Order Cost Center 36

37 Master Data: Profit Center Cost Element Cost Center Internal Order Profit Center While a cost center is the primary cost and revenue collector, Umoja uses a profit center for a different purpose. A profit center: Represents, at a higher level, an organizational function (for example, Transport, Supply, or Medical) Is linked to similar functional cost objects (cost center, internal order and WBSE) Supports reporting on product and services in revenue-producing areas In a similar way to cost centers, profit centers are part of a profit center hierarchy. 37

38 Master Data: Profit Center Example For example, a report of the profit center Supply allows the user to selectively view all cost centers at UN that are categorized as a Finance cost center. This provides the user with another way to view information. Supply Profit Center Cost Centers UNIFIL Supply UNFICYP Supply UNAMID Supply UNMISS Supply 38

39 Master Data: Activity Type Activity Type Statistical Key Figure An activity type presents a quantity-based service provided by or managed by a cost center. It: Describes the activity carried out by a cost center (for example, helicopter service provided by UNIFIL Aviation section, space provided by Engineering section) Is measured in units of time or quantity (for example, helicopter hours, square meters) for a defined period of time Has a fixed activity rate (for example, dollar amount per hour, dollar mount per square meter) for allocating costs to the service recipient Is calculated by multiplying the activity quantity with the activity rate (see activity type allocation) Cost Activity Quantity Activity Rate 39

40 Master Data: Statistical Key Figure Activity Type Statistical Key Figure A Statistical Key Figure (SKF): Is a quantity (for example, helicopter hours or square meters in a building) Is used to allocate costs during the month-end process. Quantities are first posted as a SKF (e.g. number of helicopter hours as they are incurred). At the end of the month, costs are calculated and allocated to the appropriate cost center It can be used for non-financial information that needs to be reported and is not recorded in any other system or required for cost allocation. For example, reporting the number of helicopter hours flown for a particular month at UNIFIL Aviation Cost SKF Activity Rate 40

41 CO Master Data Integration Across Modules As you recall from the Master Data and Coding Block course, the Master Data elements from various modules are linked to each other. Simultaneous Posting and Derivation Umoja uses the concept of simultaneous posting in various modules. While all modules get updated in real time, they store the data differently for different analysis. As every module has different fields for different analytical reasons, Umoja uses a functionality called derivation to populate the dependent fields from the source field. 41

42 Coding Block Elements Simultaneous Posting & Derivation: Integration Below are the coding block elements and corresponding entries in FI, CO, FM and GM: Module FI Financial Acct CO Controlling FM Funds Mgmt GM Grants Mgmt ENTERPRISE STRUCTURE CODE COMPANY CODE CO AREA FM AREA GL acc related GL Account Cost Element Commitment Item Sponsored Class Funding Source Related Organizational and activity related Programmatic Fund Fund Fund Fund Grant Grant Grant Grant Business Area Segment Cost Center (org structure: Department, Division, Unit) Internal Order Work Breakdown Structure Profit Center Funds Center Funded Program Funds Center Sponsored Program Functional Area Functional Area Functional Area Functional Area Financial Period Related Fiscal Year Fiscal Year Fiscal Year Grant Validity Period Budget Period Budget Period Budget Period Budget Period Legend: FI Entry Derived Derived or entered Underlined items are owned by corresponding module 42

43 Putting it Together Using the earlier example, we would like to calculate the true cost of a mission s various sections and components, for the fiscal year We can start to piece together the information using the Master Data elements. In 2012, the various mission cost centers collected following costs: Helicopter Expense Generator Fuel Expense Training Expense The above costs need to be moved to the responsible cost centers to ascertain operational cost of various components. The next module will cover methods to move these costs. This is known as cost allocation. 43

44 Learning Checkpoint 1 Which of the following are cost objects for UN? Select the correct option. A. Cost Center B. Internal Order C. Work Breakdown Structure Element (WBSE) D. Cost Element E. A & B F. A, B & C 44

45 Learning Checkpoint 1 Which of the following are cost objects for UN? Select the correct option. A. Cost Center B. Internal Order C. Work Breakdown Structure Element (WBSE) D. Cost Element E. A & B F. A, B & C Option F is the correct answer. Cost center, internal order and WBSE are the cost objects for UN. 45

46 Learning Checkpoint 2 A/an represents a form of productive output by a cost center having a fixed rate per unit used for allocating costs of internal activities. Fill in the blank with the correct option. A. Derivative B. Activity Type C. Activity Rate D. Cost Object 46

47 Learning Checkpoint 2 A/an represents a form of productive output by a cost center having a fixed rate per unit used for allocating costs of internal activities. Fill in the blank with the correct option. A. Derivative B. Activity Type C. Activity Rate D. Cost Object Option B is the correct answer. An activity type represents a form of productive output by a cost center having a fixed rate per unit used for allocating costs of internal activities. 47

48 Module 2 Summary The key points covered in this module are listed below: Primary cost element mirrors the income statement account posting from the FI module Secondary cost element is used for CO internal transactions only and does not have a G/L account counterpart The cost that is captured as secondary cost elements is either real posting (budgetconsuming) or statistical posting (non-budget consuming) Cost objects are used to collect costs and revenues An activity type presents a quantity-based service provided by or managed by a cost center A Statistical Key Figure (SKF) is a quantity used to allocate costs during the monthend process 48

49 Agenda Course Introduction Module 1: Umoja Cost and Management Accounting Module 2: Cost and Management Accounting Master Data Module 3: Cost and Management Accounting Processes Course Summary Course Assessment Course Survey 49

50 Module 3 Objectives After completing this module, you will be able to: Define the types of cost allocation transactions Define the types of cost allocation cycles 50

51 Key Terminology Key Term Cost Allocation Cost Allocation Cycle Description It is a general term for CO transactions, which transfer costs from a sender cost object to a receiver cost object, including manual cost allocation, direct activity allocation and cost allocation cycles. Cost allocations may cross into FI in case certain FI dimensions are crossed (see CO/FI integration). A cost allocation where multiple senders allocate certain costs to multiple receivers based on the cost drivers or statistical key figures, including indirect activity allocation, assessment cycle and distribution cycle. It is normally run as part of the monthend closing process. 51

52 Introduction to Cost Allocations Cost allocations are used to transfer costs from a sender cost object to a receiver cost object. Umoja uses three types of allocations: Manual Cost Allocation: An amount-based allocation where the specific amount to allocate from the cost sender is entered Direct Activity Allocation: A quantity-based allocation where activity amounts are entered for a certain activity type Cost Allocation Cycle: Multiple senders allocate certain costs to multiple receivers based on cost drivers or statistical key figures. It is normally run as part of the month-end closing process Cost allocations may cross into FI in case certain FI dimensions are crossed. This will be explained in the Level 3 course. 52

53 Manual Cost Allocation Manual cost allocation enables entities to do amount-based cost and management accounting within their entity (for example, to move costs to the responsible cost object). A manual cost allocation is a one-time allocation that credits one cost sender and debits one cost receiver with a specific amount. Example: Mission Aviation incurred $6,000 of fuel expense that needs to be moved to Military cost center for patrolling flights. Military cost center is a secondary cost element as it does not have budget, yet is real user of the fuel consumed. Manual Cost Allocation Cost Sender Fuel Expense Credit $6,000 Aviation Cost Center Statistical Secondary Cost Element Cost Receiver Fuel Expense Debit $6,000 Military Cost Center 53

54 Direct Activity Allocation Direct activity allocation is a quantity-based allocation where actual quantities are used. This quantity multiplied by the pre-determined activity rate is then charged to a receiver using the defined secondary cost element. Cost Activity Quantity Activity Rate Example: Flight hours used by military component for patrol flights are used to calculated a one-time, direct activity allocation. Cost sender: Mission Aviation Cost receiver: Mission Military Activity Type: Helicopter flight hours Actual hours flown (Activity quantity): 20 hours Pre-determined flight hour (Activity) Rate: $1,000/hr 54

55 Direct Activity Allocation Example Direct Activity Allocation Cost Sender Aviation Cost Center Cost Receiver Military Cost Center Helicopter Expense Activity Rate: $1,000/hr Secondary Cost Element Helicopter Expense Activity Quantity: 20 hours Credit $20,000 Debit $20,000 55

56 Introduction to Cost Allocation Cycles A cost allocation cycle is used where multiple senders allocate certain costs to multiple receivers. It can be a one-time post or a periodic run as a monthly process. In UN, these allocations are performed during the month-end closing process. Indirect Activity Allocation A method used to automatically allocate actual activities for multiple activity users or receivers Assessment Cycle A method of allocation used when the composite cost amount is transferred to the receiver. Cost drivers may be already posted costs, SKF s, fixed percentages or in proportion to service received. These postings are done on a secondary cost element Distribution Cycle A method of allocation similar to Assessment Cycle, using a primary cost element 56

57 Indirect Activity Allocation An indirect activity allocation is used to automatically allocate activities for many activity receivers (instead of entering a direct activity allocation for each receiver). During a certain month, the activity quantities are first captured as an SKF. At the end of the month, costs are calculated and allocated to the appropriate cost centers. Cost SKF Activity Rate Example: Helicopter hours for military patrol flights are recorded during a month as an SKF. During the month-end closing processes, the hours are used to calculated the indirect activity allocation. Cost sender: Mission Aviation Cost receivers: Mission Political and Military Activity Type: Helicopter services Statistical Key Figure that captures the activity quantity Military: 80 hours; Political 20 hours Activity Rate: $1000/hr 57

58 Indirect Activity Allocation Example Indirect Activity Allocation Cost Sender Aviation Cost Center Cost Receiver Political & Civil Military Cost Centers Helicopter Expense Activity Rate: $1,000/hr 20 hours Political and Civil Debit $20,000 Credit $100, hours Military Debit $80,000 58

59 Assessment Cycle (Percentage) Assessment cycle moves the cost from senders to receivers based on cost drivers. Allocation rules may be based on an amount, Statistical Key Figures, fixed percentages or in proportion to service received. These postings are done on a secondary cost element only. Example: $6,000 in generator fuel expense is to be allocated from the cost sender based on a pre-calculated percentage. Cost each office receives Total transport expense Percentage Cost sender: Mission Engineering Cost receivers: Mission Military and Humanitarian Expense account: Generator Fuel Expense Activity percentage Military: 66% Humanitarian: 33% Total cost: $6,000 59

60 Assessment Cycle (Percentage) Example Assessment Cycle Cost Sender Engineering Cost Center Cost Receivers Military Humanitarian Cost Centers Generator Fuel Expense Credit $6,000 66% 33% Generator Fuel Expense Debit $4,000 Generator Fuel Expense Debit $2,000 60

61 Assessment Cycle (Proportion) Alternatively, the assessment cycle can be performed in proportion to service received. Example: The IMTC charges training expense based on the number of people from each section who took induction training. $6,000 in training expense is to be allocated based on the proportion of people who attended the training. Cost each office receives Total training expense # of people Total # of people Cost sender: Integrated Mission Training Center Cost receiver: Mission Supply and Human Resources Expense account: Training Expense Activity proportion Supply: 40 people (out of 60 people) Human resources: 20 people (out of 60 people) Total cost: $6,000 61

62 Assessment Cycle (Proportion) Example Assessment Cycle Cost Sender Integrated Mission Training Cost Receivers Supply Human Resources Cost Centers Training Expense Credit $6, people 20 people Training Expense Debit $4,000 Training Expense Debit $2,000 62

63 Distribution Cycle The distribution cycle uses the same allocation method as assessment cycles. Distribution cycles must use primary cost elements. This retains the original posting details. Example: A distribution cycle is used by UNHQ to collect staff assessment expense from various missions. Cost sender: UNIFIL, UNAMID Cost receiver: UNHQ Expense Account: Staff Assessment Expense Primary cost: $10,000 UNIFIL: $6,000 International Staff = $1,000 Local Staff = $5,000 UNAMID: $4,000 International Staff = $1,000 Local Staff = $3,000 63

64 Distribution Cycle Example Distribution Cycle Cost Senders UNIFIL UNAMID Cost Receiver UNHQ UNIFIL Int l Staff = $1,000 Local Staff = $5,000 Activity Rate: $1000/hr Credit $6,000 UNAMID Int l Staff = $1,000 Local Staff = $3,000 Primary Cost Element Staffing Expense Int l = $2,000 Local Staff = $8,000 Debit $10,000 Credit $4,000 64

65 Cost Allocations Summary Following is a summary of the Cost Allocation methods in Controlling: Allocation Name Description Cycle Manual Cost Allocation Direct Activity Allocation Amount-based allocation Specific amount to recover is entered Quantity-based allocation Activity quantities are entered for a certain activity type No No Primary/Secondary Cost Element Secondary Secondary Indirect Activity Allocation Allocate actual activities for multiple activity users or receivers Yes Secondary Assessment Cycle Cost drivers may be already posted costs, Statistical Key Figures, fixed percentages or in proportion to service received Yes Secondary Distribution Cycle Similar to Assessment Cycle Allocate using Primary Cost Element Yes Primary 65

66 Putting it Together Returning to our original task to calculate the true cost of a mission s various sections and components, for the fiscal year 2012, we allocated the costs using Master Data elements and Umoja cost allocation methods. In 2012, the mission cost centers collected and allocated the following: Helicopter Expense Generator Fuel Expense Training Expense The various costs have been calculated and allocated to/from various sections/components using cost allocations. At the end of 2012, the user can generate a report on each section/component on its true operational cost. In conclusion, Umoja cost and management accounting is a new and powerful tool that will transform the way UN performs cost measurements and control. As UN incorporates these new changes, policies will become more refined. 66

67 Reports An example of a report used in cost and management accounting is: Cost Center Line items This report lists, for a certain posting period, cost centers, cost element and the corresponding amount allocate to/from each cost center. For example, for the fiscal year 2012, this report can display all cost centers in the UNIFIL business area and the total cost accumulated on each cost center. 67

68 Learning Checkpoint 1 Direct activity allocation is a -based allocation Fill in the blank with the correct option. A. Quality B. Quantity C. Amount D. Product 68

69 Learning Checkpoint 1 Direct activity allocation is a -based allocation Fill in the blank with the correct option. A. Quality B. Quantity C. Amount D. Product Option B is the correct answer. Direct activity allocation is a quantity-based allocation. 69

70 Learning Checkpoint 2 Which one of the following is an amount-based allocation where the specific amount to recover from the cost receiver is entered, and can only be statistical? Select the correct option. A. Manual Cost Allocation B. Indirect Activity Allocation C. Direct activity allocation D. Distribution Cycle 70

71 Learning Checkpoint 2 Which one of the following is an amount-based allocation where the specific amount to recover from the cost receiver is entered, and can only be statistical? Select the correct option. A. Manual Cost Allocation B. Indirect Activity Allocation C. Direct activity allocation D. Distribution Cycle Option A is the correct answer. Manual Cost Allocation is the amount-based allocation where the specific amount to recover from the cost receiver is entered 71

72 Module 3 Summary The key points covered in this module are listed below: Cost allocation transactions credit the sender, debit the receiver and may create a financial accounting transaction if a balancing dimension is crossed A cost allocation cycle is used where multiple senders allocate certain costs to multiple receivers. It can be a one-time post or run as a monthly process 72

73 Agenda Course Introduction Module 1: Umoja Cost and Management Accounting Module 2: Cost and Management Accounting Master Data Module 3: Cost and Management Accounting Processes Course Summary Course Assessment Course Survey 73

74 Course Summary The key points covered in this course are listed below: Umoja cost and management accounting allows UN to optimize the process of cost management, enable expense prediction and assist in key decision making The CO module maintains the Controlling Ledger for cost and management accounting purposes The CO module allows the user to move costs internally, or allocate costs, to the responsible programmes, components and operations to show their trust cost There are several important Master Data elements in CO, for example, cost element, cost object, profit center, activity type and SKF A cost allocation is a one-time allocation that credits one cost sender and debits one cost receiver A cost allocation cycle is used where multiple senders allocate certain costs to multiple receivers. It can be a one-time post or run as a monthly process 74

75 Agenda Course Introduction Module 1: Umoja Cost and Management Accounting Module 2: Cost and Management Accounting Master Data Module 3: Cost and Management Accounting Processes Course Summary Course Assessment Course Survey 75

76 Course Assessment Now that you have completed all the modules in this course, you can test your knowledge by completing the Course Assessment. To receive credit for completing this course, you must pass this assessment with a minimum score of 90%. To complete the assessment you must return to the Learning Management System: 1. Log into Inspira 2. Navigate to Main Menu -> Self-Service -> Learning -> My Learning 3. Search for the name of the course under the My Learning Activities section 4. Click on the Start link of the course assessment 5. Click the Submit button once you have completed the assessment 76

77 Agenda Course Introduction Module 1: Umoja Cost and Management Accounting Module 2: Cost and Management Accounting Master Data Module 3: Cost and Management Accounting Processes Course Summary Course Assessment Course Survey 77

78 Course Survey Your feedback is important to the continuous improvement of our training program. Please complete the evaluation for this course using the following steps: 1. Log into Inspira 2. Navigate to Main Menu -> Self-Service -> Learning -> My Learning 3. Search for the name of the course under the My Learning Activities section 4. Click on the Start link of the course survey 5. Click the Submit button once you have completed the course survey 78

79 Congratulations! You have successfully completed the Umoja Cost and Management Accounting Overview course. 79