FI108 Umoja Cost and Management Accounting Overview CBT v15 (4)

Copyright © United Nations

FI108 – Umoja Cost and Management Accounting Overview

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Umoja Cost and Management Accounting Overview – Version 15Last Modified: 09-March-15

Copyright © United NationsCopyright © United Nations

Agenda

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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



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

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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

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Agenda

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Course Introduction




Course Summary

Course Assessment

Course Survey



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

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Key Terminology

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Key Term Description

Cost

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)

ControllingModule within Umoja ECC that consists of all Master Data, configuration and reporting required to analyze costs and revenues of the organization

Cost and Management

Accounting

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

Financial Accounting A branch of accounting that involves preparing and publishing financial statements for disclosure to stakeholders


Roles & Responsibilities

The following roles are involved in the Umoja Cost and Management Accounting process:

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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




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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 carry-forward 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



The following Umoja Enterprise roles are involved in the Inventory Counting and Controlling process:

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Financial Accounting: Master Data Maintainer

Maintain Activity Type

• Defines secondary cost element to use for cost allocations

Maintains Statistical Key Figure

• Defines whether statistical key figures and values, to be posted are periodic or as of a certain point in time

Maintains Allocation Cycle

• Defines senders, receivers by activity type

Services Delivery: Master Data Maintainer

Enter Activity Type Rate

• Defines rate per cost centre, activity type and period



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Services Delivery: User

Enter Statistical Key Figure Data

• Defines statistical key figure value for each service receiver coding block

Financial Accounting: Support User (NEW ROLE)

Execute Allocation Cycle

• Allocates costs from senders to receivers


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

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Benefits of Umoja Cost & Management Accounting

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

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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 Accounting: Example

The following is an example of how cost accounting could be used in the organization for management reporting and decision making.

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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.


Cost & Management Accounting: End to End Process

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Maintain Master Data

Analyze Cost Allocation

Requirement

Update CO Master Data

Perform Cost Allocation

Post Allocation/ Update Month-

end Activity Schedule

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:


Umoja Main Ledgers

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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)

Budgetary Ledger

The G/L only records actual postings. Every financial transaction conducted in Umoja has a corresponding posting within the G/L.

The Budgetary Ledger records budget-relevant transactions such as budget allotments, budget consumption, etc.

Grants Ledger

The Grants Ledger records grant-relevant transactions (trust funds).

Controlling Ledger

The Controlling Ledger records postings used for internal cost allocation.


Umoja Controlling Module

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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


Postings to Controlling Ledger

The postings to the Controlling Ledger also originate from other modules. The diagram below illustrates the postings within Umoja.

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FIFinancial

Accounting

COControlling

(Cost Accntg)

FMFunds

Management

GMGrants

Management

PSProject Systems

MM/SRMMaterial

Management

SDSales and

Distributions

RE Real

Estate

Actual PostingsProgen Galileo

Umoja ECC


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.

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FIFinancial

Accounting

COControlling

(Cost Accntg)

FMFunds

Management

GMGrants

Management

Accounting transactions are always entered into FI

Revenue and expense transactions

Balance Sheet transactions

Budget transactions are only entered into FM and GM. GM

only covers budget for voluntary contributions

Internal cost allocations


Controlling Ledger Posting Example

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Procure-to-Pay Process

FI FM CO

1. Purchase Requisition

No Posting Pre-commitment No Posting

2. PO from Req. No Posting Commitment No Posting

3. Goods / Services Receipt(GR)

DR ExpenseCR GR/IR Clearing

Expenditure with GR status

Actual

4. Invoice Receipt (GR)

DR GR/IR ClearingCR Vendor

Expenditure with invoice status

Update expense if required

5. PaymentDR Vendor

CR Cash and BankExpenditure with payment status

No Postings

Here is an example of the postings created in various ledgers when purchasing goods from a vendor:


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

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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

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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.



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

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Where do the financial postings in the CO module come from?


A. GM Module

B. FI Module

C. FM Module

D. Cash Accounting Module

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Options B is the correct answer. The actual postings in the CO module come from the FI module.


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

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Agenda

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Course Introduction




Course Summary

Course Assessment

Course Survey



Module 2 Objectives


• Describe the elements that constitute Cost and Management Accounting Master Data

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Key Terminology

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Cost Element

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

Cost Object

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 courses).


Key Terminology

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Profit Center

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.

Activity TypeIt 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.

Activity Rate It is a rate that calculates the cost of performing an activity type. All rates in Umoja are defined in USD.

Statistical Key Figure

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.


Master Data Review

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The diagram below illustrates the various cost and management accounting Master Dataelements. There are a separate set of users who maintain and update the Master Data.

Defines system bounds

E.g. Controlling Area, Controlling Currency (USD)

Transactional Data (Documents)

Master Data

Key Reference

Data

Defines system bounds

E.g. Controlling Currency (USD)

Day to Day data that depends on accurate master data

E.g. Cost Allocations

Only as good as underlying information

E.g. Operational, Statutory

Fundamental business data common and applicable across UN

E.g. Cost Elements, Cost Objects, Profit Centers


Master Data: Cost Element

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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 74141030 “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 85021010 “Internal Allocation Statistical Training”. This would reflect the “true” cost incurred by both the sections.

Cost Element Cost Center Internal Order Profit Center


Master Data: Cost Element

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The cost that is captured as secondary cost elements is either real (budget consuming) orstatistical (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. Astatistical (non-budget consuming) posting reflects the true cost of managing these sections



FI & Corresponding CO Accounts

GL Accounts in FI Cost Elements in CO

Balance Sheet Accounts1xxxxxxx Current Assets2xxxxxxx Non Cur Assets3xxxxxxx Cur Liabilities4xxxxxxx Non Cur Liab.5xxxxxxx Net Assets

Revenue and Expense Accounts6xxxxxxx Revenue7xxxxxxx Expense

Primary Cost Element6xxxxxxx Revenue7xxxxxxx Expense

Secondary Cost Element85xxxxxx-budget consuming85xxxxxS-non budget consuming

The FI accounts and corresponding CO accounts are as follows:

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Introduction to Cost Object

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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 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.



Master Data: Cost Center

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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.



Cost Center Example

Below is an example of the UNIFIL cost centers and the cost center groups:

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Master Data: Internal Order

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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)



Master Data: Internal Order Example

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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


Master Data: Profit Center

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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.



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.

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UNIFIL Supply

UNFICYP Supply

UNAMID Supply

UNMISSSupply

SupplyProfit Center

Cost Centers


Master Data: Activity Type

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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)

Activity TypeStatistical Key

Figure

Cost Activity Quantity Activity Rate


Master Data: Statistical Key Figure

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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

Activity TypeStatistical Key

Figure

Cost SKF Activity Rate


CO Master Data Integration Across Modules

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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.

Simultaneous Posting and Derivation

As you recall from the Master Data and Coding Block course, the Master Data elements from various modules are linked to each other.


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 CODECOMPANY CODE CO AREA FM AREA

Co

din

g B

lock

Ele

men

ts

GL acc related GL Account Cost Element Commitment Item Sponsored Class

Funding Source Related

Fund Fund Fund Fund

Grant Grant Grant Grant

Organizational and activity related

Business AreaCost Center

(org structure: Department,Division, Unit)

Funds Center Funds Center

Internal Order Work Breakdown Structure

Funded Program Sponsored Program

Profit Center

ProgrammaticSegment

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

Simultaneous Posting & Derivation: Integration

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Legend: FI Entry Derived Derived or enteredUnderlined items are owned

by corresponding module


Putting it Together

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Using the earlier example, we would like to calculate the true cost of a mission’s various sections and components, for the fiscal year 2012. 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.



Which of the following are cost objects for UN?


A. Cost Center

B. Internal Order

C. Work breakdown structure element (WBSE)

D. Cost Element

E. A & B

F. A, B & C

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Which of the following are cost objects for UN?


A. Cost Center

B. Internal Order

C. Work breakdown structure element (WBSE)

D. Cost Element

E. A & B

F. A, B & C

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Option F is the correct answer. Cost center, internal order and WBSE are the cost objects for UN.



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

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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.


A. Derivative

B. Activity Type

C. Activity Rate

D. Cost Object

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Options 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.


Module 2 Summary


• 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 (budget-consuming) 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 month-end process

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Agenda

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Course Introduction




Course Summary

Course Assessment

Course Survey



Module 3 Objectives


• Define the types of cost allocation transactions

• Define the types of cost allocation cycles

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Key Terminology

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Cost Allocation

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).

Cost Allocation

Cycle

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 month-end closing process.


Introduction to Cost Allocations

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Cost allocations are used to transfer costs from a sender cost object to a receiver costobject. 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.


Manual Cost Allocation

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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

AviationCost Center

Cost SenderMilitary

Cost Center

FuelExpense

Credit $6,000

Cost Receiver

Debit $6,000

Statistical Secondary Cost Element

FuelExpense


Direct Activity Allocation

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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.

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

Cost Activity Quantity Activity Rate


Direct Activity Allocation Example

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Direct Activity Allocation

Aviation Cost Center

Cost SenderMilitary

Cost Center

HelicopterExpense

Activity Rate:$1,000/hr

Credit $20,000

Cost Receiver

Activity Quantity:20 hours

Debit $20,000

Secondary Cost Element

HelicopterExpense


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.

A method used to automatically allocate actual activities for multiple activity users or receivers

Indirect Activity Allocation

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

Assessment Cycle

A method of allocation similar to Assessment Cycle, using a primary cost element

Distribution Cycle

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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 a SKF. At the end of the month, costs are calculated and allocated to the appropriate cost centers.

Example: Helicopter hours for military patrol flights are recorded during a month as a 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

Cost SKF Activity Rate


Indirect Activity Allocation Example

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AviationCost Center

Cost SenderPolitical & Civil

MilitaryCost Centers

HelicopterExpense

Activity Rate: $1,000/hr

Credit $100,000

Cost Receiver

Debit $20,000

Political and Civil

Debit $80,000

20 hours

80 hours

Military


Assessment Cycle (Percentage)

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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 sender: Mission Engineering

• Cost receivers: Mission Military and Humanitarian

• Expense account: Generator Fuel Expense

• Activity percentage

─ Military: 66%

─ Humanitarian: 33%

• Total cost: $6,000

Cost each office receives

Total transport expense

Percentage


Assessment Cycle (Percentage) Example

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Assessment Cycle

EngineeringCost Center

Cost SenderMilitary

HumanitarianCost Centers

Generator FuelExpense

Credit $6,000

Cost Receivers

Debit $4,000


Debit $2,000

66%

33%



Assessment Cycle (Proportion)

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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 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

Cost each office receives

Total training expense

# of peopleTotal # of

people


Assessment Cycle (Proportion) Example

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Assessment Cycle

Integrated Mission Training

Cost SenderSupply

Human ResourcesCost Centers

Cost Receivers

Debit $4,000

Training Expense

Debit $2,000

40 people

20 people

Training Expense

TrainingExpense

Credit $6,000


Distribution Cycle

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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


Distribution Cycle Example

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Distribution Cycle

UNIFIL UNAMID

Cost Senders UNHQ

Activity Rate:$1000/hr

Cost Receiver

Debit $10,000

Primary Cost Element

StaffingExpense

UNAMID

UNIFIL

Credit $6,000

Int’l Staff = $1,000Local Staff = $5,000

Credit $4,000

Int’l Staff = $1,000Local Staff = $3,000

Int’l = $2,000Local Staff = $8,000


Cost Allocations Summary

Following is a summary of the Cost Allocation methods in Controlling:

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Allocation Name Description CyclePrimary/Secondary

Cost Element

Manual Cost Allocation Amount-based allocation Specific amount to recover is

enteredNo Secondary

Direct Activity Allocation Quantity-based allocation Activity quantities are entered for a

certain activity typeNo Secondary


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


Putting it Together

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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.


Former Cost Recovery Process at the UN

Many UN departments and offices provide services as part of their mandates to both “internal” and “external” clients; however, not all services provided are covered by their allotted budgets and require them to seek cost reimbursement from their clients.

The former process involves preparing and submitting a memorandum or file to Accounts Division to execute a financial transaction in the UN’s current systems. This transaction can be the issuance of an invoice and recording of an account receivable, or the entry of a Journal Voucher (JV).


Types of Works & Services engaged by the UN

There are many types of works & services provided by UN offices

• Such works/services include ...

• Some works/services are more internally focus, while others are for general public & staff (i.e. Revenue Producing Activities)

Common/Miscellaneous Services Garage Administration HR/Personnel/Counselling Services Book Shops

Records & Archive Help Desks Medical Services Public Information/Library

Catering Broadcasting Services Training Services Sales of Audio/Visual Products

Banking Services Special Events Sales of Publics/Ext. Publications

Commissary/Gift Center/Newsstand Building/Facilities Services Accounting Services Sales of Statistical Products

Mail, Pouch & Messenger Space Mgt. & Map/Drawing Services Financial/Treasury Services Visitor Services

Supplies Property Management Insurance Services

Travel/MovCon/Aviation Conference Services

Transportation PD Procurement Services

OIC

T

ICT Services Document Services

Warehouse Operations Publishing

Postal Services

OL

A

Legal Services DS

SSecurity Services Interpreters/Translators

OC

SS

- C

om

merc

ial

Serv

ices

OC

SS

- F

acil

ity M

gt.

OH

RM

OP

PB

A

DP

ID

GA

CM

Revenue Producing Activities (Outsourced in UNHQ)

Revenue Producing Activities (UN Owned Operations

in HQ)


Umoja Cost Recovery

In Umoja, cost recovery transactions can be carried out in several ways; and charges can be applied at different stages of the service delivery process. The appropriate method to use depends on:

– whether the entity to be charged is an individual person on UN payroll, an organization “external” to the UN Secretariat or an organization “internal” to UN Secretariat (i.e. has implemented Umoja) ;

– type of transactions;

– nature, volume and frequency of the service requests and/or services being provided; and

– type and regularity of the charges to be recovered.


Application of Controlling in Cost Recovery

Cost recovered from payroll?

Cost recovered from lease?

Ad-hoc service request with one-time cost to be recovered against it?

Cost to be invoiced to “external” clients directly?

Internal cost reimbursement in relation to good issue/transfer?

Cost for periodic services to be charged/ allocated to “internal” clients?

Below are methods of Cost Recovery that exist in Umoja, one of which relates to Controlling:

CO (Controlling)Cost Recovery is performed through Indirect Activity Cost Allocation Cycle

HCM

RE

PM

SD

LE


Reports

An example of a report used in cost and management accounting is:

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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.



Direct activity allocation is a _________-based allocation


A. Quality

B. Quantity

C. Amount

D. Product

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Direct activity allocation is a _________-based allocation


A. Quality

B. Quantity

C. Amount

D. Product

75

Options B is the correct answer. Direct activity allocation is a quantity-based allocation.



Which one of the following is amount-based allocation where the specific amount to recover from the cost receiver is entered, and can only be statistical?


A. Manual Cost Allocation

B. Indirect Activity Allocation

C. Direct activity allocation

D. Distribution Cycle

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Which one of the following is amount-based allocation where the specific amount to recover from the cost receiver is entered, and can only be statistical?


A. Manual Cost Allocation

B. Indirect Activity Allocation

C. Direct activity allocation

D. Distribution Cycle

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Options 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


Module 3 Summary


• Cost allocation transactions credit the sender, debit the receiver and may create afinancial accounting transaction if a balancing dimension is crossed

• A cost allocation cycle is used where multiple senders allocate certain costs tomultiple receivers. It can be a one-time post or run as a monthly process

78Copyright © United Nations


Agenda

79

Course Introduction




Course Summary

Course Assessment

Course Survey



Course Summary

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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


Agenda

81

Course Introduction




Course Summary

Course Assessment

Course Survey



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

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Agenda

83

Course Introduction




Course Summary

Course Assessment

Course Survey



Course Survey

84

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


Congratulations! You have successfully completed the

Umoja Cost and Management Accounting Overview course.

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