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Government Finance Officers Association
Basics in Project AccountingJuly 30, 2020
Speakerso Mike Mucha Director, Research and Consulting Deputy Executive Director
o Rob Roque Technology Solutions Manager
o Craig Lesner Senior Manager Former CFO
o Michele Mark Levine Director, Technical Services Center
S2
Agendao What is a project?o Components of a projecto Projects and Your Financial Systemo Financial Reporting Considerationso Examples
S3
What is a project?
S4
What is a project?o A project is a group of related activities
with a defined purpose/outcome that occur over a defined period of time. A project is assumed to have a “beginning”
and an “end”.o “Projects” can be used to track many
different types of activities your ERP/Financial System Projects are flexible. They can track activities
across funds, organizations, accounts, and fiscal years.
S5
Financial Systems Use Project Ledger
o Most (if not all) modern systems utilize a project ledger for tracking projects
o Project ledger allows for tracking additional detail outside of the chart of accounts Allows for user defined segments specific to
each project/use
Chart of Account Components
o Fund (General Fund)o Organizational unit (Police Department)o Program/activity (Patrol)o Account classification (Salary) Expense Revenue Balance Sheet
o Project
Fund Organizational Unit
Program / Activity Project Object /
Account
Use of project ledger allows for detailS8
Fund Organizational Unit
Program / Activity Project Object /
Account Phase Task SubTask Activity
1. Detailed sub-ledger components roll up to chart of accounts2. Values within each segment can be set project by project3. Extensive detail does not require expansion of chart
Use of project accounting “module” provides additional functionality
S9
Fund Organizational Unit
Program / Activity Project Object /
Account Phase Task SubTask Activity
1. Ability to link to multiple funding sources (e.g. capital and non-capital)
2. Ability to link multiple projects together under a “master” project
3. Identify project budget and control expenses against budget
4. Build and develop project budget before funding sources are confirmed
5. Identify and manage constraints6. Time can be entered against phases, tasks, and
activities (useful for FEMA events)
What do governments track as projects?
o Capital projectso Grantso Operating projects with defined start and end
dates (grants)o Events (Disaster clean-up)o Activities / Events that require high levels of
detail o Unique department by department tracking
needs (project segment can typically be set differently project by project).
S11
COVID-19o Governments have a need to track all
expenses related to COVID-19 responseo Costs could occur throughout the
organization
o Establish COVID-19 as a “master” project Allows for other projects to be associated with
COVID-19 Allows any associated department or program
costs to be tracked as COVID-19
S12
Characteristics of Projectso Require detailed tracking of expenseso Can occur over multiple yearso Can occur with multiple departments or
fundso Can have multiple funding sourceso Costs are either tracked for
reimbursement, capitalization, or analysis
S14
Grants are tracked as projectso Tracking expenses for a grant is easily
tracked as a “project”
S15
Fund Organizational Unit
Program / Activity Project Object /
Account Phase Task SubTask Activity
1. Examples of sub-ledger details• Phases of a grant / years of funding• Eligible for reimbursement/ not eligible • Specific expenditure categories
Projects in a system replace need for excel shadow systems
o Many organizations will use excel to track projects and grants Redundant data entry Risk of data that is inconsistent / not reconciled Detail not in financial system – no single version of
truth Limited reporting features Difficulty in tracking reimbursements (no AR) Delay in getting timely information Need to develop complicated excel spreadsheets
S16
Components of a Project
S17
Considerations for setting up a project
o Project Budgeto Project Accountingo Integration (e.g., Capital Asset)o Project Management
S18
The project budget should identifyo Total project costso Cost by period (year)o Cost by phase / activity on the project o Funding sources Any restrictions on use of funding
S19
Building the Budgeto Understand the difference between
“construction” budget and “project” budget Land acquisition Site preparation Design Project management costs Technology and communications Financing costs Furniture, fixtures, and equipment Moving costs Contingency costs
S20
Project Accountingo How you track expenses on the project
will depend on several factors: Information needs of your organization Need to monitor different phases of the
budget Restrictions on funding from external funding
sources Reporting needs of external funding sources
S21
Project Managemento Project management is a team effort
S22
FinanceBudget
Vendor
Department Staff
Project Manager
Tracking Project Expenseso Microsoft Excel
o Stand Along CIP / Capital Project Software
o Integrated ERP Module
S23
Projects and Your Financial System
S25
Setting Up a Project
o Identify types of information to track as Phase, Task, SubTask, Activity
o Determine values for each “segment” Identify any eligibility rules for expenses
• Budget for funding sources• Eligibility dates• Overhead / Indirect costs
o Create structure within your financial systemo Using logic in number (?)
S26
Fund Organizational Unit
Program / Activity Project Object /
Account Phase Task SubTask Activity
Make project consistent with WBSo WBS = Work Breakdown Structureo Used in project management to identify
groupings of tasks that occur on a project Allow for rolling up detailed tasks to higher
level categorieso Often tracked in MS Project or other
project management tool
S27
Communicating Project Accountso Project accounting in your financial
system requires that staff use project codes during initial transactions Purchase requisitions Invoices Time entry Contracts
o Need to ensure that all staff have necessary security permissions to access project Staff from multiple departments
S28
Communicating Project Accountso Staff need to understand financial impact
of project accounting design Projects can track capital and non-capital
costs related to capital projects Projects are usually “closed” or “accepted”
before being converted to a capital asset
S29
Basic ERP Modules
HR/Payroll
Budget
Finance
Applicant Tracking
Forecasting
Fixed Assets
Utility Billing
Property
Budget Prep
Business Intelligence
Contracts
Bids
Grant ManagementProjects
Accounts Payable
Accounts Receivable
General Ledger
P-Cards
Purchasing
Employee Records
Risk Management
Position ControlTime EntryPension Admin
Payroll
Self ServiceCashiering
Work Orders
BenefitsPerformance Evals
Employee Relations
Training / Learning
Business License
Special Assessments
Property Tax
CRM
Permitting
Performance Management
Student
RecordsScheduling
Projects are part of integrated ERP
HR/Payroll
Budget
Finance
Applicant Tracking
Forecasting
Fixed Assets
Utility Billing
Property
Budget Prep
Business Intelligence
Contracts
Bids
Grant ManagementProjects
Accounts Payable
Accounts Receivable
General Ledger
P-Cards
Purchasing
Employee Records
Risk Management
Position ControlTime EntryPension Admin
Payroll
Self ServiceCashiering
Work Orders
BenefitsPerformance Evals
Employee Relations
Training / Learning
Business License
Special Assessments
Property Tax
CRM
Permitting
Performance Management
Student
RecordsScheduling
Considerations for Purchasing Transactions
o Purchase requisitions need to pre-encumber funds Approval from project managers?
o Consistent use of RFPs / Bidso Integration to contractsMilestones Contract retainage Vendor contracts / terms Alignment with any constraints from funding
source
S32
Considerations for Costing Labor
o Labor costing requires integration to time entry / payroll Direct charges vs. allocation of total pay Premium pay? (OT) Indirect costs Overhead
o How can employees indicate time worked on a project?
S33
Financial Reporting Considerations
S35
Grant Type & MFBA Determine Accounting
o Expenditure-driven grantsMust incur qualifying expenditures to “obtain
claim to resources” (i.e., to earn and recognize revenue)Often require matching funds or other actions
by grantee, referred to as a “contingencies”Most federal grants
o Purpose-restricted grants Includes entitlements, shared revenues,
endowment and other restricted donations Do not need to incur eligible expenditures
before recognizing revenue
S36
Governmental Funds – Expenditure-driven
o Expenditure-driven Recognize revenue when all of the following
are true:1. Eligible expenditures have been incurred,2. All contingencies have been met,3. Grant money is available (received during the
fiscal year or shortly thereafter); Recognize receivable and deferred inflow of
resources if 1. and 2. are true, but money is not yet available; or Recognize liability if cash is received before 1.
and 2. are true.
S37
Governmental Funds – Purpose-restricted
o Purpose-restricted grants Recognize revenue when both of the following
are true: 1. All eligibility requirements – including time
requirements – have been met,2. Grant money is available;
Recognize receivable and deferred inflow of revenues if all eligibility requirements are met but money is not yet available; or Recognize liability if cash is received before
all eligibility requirements are met.
S38
Gov. Funds – Purpose-restricted (cont.)
o Purpose-restricted grants (cont.) Purpose restrictions are not eligibility
requirements; • Recognize revenue and• Unspent amounts are reported as restricted
fund balance. Time requirements specify either:
• The time period during which grant money may be used, or
• A date before which grant money may not be used.
S39
Economic Resources/Full Accrual MFBA
o Expenditure-driven grants Recognize receivable and revenue when
both:1. Eligible expenditures have been incurred, and2. All contingencies have been met; or
Recognize liability if cash is received before 1. and 2. are true.
S40
Economic Resources/Full Accrual MFBA (cont.)
o Purpose-restricted Recognize revenue when all eligibility
requirements – including time requirements –have been met, or Recognize liability if cash is received before
all eligibility requirements are met.
S41
Disallowanceso If either of the following becomes known
(generally, in a period after the period in which grant revenue has been recognized): Expenditures are determined not to have been
eligible, or Purpose restrictions will not be met;
o Then Grantee recognizes expenditure/expense and
decrease in receivable from, or increase in liability to, grantor; and Grantor recognizes revenue and decrease in
liability to, or increase in receivable from, grantee.
S42
Program v. General Revenue
o In government-wide statement of activities grant revenue is recognized either: As program revenue of the program to which
its use is restricted:• As a capital grant if restricted to use for (or is
contribution of) a capital asset, or• As an operating grant if use is restricted to
operations or if may be used either for operating or capital purpose (regardless of how actually used); or
As general revenue if funds are unrestricted (such as general-purpose revenue sharing).
S43
Capital Assetso Assets used in operations and having an
initial useful life of more than one year (many governments impose additional $ and/or longer life thresholds)
o May be tangible or intangibleo Not reported in governmental funds –
report capital outlays as expenditures
S44
Capital Assets (cont.)o In funds other than governmental funds, and in
government-wide statements: Report depreciable/amortizable and non-
depreciable/non-amortizable capital assets separately. Non-depreciable (non-amortizable) assets:
• Unlimited useful life (e.g., land, permanent rights-of-way),• Construction work-in-progress, and• Certain infrastructure assets (next slide).
Depreciable (amortizable) assets• Report as construction work-in-progress, not depreciated
until ready to be placed in service, and• Governments generally use straight-line
depreciation/amortization.
S45
Infrastructure Assetso Long-lived capital assets that are
generally both: Stationary, and Preserved for longer than most capital assets.
o Optional alternative method to report infrastructure (not widely used): Commit to maintain infrastructure assets at
least at predetermined condition level, Monitor and disclose actual v. target condition, Expense all costs to maintain indefinitely, and Do not depreciate so long as minimum
condition is maintained.
S46
Capitalizable Costso Capitalize (report as part of asset value and
depreciate or amortize, rather than expense when incurred) the following types of costs: To purchase, construct, or develop assets, including:
• Project management• Architecture and design• Contractor billings and/or labor, materials, etc.• Indirect costs allocable (only) to capitalizable projects –
usually exclude general administrative, overhead; or If donated – amount the government would have paid
to acquire at time of donation (acquisition value); and “Ancillary charges necessary to place asset in its
intended location and condition for use”• Transportation, installation, inspection, testing.
S47
Non-Capitalizable Costso Do Not Capitalize: Preliminary, scoping, feasibility, siting,
environmental impact, etc., Training costs; Interest (recent GASB guidance, not fully
implemented and not retroactive) and other financing transaction costs; or IT:
• Technical/technological feasibility• Data conversion (in most cases)• Before funding commitment.
S48
Capital Asset Disclosureso Disclosures of cost, accumulated depreciation by type
assetS49
Federal Funding – Uniform Guidanceo Uniform Guidance - Code of Federal Regulations
(CFR), Chapter 2, Section 200, Uniform Administrative Requirements, Cost Principals, and Audit Requirements for Federal Awards Subpart E – Cost Principles Cost allocation plans and indirect cost
proposals [2 CFR § 200 Appendix V]
Costs incurred by states and local governments [2 CFR § 200.416]
And many, many more…
S50
Federal Funding – Audit Requirements
o Uniform Guidance Subpart F – Audit Requirements
o Single Audit Act Amendments of 1996 –governments that expend $750,000 or more of federal awards in a fiscal year
o Government Auditing Standards (a.k.a. “Yellow Book”) 2018 Revision
o Annual Compliance Supplement [2 CFR §200 Appendix XI]
S51
Federal Funding of Capital Assetso Limitations on purchasing assetsGenerally need prior written approvalWhen allowed, must inventory and track
assets with cost of $5,000 or more Rules governing on-going use and disposal
o Contingency Provisions (in budgets for large construction or IT development projects) [2 CFR § 200.433]
o Depreciation [2 CFR § 200.436]
o Equipment and Other Capital Expenditures [2 CFR § 200.439]
S52
Example Projects
S53
Example 1: Capital ProjectS54
o New Fire Stationo Major Activities on Project Preliminary Approvals Bond IssuanceGrant Applications Purchase Land Design Construction Furniture, Equipment, Supplies Implementation / Occupancy
How to Set Up the Project?o What are the appropriate project phases?
o How would you establish controls for project expenses?
o What are end results of the project?
S55
Example 2: COVIDo Tracking All Expenses Related to COVID-19o The CARES Act requires that the payments from the Coronavirus
Relief Fund only be used to cover expenses that—1. are necessary expenditures incurred due to the public health emergency with respect to the Coronavirus Disease 2019 (COVID–19);2. were not accounted for in the budget most recently approved as of March 27, 2020 (the date of enactment of the CARES Act) for the State or government; and3. were incurred during the period that begins on March 1, 2020, and ends on December 30, 2020.
S56
Example Expenseso Example expenses: Expenses for disinfection of public areas and other facilities, e.g.,
nursing homes, in response to the COVID-19 public health emergency. Expenses for public safety measures undertaken in response to COVID-
19. Expenses for quarantining individuals Payroll expenses for public safety, public health, health care, human
services, and similar employees whose services are substantially dedicated to mitigating or responding to the COVID19 public health emergency.
Expenses to facilitate distance learning, including technological improvements, in connection with school closings to enable compliance with COVID-19 precautions.
Expenses to improve telework capabilities for public employees to enable compliance with COVID-19 public health precautions.
S57
How to Set Up the Project?o What are the appropriate project phases?
o How would you establish controls for project expenses?
o How would you ensure that information is captured?
o What are end results of the project?
S58
Questions
S59