Expenditure Allocation Guidelines

Issued: March 31, 2004
Revised: May 7, 2008

The following guidelines address the use of expenditure allocation Projects, Tasks, and Awards (PTAs) in the Oracle Financial System. These guidelines are effective 9/01/03 (fiscal year 04). Stanford policies governing these PTAs are found in Administrative Guide Memos 34.2.10, 38 and 38.1.

TABLE OF CONTENTS

Institutional Policies

Policies governing expenditure allocation PTAs are as follows:

What is an Expenditure Allocation PTA and when do I need one?

Expenditure allocation PTAs are used to accumulate specific expenditures, typically materials, supplies, services or salaries whose distribution to the PTAs benefiting from the expenditures cannot be determined at the time the expenditure is incurred. Departments then distribute (or allocate) these expenditures monthly from the expenditure allocation PTA to the benefiting PTAs using an allocation methodology that:

• Logically relates to the type of expense incurred.
• Produces an allocation of costs to each PTA in reasonable proportion to the benefit received.
• Results in charges to PTAs that are allowable, allocable and reasonable.

It is not necessary to open an expenditure allocation PTA for a one-time allocation of expense. However, one-time allocations of expense should be carefully justified, including a statement addressing the one-time nature of the allocation.

Expenditures that MAY be charged to an Expenditure Allocation PTA

There are two types of expenditure allocation PTAs. They are categorized by the expenditures that may be charged to them.

1. Non-salary Expenditure Allocation PTA: Only non-salary expenditures, typically materials, supplies and services may be charged. This may include rental, lease and maintenance charges.
2. Salary Expenditure Allocation PTA: Only salary expenditures (includes related fringe benefits) may be charged. (Note: These PTAs are not salary guarantee accounts. Salary guarantee accounts have been replaced by salary suspense PTAs. Every department has a salary suspense PTA!)

Tip: Consider using Oracle labor distribution schedules to allocate salary instead of an expenditure allocation PTA. If your activity requires you to allocate salary and non-salary expenditures, you must request two separate PTAs - one for salary expenditures and one for non-salary expenditures. Otherwise you must be a service center.Tip: Remember if you can direct charge the expenditure you do not need an expenditure allocation PTA.

Expenditures that MAY NOT be charged to an Expenditure Allocation PTA

The following expenditures may not be charged to an expenditure allocation PTA:

• Transactions that are not in the 4XXXX or 5XXXX GL code/expenditure type ranges
• Capital equipment
• Expenditures in unallowable expenditure types. Charge these expenditures to an unrestricted PTA.
• Financial aid
• If you are allocating expenditures to a sponsored award, you may not allocate expenses to the award that the sponsor has identified as unallowable.
• Subawards (expenditure types 54710, 54720)
• Indirect Costs
• Veterinary Service Center Charges (expenditure types 58710, 58720)

Departments should refrain from building up on-hand supplies beyond what is reasonably needed to anticipate actual demand. And remember...salary and non-salary expenditures may not be charged to the same expenditure allocation PTA.

What is an Allocation Methodology?

The allocation methodology distributes the expenses incurred in the expenditure allocation PTA to each benefiting PTA in proportion to the benefit received. These methodologies are often the most challenging to develop. Some examples of allocation methodologies that have been used as a basis for allocating costs include effort, space (square footage), head count, number of experiments and usage records (supply logs, copier logs (auditron), logs of hours used or surveys resulting in a measure or measures for allocating costs, etc.) Where work on projects is interrelated due to overlapping scopes of work and the costs benefit more than one project, PI judgment may be used to allocate costs to one or more projects.

Allocation methodology "Do's and Don'ts"

• Always remember to document why measures such as headcount, square footage or hours directly relate to the benefit received.
• Allocate expenditures on a routine basis-don't want until the end of the fiscal year! (Ideally, these PTAs should carry zero balances each month.)
• Allocation methodologies should not result in an over or under recovery of expense. An over recovery of expense may result in potential refunds. An under recovery may need to be covered by the department. For sponsored projects it is extremely important to ensure expenditures are properly allocated to avoid over (and undercharging) the sponsors.
• Prohibited allocation methodologies include any methodology based on budgets, funding or available funds.
• Administrative expenses may not be distributed or rotated among sponsored projects. Pooled allocation methodologies may not be used to charge administrative costs to sponsored projects except by service centers with approved rates.
• Allocation methodologies must be documented and auditable. Documentation should include support for the specific costs allocated and indicate how the allocation methodology is logically related to the cost being allocated. This support should be retained by the department and be made available for review.
• Allocation methodologies should be reviewed periodically to ensure they are reasonable. Methodologies based on sampling, surveys, etc. should be reviewed and updated at least once each fiscal year. Significant changes to the population may signal the need to review the allocation methodology.

See Appendix A for examples of allocation methodologies.

I need an Expenditure Allocation PTA - what do I do?

Use the Request for Expenditure Allocation PTA form to request new projects, tasks and awards. This form must be used for requests for new PTAs and to request new projects and/or tasks on existing awards/projects. A guarantee award is required in order to open the expenditure allocation PTA.

Salary and non-salary expenditures are set up as separate expenditure allocation awards. Expenditures subject to different allocation methodologies should be segregated into separate project/task combinations.

Expenditure Allocation PTA Maintenance

Changes to information documented on the Request form made after the PTA has been set up should be transmitted to Lisa Ciambrone by e-mail - for example, a change in the purpose or use of the PTA, the individual responsible for clearing the account, the allocation methodology, etc. Requests for changes to principal owner, award, project and task manager as well as titles and other attributes may be requested by e-mail.

How do I find my Expenditure Allocation PTA?

The following attributes describe the expenditure allocation PTA in the Oracle financial system:

About converted legacy Expenditure Allocation balances

Legacy balances as of the end of FY03 were converted to Oracle using Expenditure Type 50010 (Conversions and Adjustments) for all expenditure allocation PTAs. On the September 03 expenditure statement the beginning balance is an entry to Expenditure Type 50010 with the description "Sept 03 Beg Bal".

How do I allocate expenditures?

The expenditure allocation PTAs are cleared using the ijournals allocation form. Please establish a routine of clearing these PTAs on a monthly basis. Remember it's good business practice and good customer service to clear these charges on a timely basis to the PTAs that benefited from them. Expenditures can be associated with the month in which they provided the benefit and rejected late charges to sponsored projects can be avoided. The department allocating the expense must have received prior approval from an authorized individual to charge a benefiting PTA. Approval may be documented by e-mail or written request. This approval should be retained by the department allocating the expenditures.The expenditure item date for transactions should be set to the first of the month to which the transactions pertain unless the actual date of service is used. For instance, if we allocate expenditures in September 03, the expenditure item date would be 01-SEP-03. Reversals should be made using the ijournal new journal form.See Appendix B for an example of the allocation process.

How do I allocate non-salary expenditures?

Non-salary expenditures may be allocated (cleared) using the same expenditure type where the non-salary expenditure was charged. In some cases, it is not possible to use the same expenditure types to clear the transactions. Use the Interdepartmental Revenue objects (category 48100) to credit the expenditure allocation PTA and use the appropriate expenditure type from category 58000 (Internal Expenditures) to charge the receiving PTA. Per Controller Office guidelines, the total dollars charged to the 48xxx revenue objects must offset the total dollars charged to the 58xxx expenditure types and net to zero.If you are allocating a prior year's expenditure (prior to FY04) you must use the historical journal form.

Example - Allocate expenditures out of the same Expenditure Type
The department is allocating laboratory supplies in expenditure allocation PTA 1074587-100-AAQWS to several sponsored projects in October 03. The department has determined these supplies benefited the sponsored projects.

Example - Allocate expenditures using an Interdepartmental Revenue Object.

A department has a copier that is being used by several different areas. PTA 1026999-100-AAQXX is accumulating the cost of operating the copier. A log documents the number of copies made by users. Users are charged by the copy (16 cents each). In December 03, the department charges users for copies made during the month of November 03. The revenue codes are reproduced at Appendix C.

How do I allocate salary expenditures?

Salary must be allocated (cleared) using the same expenditure type in which the salary was originally charged. Clearing salary transactions out of a different expenditure type may prevent fringe benefit charges and vacation accrual from properly clearing as different salary expenditure types may have different fringe and vacation accrual rates. If it is appropriate to charge the salary to a different expenditure type, the entry clearing the expenditure allocation PTA must be to the same expenditure type originally charged. Currently only Payroll can process these kinds of entries.

If you are allocating a prior year's expenditure (prior to FY04) you must use the historical journal form.

Example: Allocating Salary

In December 2003 the department allocates the monthly November 2003 salaries of one employee based on a log of the number of hours the employee devoted to each project.

How do I monitor my Expenditure Allocation PTA?

In addition to the expenditure statements we recommend departments use the online Reportmart3 reportsFIN_OP_101_Operating_Detail or FIN_OP_102_Oper_Award_and_GL_Sum. These reports document both expenditures and revenue.

Fiscal Year-end Roll-forward of Expenditure Allocation Project Balances

Expenditures should be fully allocated as of fiscal year-end. Any year-end balances in the expenditure allocation PTAs are rolled forward each year into the next fiscal year at the project level.  These balances are the net of revenues and expenditures incurred during the year plus any balance from the prior fiscal year. These ending/beginning fiscal year balances can be seen in Reportmart3 on the FIN_OP_101_Operating_Detail and FIN_OP_102_Oper_Award_and_GL_Sum reports. Schools and departments should run these reports to ensure they have not omitted allocating these balances.

Closing an Expenditure Allocation PTA

Send an email request to Lisa Ciambrone documenting the specific Expenditure Allocation PTA you would like closed and explain why it should be closed. All Expenditure Allocation PTAs must have a zero fund balance before they may be closed. Please make sure you have allocated all expenditures to benefiting PTAs. Any remaining expenditures that cannot be allocated to benefiting PTAs should be transferred to an unrestricted departmental PTA. Please remember to adjust any labor distribution schedules, purchase requisitions/orders so they do not attempt to charge the Expenditure Allocation PTA after it is closed.

Appendix A: Examples of Allocation Methodologies

Allocation Based on Effort: A research assistant spends 80% effort on Project A and 20% effort on Project B. The research assistant uses supplies totaling $3,000/month on the two projects. Usage is directly related to the amount of effort devoted to each project, therefore, $2,400 (80% of $3,000) is charged to Project A and $600 (20% of $3,000) is charged to Project B.

Allocation Based on Usage: The monthly cost of supplies/expendables to maintain a lab computer system is $1,000. The computer system is used solely for projects A and B. The computer operating system keeps a log of users and their time on the system. A reasonable base to allocate the expense would be computer user hours. Project A assistants have 100 combined user hours a month and project B assistants have 80 combined user hours a month. The cost allocated to project A is $560 (100 user hrs. /180 total user hrs. x $1,000). The cost allocated to project B would be $440 (80 user hrs. /180 total users hrs. x $1,000).

Allocation Based on Square Footage: A student is paid a salary of $1,500 a month to clean glassware in two laboratories that are conducting similar research. In this example, the square footage of the laboratories could be used as a reasonable basis. Lab A is 1600 square feet and Lab B is 1,200 square feet. Lab A is charged $855 (1,600-sq. ft/2800 sq. ft x $1,500) and Lab B charged $645 (1,200-sq. Ft/2800 sq. ft x $1,500).

Appendix B: An Example of an Allocation Process

Each month a department purchases supplies for a laboratory where several different sponsored projects are on-going. Bench scientists on the sponsored projects use these supplies in their research. At the time the supplies are purchased the department does not know how the supplies will be used on the sponsored projects. The department does know that the use of these supplies is directly related to the number of bench scientists on each project. (Each bench scientist performs similar tasks and therefore uses the supplies in the same way.)

1. The department requests a non-salary expenditure allocation PTA to be opened by completing the Request for New Expenditure Allocation PTA form.
   
2. The department purchases the supplies and charges them to the Expenditure Allocation PTA using expenditure type 55210.
   
3. At the end of the month, the department tallies the number of bench scientists working on each project for the month and calculates relative number per project to allocate the monthly expense.
   
4. The department initiates an ijournal crediting the expenditure allocation PTA and debiting the sponsored projects for their calculated share of the monthly expense using expenditure type 55210.

Appendix C: Internal Revenue Objects