Working with Overhead for the VT Department Fiscal Manager
Advanced Topics
AGENDA
- Tools for distributing YOUR overhead
- A sample Excel template for overhead distribution
- What happens if the Indirect budget is exhausted?
- What happens to Overhead when distributing a residual?
- Proofing the Indirect Expense
- Non-Sufficient Funds (NSF) Control
- Salary rollover to Overhead
What this training is NOT… ¾ Thou Shalt do it this way ¾ A new supported computer system or tool ¾ A negotiation of who gets what
What this training IS… General education about Overhead How to understand and use existing Banner tools Sharing techniques with other departments An Excel template that you might be able to adapt to your own needs, or just get ideas from
STAGE FOUR: Manually distribute returned overhead to faculty Banner funds
Enter a single budget transaction in Banner using rule code BBO, with the following line items that net to zero:
Fund Account Amount DEPARTMENT 230612 1200 $ (9,014) Aning 232555 1200 $ 526 Asryan 232897 1200 $ 480 Corcoran 232557 1200 $ 2,557 Druschitz 234260 1200 $ 85 Farkas 232558 1200 $ 910 Foster 234808 1200 $ 922 Hendricks 232560 1200 $ 879 Li 232562 1200 $ 350 Lu GQ 232564 1200 $ 157 Lu Peizhen 232895 1200 $ 1,436 Murayama 234261 1200 $ 293 Pickrell 232896 1200 $ 52 Reynolds 232566 1200 $ (3) Viehland 232568 1200 $ 78 Whittington 233396 1200 $ 293
Net $ 0
That’s easy. The hard part is figuring out who gets what!
What happens if the Indirect budget is exhausted on a sponsored project?
From “Overhead Explained” in the section on Instructions for Proofing Overhead
If the indirect budget “maxed out”, Banner will not charge above the budgeted amount. If incremental funding arrives the post-award administrator needs to proof the overhead to retroactively charge indirect using the new indirect available budget.
How can the indirect budget max out? Suppose you budgeted equipment on a project, but bought supplies instead.
What happens if the Indirect budget is exhausted? Budget with Equipment Direct Indirect GRA Salary 24,000 14,640 GRA Fringes 1,800 1,098 Indirect budget is low because it GRA Tuition 12,620 - doesn’t apply on the EQUIPMENT Equipment 20,000 -
58,420 15,738 74,158
Budget with Supplies Direct Indirect GRA Salary 24,000 14,640 Indirect budget is higher because GRA Fringes 1,800 1,098 it applies to all categories GRA Tuition 12,620 - Supplies 12,422 7,577
50,842 23,315 74,157
Budget Equipment but buy Supplies Direct Indirect Buying SUPPLIES instead of EQUIPMENT generates GRA Salary 24,000 8,247 higher INDIRECT charge at first, but it maxes out at GRA Fringes 1,800 619 the budgeted amount GRA Tuition 12,620 - Supplies 20,000 6,872
58,420 15,738 74,158
What happens if the Indirect budget is exhausted? Budget with Equipment Direct Indirect GRA Salary 24,000 1,800 GRA Fringes 1,800 1,098 Indirect budget is low because it GRA Tuition 12,620 - doesn’t apply on the EQUIPMENT Equipment 20,000 -
58,420 2,898 61,318
Budget with Supplies Direct Indirect GRA Salary 24,000 1,800 Indirect budget is higher because GRA Fringes 1,800 1,098 it applies to all categories GRA Tuition 12,620 - Supplies 12,422 7,577
50,842 10,475 61,317
Budget Equipment but buy Supplies Direct Indirect Buying SUPPLIES instead of EQUIPMENT generates GRA Salary 24,000 1,519 higher INDIRECT charge at first, but it maxes out at GRA Fringes 1,800 114 the budgeted amount GRA Tuition 12,620 - Supplies 20,000 1,266
58,420 2,898 61,318
What happens if the Indirect budget is exhausted? Budget with GRA Direct Indirect GRA Salary 24,000 14,640 Indirect budget is low because it GRA Fringes 1,800 1,098 doesn’t apply on the TUITION GRA Tuition 12,620 -
38,420 15,738 54,158
Budget with Research Associate Direct Indirect Indirect budget is higher because Res Asso Salary 27,183 16,582 it applies to all categories Res Assoc Fringes 6,456 3,938
33,639 20,520 54,159
Budget GRA but hire Research Associate Lack of TUITION charge frees up direct money for higher salary and some Direct Indirect travel, which would cause higher Res Asso Salary 30,000 12,289
INDIRECT charge, but it maxes out Res Assoc Fringes 7,125 2,919 Travel 1,295 530
38,420 15,738 54,158
What happens to Overhead when distributing a residual?
What is a residual? A residual is the unspent money left over at the end of a fixed-price contract.
Fund: 458465 Agency: Rolls Royce Category: Fixed Price Contract End Date: 31-Dec-15
At the end of the project… Remaining Budget Expenditures Balance Direct 145,907.00 129,204.50 16,702.50 PI can request this amount Indirect 69,629.00 58,776.24 10,852.76 What happens to this?
Total 215,536.00 187,980.74 27,555.26
Contract Received from Amount Sponsor Amount spent Cash Balance Revenue 215,536.00 215,536.00 187,980.74 27,555.26
The Cash Balance matches the Remaining Budget Balance, so OSP has the money
THE PI fills out a Residual Request Form
Residual request was made in March 2016 The following Finance transactions were entered by OSP March 29, 2016
Fund Type Amount Account Description Rule 458465 Indirect Expenditure 4,372.58 OH140 - Indirect Costs - College/Dept Share Transfer of Res. Indirect (40.29%) JE9 - Journal Voucher 458465 Revenue Actual (6,480.18) 0255 - Private Grants and Contracts Transfer of Res. Indirect (59.71%) JE9 - Journal Voucher 458465 Revenue Actual (16,702.50) 0255 - Private Grants and Contracts Transfer of Residual Direct JE9 - Journal Voucher
Fund Type Amount Account Description Rule 445207 Direct Budget 16,702.50 130 - Supplies and Materials Budget move fund BRES - Spon. Pgms. Residual Budget
- Indirect Expenditure was posted to the college share (OH140) which generated the normal monthly distribution to the department (i.e., you got your share of the overhead).
- Revenue was decreased in the amount of the non-college share of the overhead balance.
- Revenue was decreased in the full amount of the direct balance.
- The full Direct Balance was transferred as budget to the requested Various fund.
How did the numbers change? At the end of the project… Remaining The result… Budget Expenditures Balance Direct 145,907.00 129,204.50 16,702.50 A. The PI got the full direct balance Indirect 69,629.00 58,776.24 10,852.76 in his/her Various fund.
Total 215,536.00 187,980.74 27,555.26 B. You got your part of the college share of the indirect balance Contract Received from through the normal distribution. Amount Sponsor Amount spent Cash Balance Revenue 215,536.00 215,536.00 187,980.74 27,555.26 C. The cash balance was reduced to zero. After the residual was processed… D. However, it still appears that Remaining there are remaining direct and Budget Expenditures Balance Direct 145,907.00 129,204.50 16,702.50 indirect balances Indirect 69,629.00 63,148.82 6,480.18 E. The overhead balance still remaining goes to the OSP Total 215,536.00 192,353.32 23,182.68 Residual Reserve fund for Bad Debt and Uncollectibles Contract Received from Amount Sponsor Amount spent Cash Balance Revenue 215,536.00 192,353.32 192,353.32 -
A Banner research fund generally has both Direct and Indirect Expenditures In FY2015, VT had $228M in Direct and $55M in Indirect, for a total of $283M in total research expenditures
What is a DIRECT Expenditure? The normal expenses like payroll, tuition, supplies, travel, equipment, services, subcontracts that apply specifically to a research project.
What is an INDIRECT Expenditure?
- A financial transaction that automatically posts at month-end based on that month’s direct expenses
- Amount is based on the direct expenditure amount in applicable categories multiplied by the indirect rate on the project
- Posted in Banner so VT can bill the sponsor and get reimbursed for the full cost of the project (direct AND indirect costs)
- Posted to account codes OH*** (e.g., OH140 – college share)
- These Indirect Expenditures are also called EARNED OVERHEAD or EARNED INDIRECT or OVERHEAD EARNINGS
- Some Direct expenses are EXEMPT from the indirect charge:
- Tuition
- Equipment
- Subcontracts after the first $25,000
Departmental Overhead Earnings Report “program1” report shows STAGE ONE distribution of earned overhead to State, Capital, College, Admin, etc.
These actions post in Banner at month-end as actual expenditures, and are called Indirect Expenditures and are included in the annual research expenditure totals. They are easy to identify in reports or queries because they use account codes that begin with ‘OH’, e.g., the college share is OH140 (with object code OH14).
IMPORTANT NOTE: keep in mind that ALL funds that earned overhead are shown here, including ones with a Form C. So you can u se this as a starting point for a manual distribution but you’ll have to remove any fund that has a Form C because it has ALREADY been d istributed.
Proofing the Indirect Expense Basis of Proofing: Although BANNER automatically calculates F&A monthly, there may be occasions where the indirect does not show on the monthly financial statement, or the amount may actually be incorrect. Five situations occur which could cause Banner to incorrectly calculate overhead.
- If the project has expired F&A will stop calculating 30 days after the expiration date. Often credit card purchases will post to the account in the 31 – 60 day window, which requires the post-award administrator to manually charge indirect costs. Indirect may need to be manually removed from the fund if the department reverses charges 30 days past the end date.
- If there is a cost overrun (overdraft) F&A will stop calculating 30 days after the month the project was in deficit.
- If the project is on a LOG (Letter of Guarantee) F&A may not calculate depending if there was a budget for indirect costs under the LOG.
- If the indirect budget “maxed out”, Banner will not charge above the budgeted amount. If incremental funding arrives the post-award administrator needs to proof the overhead to retroactively charge indirect using the new indirect available budget.
- Banner has incorrect information on FZMFNDA
Non-Sufficient Funds (NSF) Control NSF control blocks Hokie Mart orders and other non-salary spending when budget balance falls below zero.
Controller can switch NSF on or off for E&G and Overhead; typically is turned OFF in late June and turned ON again in August after colleges have distributed E&G budgets.
BAVL = Budget Availability
BAVL Balance = the running balance kept by Banner to determine if funds are sufficient
BAVL Balance comes in two types: ¾ A balance of a single Banner fund (e.g., a single sponsored fund)
¾ A summarized balance of a group of Banner funds (e.g., E&G vs. Overhead)
BAVL can be thought of as a “bucket” of funds within a department. As long as there is money left in the bucket, any fund in the bucket can continue spending, even if its own balance is negative
Examples where the “bucket” is a single Banner fund code:
Current Dept Category BAVL Fund Fund Fund Title Balance 0107 Sponsored 321549 Bioinspired Dynamic Broadband Sonar 88,560 0107 Sponsored 417151 Development of Closure Models of th 38,866 0107 Sponsored 417466 RBI Analytical Modeling with the MC 42,957 0107 Sponsored 417640 Development of a Novel Control Meth 12,988
0107 VTF Research 438332 PACE program 2,090 0107 VTF Research 441157 Kraft professorship 986
0107 Various 440602 Various Funding Sources 5,934 0107 Various 440732 Various Funding Sources 1,026
0107 Other 114032 ETFP29-Mechanical Engineering (22,080) 0107 Other WLFTRW 997107 Tuition Rem Mech Eng 36,460 0107 Other 998234 Tuition Rem Mech Eng-Alt 1,643
Typical NSF control with Overhead funds ¾ Every fund in the B80303 bucket contributes to the overall balance
Current Dept Category BAVL Fund Fund Fund Title Balance 0107 Overhead B80303 230602 M E Overhead Acct 928,000 0107 Overhead B80303 230603 M E Rocket Lab (450,000) 0107 Overhead B80303 233054 OH-Kurdila 995 0107 Overhead B80303 233400 Overhead - Francine Battaglia (3,957) 0107 Overhead B80303 233403 Overhead - Alexander Leonessa 4,587 0107 Overhead B80303 233599 Behkam Start Up (113,363) 0107 Overhead B80303 234104 Tarazage Start Up (180) 366,082
¾ The funds with negative balances can continue to spend because the overall bucket balance is positive
Typical NSF control with E&G funds ¾ Every fund in the 1000 bucket contributes to the overall balance