Deltek Insight 2010: Owning Org vs. Performing Org - Project Revenue & Reporting

CP-322: Owning Org vs. Performing Org - Project Revenue & Reporting

Presented by: Kim Clark, Deltek, and Michael O’Malley, Deltek

1

Introduction

• Kim Clark

• Michael O’Malley

Copyright © 2010 Deltek, Inc. 2

Agenda

• Definitions

• Setup (assignment of orgs to projects)

• Cost & Revenue by Owning Org

• Cost by Performing Org and Revenue by Owning Org

• Cost & Revenue by Performing Org

• Cost Transfer Journal Entry

• Redistribute Revenue

• Reconciliations

• Summary


Definitions

• “Owning Org” and “Performing Org” are project reporting terms in Costpoint

• A project is usually “owned” by a particular department or division within a company’s organization structure

• The owning org is normally the entity that is responsible for the initial procurement of the contract, as well as for customer relations, project management, and financial accountability during the contract term

• Each project must have an “owning org” when it is set up. A project can belong to a single owning org in its entirety, or different nodes of the project can have different owning orgs

• The performing org is any org which does work on a specific project, regardless of which org “owns” the project

• Performing orgs are effectively “loaning” labor resources to a project that is “owned” by another org.


Setup

• Default flag for revenue in Project Settings by company

• Flag for revenue by Project ID in Basic Revenue Info

• Flag for Default to Owning Org (applies to non-labor costs only) by Project ID in Project Master/Basic Info

• Labor on timesheets will default from Employee Home Org in Salary Info and History, unless other defaults are set up

• Other Labor Defaults for org can be set up in Labor > Timesheet Default Setup – Employee Timesheet Line Type Defaults

– Employee Project TS Defaults

– Employee Project-Acct-Grp TS Defaults

– Labor-Grp Project-Acct-Grp TS Defaults

– Project TS Defaults

• Make sure all cost, revenue, and unbilled accounts are linked to all necessary orgs in G/L


Cost & Revenue by Owning Org

• Project reporting loses visibility of where labor actually originates for any labor borrowed from/loaned by another organization

• Labor cost by owning org is not automatic in Costpoint – other labor defaults must be set up to charge labor to owning org

• No “what if” revenue analysis by performing organization is available

• Unless unique accounts are used by each organization’s employees so that cost pools can be set up accordingly, labor will receive the burden rates belonging to the home org of the project (instead of the burden rates belonging to the org from which the labor was borrowed) – This would usually not be a problem with company-wide indirect pools that

apply to all labor, regardless of which organization an employee works for

– This approach is not recommended if indirect pools are org-specific, and different pools must be applied to different labor costs, based on org

• This approach is less commonly used, due to these issues


Cost & Revenue by Owning Org (Cont.)


View: Owning 1.1

Performing 1.2

Performing 1.3

Income Statement:

Revenue $55 $0 $0

Costs $50 $0 $0

Profit

$ 5 $0 $0

Project Status:

Revenue $55 N/A N/A

Costs $50

Profit $ 5

Cost by Performing Org and Revenue by Owning Org

• Labor on timesheets is posted to the employee’s home organization, as specified in Salary Info and History

• No other labor defaults for organization need to be set up

• Indirect burdens from an employee’s home org will apply to each project charged by that employee, and normally requires no special setup

• Revenue analysis by performing org is available, but may be skewed with “Fixed Amount” formulas or with ceilings/revenue adjustments

• Cost Transfer Journal Entry and Redistribute Revenue may be needed

• This approach is very commonly used

• Printing PSRs by project with performing org as secondary sort provides a separate PSR for each org that performed work on the project and/or had revenue

• Printing by project with owning org as secondary sort provides a “total org” rollup of costs and revenue on the project


Cost by Performing Org and Revenue by Owning Org (Cont.)


View: Owning 1.1*

Performing 1.2*

Performing 1.3*

PSR by Performing:

Revenue $5 $20 $30

Costs $0 $20 $30

Profit

$5 $0 $0

PSR by Owning:

Revenue $55 N/A N/A

Costs $50

Profit $ 5

*Assumes a “Fixed” type of revenue formula with no Revenue Redistribution. See Cost and Revenue by Performing Org or Redistribute Revenue sections for examples of how Redistribute Revenue changes this report.

Cost & Revenue by Performing Org

• Labor on timesheets is posted to the employee’s home organization, as specified in Salary Info and History

• No other labor defaults for organization need to be set up

• Indirect burdens from an employee’s home org will apply to each project charged by that employee, and normally requires no special setup

• Revenue analysis by performing org is available, but may be skewed with “Fixed Amount” formulas or with ceilings/revenue adjustments

• Redistribute Revenue may be needed

• This approach is very commonly used

• Printing PSRs by project with performing org as secondary sort provides a separate PSR for each org that performed work on the project and/or had revenue

• Printing by project with owning org as secondary sort provides a “total org” rollup of costs and revenue on the project

• PSRs are the same as with “cost by performing/revenue by owning”


Cost & Revenue by Performing Org (Cont.)


View: Owning 1.1

Performing 1.2*

Performing 1.3*

PSR by Performing:

Revenue $0 $22 $33

Costs $0 $20 $30

Profit

$0 $ 2 $ 3

PSR by Owning:

Revenue $55 N/A N/A

Costs $50

Profit $ 5

*Assumes a transaction-based revenue formula (Cost Plus or Loaded Labor) with no ceilings/revenue adjustments, or the Revenue Redistribution of a Fixed formula or in cases where there are ceilings/revenue adjustments. See section on Cost by Performing Org/Revenue by Owning Org for an example of these reports prior to running Redistribute Revenue for a non-transaction-based revenue formula.

Cost Transfer Journal Entry

• Used whenever costs are posted by performing org, and revenue is posted to owning org

• For financial statement purposes, Cost Transfer JE allows income and expense to be reflected in the same organization

• Cost Transfer JE is done only at the financial statement level, using non-project accounts. It moves cost from the performing organization, to the owning organization.– Direct cost is moved to owning org

– Burden cost is moved at target or actual rates to owning org

– Does not apply to indirect projects

– Project must have a revenue formula set up

• Setup– Direct Costs – G/L > Financial Statement Setup - Set Up Financial Statements:

Need debit and credit accounts, linked to all necessary orgs

– Burdens – Projects > Cost & Revenue Processing > Cost Pool Setup > Cost Pools: Need debit and credit accounts, linked to all necessary orgs


Cost Transfer Journal Entry (Cont.)


View: Owning 1.1

Performing 1.2

Performing 1.3

*Income Statement:

Revenue Costs Profit

$55 $ 0 $55

$ 0 $20 ($20)

$ 0 $30 ($30)

**PSR by Performing Organization:


$ 0 $ 0 $ 0

$22 $20 $ 2

$33 $30 $ 3

PSR by Owning Organization:


$55 $50 $ 5

N/A N/A

*Income statement shows cost recorded by performing org and revenue posted by owning org, before Cost Transfer JE. ** PSRs assume a transaction-based revenue formula with ceilings or revenue adjustments.

Cost Transfer Journal Entry (Cont.)


View: Owning 1.1

Performing 1.2

Performing 1.3

*Income Statement:


$55 $50 $ 5

$ 0 $ 0 $ 0

$ 0 $ 0 $ 0

**PSR by Performing Organization:


$ 0 $ 0 $ 0

$22 $20 $ 2

$33 $30 $ 3



$55 $50 $ 5

N/A N/A

*Income statement shows cost recorded by performing org and revenue posted by owning org, after Cost Transfer JE. ** PSRs assume a transaction-based revenue formula.

Redistribute Revenue

• Can be used whenever revenue is calculated using a “Fixed” type of revenue formula, or whenever there are total ceilings or revenue adjustments on a project

• Fixed revenue formulas (i.e., non-transaction-based revenue formulas), total ceilings, and revenue adjustments all post “plug” amounts to the owning organization of a project, no matter which revenue posting method you use (performing org or owning org)

• To get accurate performing organization revenue, a redistribution has to happen from the revenue “plug” at the owning org to the performing orgs

• Redistribute Revenue will redistribute based upon the revenue calculated in each task/performing org

• No special setup is required, as long as all necessary orgs are linked to the appropriate revenue accounts


Redistribute Revenue (Cont.)

• If revenue posts to owning org, Redistribute Revenue affects only project reporting by performing org, and has no impact on the G/L financial statements

• If revenue posts to performing org, Redistribute Revenue affects both project reports by performing org and revenue posting to G/L, and therefore financial statement revenue

• The owning org will be cleared of any revenue “plug” amounts. – If the owning org has no costs incurred at all, then it will be cleared of all

revenue

– If the owning org also has costs incurred and revenue recognized in its own right (i.e., apart from any revenue “plug” amounts), then it will get a proportional distribution of the revenue plug, in addition to the revenue already recognized, just like any other performing org

• Redistribute Revenue by Project (not recommended) – will redistribute revenue based on cost contribution of other tasks/orgs, for the current period, across all tasks




Before Redistribution of Revenue (non- transaction-based revenue formula, cost and revenue at performing org)

View: Owning 1.1

Performing 1.2

Performing 1.3

Income Statement:


$ 5 $ 0 $ 5

$20 $20 $ 0

$30 $30 $ 0

PSR by Performing Organization:


$ 5 $ 0 $ 5

$20 $20 $ 0

$30 $30 $ 0



$55 $50 $ 5

N/A N/A



After Redistribution of Revenue (non- transaction-based revenue formula, cost and revenue at performing org)

View: Owning 1.1

Performing 1.2

Performing 1.3

Income Statement:


$ 0 $ 0 $ 0

$22 $20 $ 2

$33 $30 $ 3

PSR by Performing Organization:


$ 0 $ 0 $ 0

$22 $20 $ 2

$33 $30 $ 3



$55 $50 $ 5

N/A N/A

Reconciliations

• Costs are reconciled based on how they are charged (generally by performing org) – Print PSRs rolled up by “Performing Org”

• Reconcile direct costs to the financial statements

• Reconcile indirect costs to the SIE and to the financial statements

• Revenue is reconciled based on how it is charged – owning or performing– For owning org, print PSRs rolled up by “Owning Org”

• Reconcile revenue to the financial statements

– For performing org, print PSRs rolled up by “Performing Org”• Reconcile revenue to the financial statements

– For mixed performing org and owning org • Set up Alternate Projects to link all “performing org revenue” projects into one Alt

Project, and to link all “owning org revenue” projects into another Alt Project

• Print a separate PSR for each Alt Project (use Performing Org as a secondary sort on the performing org Alt Project), and reconcile revenue to the financial statements.


Summary

• Costs are normally recorded by performing org

• Revenue can be tracked by owning or performing org– Though this can be determined on a project-by-project basis, often this is

based on a company-wide policy.

– Reconciliations are simpler if all projects in a company use the same method

• If revenue is tracked by owning org, and costs by performing org:– Cost Transfer Journal Entry should be used to move costs to owning org for

financial statement reporting purposes

– Redistribute Revenue can be used to move revenue to performing org and to lower project levels for PSRs only, but will not affect posting to G/L

• If revenue and costs are tracked by performing org:– Cost Transfer Journal Entry is not applicable

– Redistribute Revenue can be used to move revenue to performing org for both PSRs and revenue posting (and to lower project levels for PSRs only)


Q&A

• Questions


More Insight 2010 Costpoint Sessions

Other related sessions:

CP-207: Troubleshooting Costpoint Projects

CP-209: Valuable Costpoint Features, Often Overlooked

CP-216: Award Fees: How They are Calculated and Captured in Costpoint

CP-235: Revenue Formulas: Using Them Effectively



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Deltek Insight 2010: Owning Org vs. Performing Org - Project Revenue & Reporting

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