WOODS HOLE OCEANOGRAPHIC INSTITUTION

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Bruce Boyd
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1 To: Budget Managers From: D Fernandez, Elaine Bolognese, Assistant Subject: 2018 Budget Guidelines and Schedule Date: June 26, 2017 Below are the 2018 Budget Guidelines for the direct, indirect, unrestricted, and capital spending categories. As always, the Finance Team is looking forward to a collaborative and integrated budget process for The goal is to maintain or reduce all indirect costs and rates to the extent possible, while maintaining adequate support to WHOI activities and maintaining external competiveness. With the ongoing goal of incorporating process improvements, increased efficiencies and of course ensuring a value-added budget process, the Staff Council has once again focused on creating a strategic budget that will enable the delivery of The Institution s 2018 financial and operational objectives. These guidelines, which are subject to change throughout the process, are detailed below. Once detailed budgets are submitted, the Staff Council will review any guideline exceptions and any significant impacts to your department(s) with you. They will make recommendations based on these discussions, and then will provide final approvals. Also, in alignment with our goal of increasing efficiencies, and because we have maintained a proactive forecasting process, we will be rolling over your ending Forecast Q to serve as your baseline starting point for Budget 2018, with the exception of a few updates such as insurance and existing depreciation, which Finance will provide. For example, your Workforce Planning, in MTDC Cost Center Plan, will contain your Forecast Q entries (hours & TBH s), unless you submitted requests to change your existing employee list. Your Rev and Exp Planning (MTDC Cost Center Plan) will contain your Forecast Q total amounts, which will be spread evenly over the 12 months. Capital Planning input remains the same as in prior year your Forecast Q approved entries will be carried over to PY Capex. Forecast will also be the starting point for your Research Hours Planning in MTDC Base. All hours and TBH s in Forecast will be rolled over to start Budget 2018, unless you requested changes, and the Spons Res Reference Only Column from 2017 will be removed. As a reminder, this column was used last year because we couldn t roll the forecast from 2016 as your starting point for 2017 budget due to the new structure changes. For Other Direct Costs in MTDC Base, we will be loading 2016 Actuals as your starting point, and like last year, you can make any necessary 2018 adjustments in the adjustment column. June of 10

2 For 2018, in order to strive to continuously improve our total sponsored research budget, we need to ask you to be sure to budget for EXCLUDED other direct costs, in the appropriate object codes, in addition to INCLUDED. This is a change from the voluntary entry of these costs in The approved 2017 Rates will be the starting rates used for the Version 1 kick-off. Assumptions and Guidelines The Finance Team will rely on input from the Science Departments and Grants & Contract Services to develop revenue and expense projections, which will be used in budget assumptions. Consequently, receiving your timely and complete input is imperative to improving the process and accuracy in order to best allocate resources and make sound decisions. Science Department Budget Revenue Revenue projections will be developed in conjunction with Labor Base projections; this will be a collaborative effort between Science Departments, Ships & Sub Operations, Grants and Contracts, and the Finance Team Labor Base and Other Direct Costs Staff requirements must be aligned with current and projected funding Departments are required to provide the basis for their proposed budgeted FTE s within the MTDC Base module and MTDC Cost Center Plan module for the cost center side in the Budget System (Cognos/TM1) Staff levels should reflect the funding/revenue projections from current grant profile and new grant projections within each Science Department Staff levels submitted by Science Departments will be reviewed by Staff Council Salary Adjustment Factors (merit and promotion increases) will be provided by Human Resources and approved by Staff Council. Other Direct Costs will also be budgeted in the MTDC Base module and similar to the labor base, should reflect the funding/revenue projections from current grant profile and new grant projections within the Department Indirect Budgets The initial 2018 Indirect Budget should be flat to the Forecast less any extraordinary 2017 expenses, with the exception of the impact of Salary Adjustment Factors and Fixed Costs (depreciation, insurance, facilities allocations, interest, carry forwards, and utilities). Changes to the Indirect Budget, other than salary increases, must receive approval from the Department Chair or Vice President of the department, and ultimately approved by the Staff Council. Only approved replacement hires should be planned for at this time. June of 10

3 Capital Budget (Equipment, Building Improvements, Buildings) The 2018 Capital Budget process will be incorporated within the Operating Budget review will also incorporate the Strategic Facilities Plan and a 10 year outlook. Meetings of the CPAC will occur during the budget process. Building improvements will be analyzed for deferred maintenance and new lab renovations for new scientific hires. Capital expenditures result in depreciation, which is part of the indirect costs and rates and is the process by which the Institution is reimbursed for capital expenditures. This reimbursement, however, takes place over several years while the Institution s cash outlay is immediate (e.g. in one year). Depreciation begins when an item is placed into service and is expensed each year throughout the item s useful life. Indirect Rates are impacted by both current year and prior-year depreciation that is tied to all of the equipment or building improvements currently in service. Equipment Equipment that has multiple cost objectives (benefits the entire Institution and can be used by more than one department/project versus an item having a single cost objective, limiting use to one project and paid for via direct project funds) Equipment must have an acquisition value of $5,000 or more (items that can be identified and used individually, with an individual acquisition cost of less than $5,000 but combined equal $5,000 or more are not defined as Capital Equipment and must be purchased as individual units in Indirect Budgets) Building Improvements A building improvement that increases the value of the asset, is affixed to the building (e.g. cannot be moved to another facility without doing significant damage to the existing facility), and has multiple cost objectives The improvement must exceed $5,000 The Capital Budget Process for Building Improvement project requests, including lab renovations, began on June 8th and was outlined in a detailed memo addressing the process. Instructions Accessing the Budget System The 2018 Operating and Capital Budgets will be submitted on Cognos TM1, a Web application that requires Internet Explorer 7 or higher URL to access the TM1 Cognos Budgeting Home Page is Note that your login name and password is your current Active Directory password Should you need assistance accessing the application, please call Elaine Bolognese (x2642), ebolognese@whoi.edu, or Nick Lee (x2631), nlee@whoi.edu Labor Base/FTE and Other Direct Costs (defined in Budget Expenditure Descriptions section below) Finance and Accounting and Human Resources will provide: June of 10

4 Staff name and status Base salaries Departments will provide: Projections for Regular, Overtime, and Casual hours Identify new hires and replacement hires by job title, start date, and projected hours to be worked in 2018 Identify anticipated promotions and reclassifications Projections for Other Direct Costs Assigned and Allocated (Indirect/MTDC) Costs Assigned Finance and Accounting to provide Taxes (5820) and Insurance (5800) where applicable Allocated Modified Total Direct Costs allocated as applicable Service Center Rates For accounting/government rates, refer to Schedule Operating, Capital, Service Center and Unrestricted Budgets Jun 8 Capital Building Project Requests Submit first round of building project requests to David Desrosier, dderosier@whoi.edu, who will review in conjunction with the Strategic Facilities Plan. He will provide placeholder estimates in Cognos for the July 14 th roll-up for building project requests only. Jun 26 Jul 14 Aug 7 Aug 18 Version 1 Operating & Capital Budget Submission Submit initial Budget to Cognos/TM1 Review: Staff Council and Budget Managers as needed Version 2 Operating & Capital Budget Submission Submit Budget v2 changes to Cognos/TM1 Review: Staff Council and Budget Managers as needed Sept 05 Sept 08 Version 3 Final Changes Submit Budget v3 changes to Cognos/TM1 Review: Staff Council and Budget Managers as needed June of 10

5 Sept 11 Sept 15 Final Operating Budget Review & Internal Approval Submit final Budget changes to Cognos/TM1 Review& Approval: Staff Council Approvals Sept (TBD) Oct 02 Oct Board of Trustees, Finance Committee Review and Approval Finance Team submits Indirect Budget to DCAA for review Board of Trustees, Final Review and Approval Budget Expenditure Descriptions Labor Base All labor is charged to the applicable project, department, service center, or cost center Exempt Exempt positions are excluded from minimum wage, overtime regulations, and other rights and protections afforded non-exempt workers Example: Annual salary $40,000 Work Year 2,080 hours and 26 pay periods in a year Biweekly wage $1,539 ($40,000/26) Non-Exempt Employees in a job category designated as non-exempt, paid an hourly wage, at a rate not less than the federal minimum wage for each hour worked, and paid overtime pay not less than one-and-a-half times their hourly rate for any hours worked beyond 40 each week Example: Annual salary $40,000 Hourly wage $40,000 divided by 2,080 = $19.23 Biweekly wage $19.23 x 80 hours = $1,539 Full-Time Equivalent is calculated as follows: 1.0 FTE = Full-Time Employee 1,824 Annual Productive Hours 256 Annual Paid Absences 0.75 FTE = ¾-Time Employee June of 10

6 1,368 Annual Productive Hours Prorated Annual Paid Absences 0.50 FTE = Half-Time Employee 912 Annual Productive Hours Prorated Annual Paid Absences 0.25 FTE = Casual Employee <912 Annual Productive Hours No Annual Paid Absences MTDC (Indirect) and Fringe Rates There are two (2) external a Research and a Marine Operations rate - and four (4) internal Institution, APO, Ships and Subs - MTDC (Indirect) rates which are calculated and used to allocate indirect costs to their respective benefiting functions. The 4 internal rates will have a cost rate adjustment at the end of the year, based on the final rate. Therefore, you could see a budget increase or decrease accordingly at that time. There is also a Paid Absence rate and a Fringe Benefit Rate. These items will result in three (3) additional categories, as applicable, in your Project Report and Cost Center Report. Example 1 Research Project (external Indirect RES rate): Paid Absence Rate (2017 Paid Absence Rate of 17.87%) 17.87% x Productive Direct Labor of $52,615 = $9,402 in Paid Absence cost Fringe Benefit Rate (2017 Fringe Rate of 43.88%) 43.88% x (Productive Direct Labor + Paid Absence) ($52,615 + $9,402) * 43.88%= $27,213 in Fringe Benefit cost Indirect Rate (2017 RES Indirect Rate of 58.00%) 58.00% x (Productive Direct Labor + Paid Absence + Fringe Benefit + Other Included Direct Costs) ($52,615 + $9,402 + $27,213 + $75,000)*58.00% = $95,253 in Indirect (RES) cost Total research Project Costs and Indirect Rate Costs for a staff with a total labor of $60,000 and Other Direct Costs of $75,000 = Labor $52,615 Paid Absence $9,402 Fringe $27,213 Other Direct Costs $75,000 Indirect (RES) $95,243 Total $259,483 June of 10

7 Example 2 Institution (Unrestricted) Cost Center (Internal Indirect INS rate): Paid Absence Rate (2017 Paid Absence Rate of 17.87%) 17.87% x Productive Direct Labor of $52,615 = $9,402 in Paid Absence cost Fringe Benefit Rate (2017 Fringe Rate of 43.88%) 43.88% x (Productive Direct Labor + Paid Absence) ($52,615 + $9,402) * 43.88%= $27,213 in Fringe Benefit cost Indirect Rate (2017 INS Indirect Rate of 38.32%) 38.32% x (Productive Direct Labor + Paid Absence + Fringe Benefit + Other Included Direct Costs) ($52,615 + $9,402 + $27,213 + $20,000)*38.32% = $41,857 in Indirect (INS) cost Total Institution (Unrestricted) Cost Center Costs and Indirect Rate Costs for a staff with a total labor of $60,000 and Other Direct Costs of $20,000 = Labor $52,615 Paid Absence $9,402 Fringe $27,213 Other Direct Costs $20,000 Indirect (INS) $41,857 Total $151,087 Indirect Rate and Costs Categories An Indirect (overhead) Cost Budget will be developed using the categories below. The costs will be allocated to MTDC pools (RES, MAR, INS, APO, SHP, SUB) via prescribed allocation methodology and CFR requirements. The MTDC (Indirect) Rates or percentages will be determined by dividing the total direct costs including salaries & fringe benefits, less MTDC exclusions (Base) by the total allocated MTDC pool costs for that function (RES, MAR, INS, APO, SHP, SUB), yielding a rate or percentage The Fringe and Paid Absence Rates or percentages will be determined by dividing the Total Fringe Costs by the Total Direct Labor (for Paid Absence) plus Paid Absence (for Fringe) categories yielding a rate or percentage Fringe Benefit Overhead Highlighted categories (blue) will be used in Labor Base Calculation Health Insurance Annual health care cost negotiated with health care providers, less employee contribution Paid Absences Occasional Illness, Family Illness, Vacation, Holiday Dental Insurance June of 10

8 Annual dental care cost negotiated with dental provider, less employee contribution Pension Contribution Pension contribution made in compliance with Pension Protection Act Employee and Student Assistance Program (ESAP) Annual ESAP cost negotiated with ESAP provider Life and Disability Insurance Annual Life and Disability Insurance cost negotiated with insurance provider FICA Employers portion of the Social Security and Medicare taxes paid for the employee Unemployment Employers portion of unemployment compensation Other Overhead Facilities Costs: Interest on bond Depreciation Utilities Facilities Administrative Costs General Administration (IR&D, Bid and Proposal, Directorate Office, Communications, IS, Finance & Administration) Library Sponsored Program Administration (Grants & Contracts Services) Departmental Administration (administrative costs necessary to operate the Science Departments) Capital Expense Categories and Definitions Equipment Depreciation Applies to equipment acquisitions with a value of $5,000 or more and a useful life of two (2) years or more. Software is included in this category. Building Improvement Depreciation June of 10

9 Applies to facility improvements to an owned building (or a building treated as an owned asset) which meets the following criteria the improvement increases the value of the asset; the improvement is affixed to the building and cannot be moved to another facility without doing significant damage to the existing facility; the improvement must have multiple cost objectives; the improvement exceeds $5,000; and has a useful life of no less than two (2) years New Building Construction or Total Building Re-modeling Depreciation Applies to construction of a new building with multiple cost objectives and a useful life of 30 years or more Specific ID Depreciation Applies mainly to ship related assets Initial Compliment Depreciation When a group of low cost items purchased for a specific purpose (e.g. office/lab furniture, conference room furniture) with a total value equal to or greater than the cost criteria for a building improvement or leasehold improvement ($5,000), they must be treated as a capital asset. If these items are purchased individually they will not qualify as a capital asset; however, when they are required to satisfy facility needs, they are grouped and treated as a single capital asset. Initial compliment must have multiple cost objectives, an acquisition value of $5,000 or more, and a useful life of two (2) years or more Depreciation for Donated Items In accordance with OMB Circular CFR 200, FASB 116, and General Accepted Accounting Practices (GAAP), contributions or gifts received shall be recognized as assets in the period received. Contributions received shall be measured at their fair value and depreciated over the useful life of the asset in accordance with GAAP WHOI guidelines, in accordance with OMB Circular CFR 200, FASB 116, and GAAP are as follows: gifts greater than $170,000 will be recorded at fair market value based on an appraisal or documentation from an external industry recognized source identifying the value of the gift. The gift will be recorded as follows: if the item is capital (multiple cost objectives, a useful life greater than 2 years, and valued at or over $170,000) the asset will be depreciated in accordance with WHOI accounting guidelines. Not following this guideline is a violation of GAAP and will result in penalty to the organization If the gift is a capital item utilized by a project within sponsored research, the gift-in-kind will be recorded as cost share and credited to non-cash gifts. This is based on government guidelines. No depreciation is taken at this time. The government guidelines are as follows: Project Related June of 10

10 The value of donated goods to a specific project and therefore not capital, such as expendable personal property, equipment, and supplies are not subject to being depreciated and thus not reimbursable either as direct or indirect costs. Therefore, there are no costs to be charged directly to projects, and costs may not be included in any WHOI indirect cost pool such as Lab overhead or General and Administrative. OMB Circular CFR 200 does permit the use of donated items to meet cost share requirements. The value of the item is its fair market value at the time of the donation Cost Center Related OMB Circular CFR 200 requires organization to depreciate donated assets that meet the definition of capital. The acquisition cost of the asset donated to WHOI by a third party shall be its fair market value at the time of the donation Donated Gift Protocol All donated gifts must be reviewed with Development prior to accepting June of 10

Capital Area Council of Governments FY 2019 Cost Policy Statement and Cost Allocation Plan

Capital Area Council of Governments FY 2019 Cost Policy Statement and Cost Allocation Plan The Capital Area Council of Governments uses the cost allocation method prescribed in OMB Uniform Administrative