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#403 Dual Indirect Cost Pool
This button will automatically appear on the Cost Allocation menu if you have installed Supplement
#403 Dual Indirect Cost Pool.
Function
The Dual Indirect Cost Pool supplement allows you to separate indirect costs into two pools: a common cost pool and a management and general (M&G) pool.
The common cost pool is intended to be used for costs that are not easily identifiable to program activities but benefit all program activities administered in an agency such as general office supplies. It will allow you to allocate these costs using a single base to the M&G cost pool in addition to program activities.
The M&G cost pool is intended for central management activities using a single base.
Each pool has its own user defined setup file to establish the base for the allocations. The allocations are expensed to program activities using separate expense codes: 59900 for the common cost pool and 59700 for the M&G cost pool.
Some agencies are presently only putting M&G costs in their indirect cost pool for several reasons. Some of these reasons may include the following:
Under SFAS No. 117, Financial Statements of Not-For-Profit Organizations issued by the Financial Accounting Standards Board (FASB), the Statement of Activities and the Statement of Functional Expense require management and general to be reported as a separate function. In addition to the differing opinions on the IRS Form 990 as to what is to be included in management and general, the same is true on the audit statements. The Dual Indirect Cost Pool supplement will provide easy access to the amounts to be reported.
Things You Should Know
Operating Instructions
Click on the Dual Indirect Cost button on the Cost Allocation menu, which will automatically process and print the Common Cost Rate Computation and Analysis and M&G Cost Rate Computation and Analysis.
#403 Dual Indirect Cost Pool.
Function
The Dual Indirect Cost Pool supplement allows you to separate indirect costs into two pools: a common cost pool and a management and general (M&G) pool.
The common cost pool is intended to be used for costs that are not easily identifiable to program activities but benefit all program activities administered in an agency such as general office supplies. It will allow you to allocate these costs using a single base to the M&G cost pool in addition to program activities.
The M&G cost pool is intended for central management activities using a single base.
Each pool has its own user defined setup file to establish the base for the allocations. The allocations are expensed to program activities using separate expense codes: 59900 for the common cost pool and 59700 for the M&G cost pool.
Some agencies are presently only putting M&G costs in their indirect cost pool for several reasons. Some of these reasons may include the following:
- Some grants and contracts require M&G costs to be reported under the administration component of a grant or contract and have placed restrictions on the amount of reimbursement allowed for the administration component.
Using the Dual Indirect Cost Pool supplement allows you to separate both types of indirect costs and easily report only the M&G costs under the administration component.
- When preparing IRS Form 990, many feel that M&G costs should be reported under the management and general functional area and that common costs should be included in program services. Others feel that total indirect costs should be reported under the management and general functional area. In either case, the Dual Indirect Cost Pool allows easy access to the amounts to be reported.
- Many feel the indirect rate is too high if both common costs and M&G costs are included in the indirect pool. Too high according to whom? Who knows! Using the Dual Indirect Cost Pool will reflect two rates that may appear to show a lower indirect rate, however, overall agencywide costs will not change.
Under SFAS No. 117, Financial Statements of Not-For-Profit Organizations issued by the Financial Accounting Standards Board (FASB), the Statement of Activities and the Statement of Functional Expense require management and general to be reported as a separate function. In addition to the differing opinions on the IRS Form 990 as to what is to be included in management and general, the same is true on the audit statements. The Dual Indirect Cost Pool supplement will provide easy access to the amounts to be reported.
Things You Should Know
- Program elements to be used for the common cost pool are 999000-999400. For the M&G cost pool use 999500-999900. These program elements must be established in the GL Master Files and assigned to project 39900.
- The expense code used for the common cost pool is 59900. For the M&G cost pool use 59700. These expense codes must be established in the GL Master Files. The GL code 59900 has the same restrictions as control accounts for salaries, leave, fringe, and M&G; therefore, it should never be directly coded to until year-end closing entries.
- The common cost pool and M&G pool setup files need to be established under Tools, Cost Allocation Setup, Common Cost Pool tab, and M&G Pool tab. Instructions for these setup files can be found under Help, Tools, Cost Allocation Setup, Common Cost & M&G Cost.
- Since the common cost pool is allocated to the M&G pool in addition to program activities, the amount reflected in account 59900 on the Agencywide Line Item Revenue and Expenditures without indirect detail report will be the total of the common cost pool less the amount of common costs allocated to the M&G pool.
Operating Instructions
Click on the Dual Indirect Cost button on the Cost Allocation menu, which will automatically process and print the Common Cost Rate Computation and Analysis and M&G Cost Rate Computation and Analysis.