Abacus Cost Services Joins De Novo!

Abacus5In July, Abacus Cost Services joined De Novo Consulting Solutions.   Together, we have over 60 clients in MN, ND, WI and OH.  We are growing.   We have our newly developed .NET Indirect Cost Plan System which will produce a traditional plan as well as provide output in an EXCEL Template for ease of use by our clients.   We are excited to show you our new system and to work with you!

With this merger, Dawn Rhone and Britney Ahlmann join our team.   Dawn is a CPA and a resident of North Dakota.   She has years of experience working with Indirect Cost Plans and rate studies.  She has worked with the State of North Dakota on a variety of projects as well as working with the Counties .    We appreciate her expertise and technical knowledge.

Britney Ahlmann is a former MAXIMUS employee with experience in North Dakota, Minnesota, Nebraska, Iowa and Wisconsin.   She has an eye for detail and ensuring quality in our plans.   Britney can complete all aspects of an indirect cos plan.   We are thrilled to have her on the team.

These two join the rest of the De Novo team as we move forward providing not just a cost plan, but a better cost plan.

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De Novo’s New Cost Plan System

De Novo is very excited to announce that we have completed our NEW, .net cost allocation system.   It produces a traditional indirect cost allocation plan as well as as an excel spreadsheet version, for use in calculations, trend analysis and ad hoc reporting.   We are proud of the fact that we have a state of the art cost allocation system to share with our clients. We continue to book new work and bring on new clients!    Give us a call if you’d like to see  how our system can work for you.

Do your Roll Forwards look a Roller Coaster?

What are roll forwards?   Each year that a cost plan is completed, the numbers are used for two purposes:

1.)   To determine what can be charged in the future

2.)  To reconcile what was charged in the past.

For example.   In 2012, you probably had a plan prepared for your agency.  That plan was probably prepared in 2013 and will be used to charge indirect costs during 2014.   This is merely a projection of what we think is most likely to occur in 2014 and allows the agency to bill the programs without having to wait for reimbursement.

Then, sometime after 2014 is done, a plan will be prepared based on the actual costs from 2014.   At that time, there will be a reconciliation of what the 2012 plan projected as a billing for 2014 and what actually occurred.    This amount is known as a roll forward.   So, if in 2012, you projected that indirect costs would be $100 and the 2014 plan identifies the real cost to be $110, you get to bill the $10, along with the projected costs in 2016.

Now, if the 2014 plan showed that the actual cost was only $80, then we have to pay back the $20 that we over-collected based on the numbers from the 2012 plan.

This means that your consultant has to take a good look at what is being projected forward to tell you if that number is a good number to project forward.   Here are some situations:

  a.)   In 2012, the Agency had many one time cost during a a systems implementation.   The actual costs in 2012 came out to be $200.   Normally, the cost would have been $100.   How should this be calculated for the agency?

This is a tough calculation.   First, in 2012, we are reconciling what had been projected for 2012.   Let’s assume that we our indirect costs were $100 in 2012 based on the previous cost plan.  Now we determine that the indirect costs are actually $200 this year because of some one time costs that are allowable and eligible.

  • So, first, we know that can roll $100 forward with our billing so that we collect the additional money spent on the program during 2012.
  • Now, we have the issue of what do we project for 2014?   Our plan says that we should project $200.   So, our indirect costs for 2014 will be the $100 roll forward, plus the $200 we just calculated for a total of $300.
  • WOW.  Our costs just went from $100 to $300.

Consequence of this action:   In 2014, we will the $300 ($200 forecast plus $100 reconciliation amount).   When we do the 2014 plan, we will find out that actual costs have gone back to normal.   So, now we have to reconcile the costs to calculate the next roll forward.  Let’s assume that costs have settled back down to the normal level of $100.   Our reconciliation will be that we billed $200, we should have only been able to bill $100 so we have a negative amount to roll forward in order to pay back the additional we should not have collected.   Our roll forward is -$100.   So if the costs came out to $100 and our roll forward is -$100, we have no indirect costs for 2016.   Why?  We collected double back in 2014.

What should we have done?   We should have adjusted the forecast for 2016 to the normal costs of $100 and that would have kept costs steady and we still would have gotten the extra money from the systems project through the roll forward, but we would not have collected that twice!

Email me if you have questions!   We love to talk about issues like this.     dianeblaschko@denovoconsultingsolutions.com

 

 

 

Is your Cost Plan a Big Black Box?

I’ve been out meeting with new clients and everyone asks, what is different about a De Novo Cost Plan from a traditional plan?  We can think out the box and we can customize plans for your needs.    One client recently told me how frustrating it was that they were limited by the number of activities in their plan and that it was difficult to follow.   They felt like they had to trust that it was right, but that it look a lot like a big black box!   Many firms want conformity between all of their plans to the degree that creativity is not encouraged and same as last year is good.   Just because a cost plan matches last year’s plan, doesn’t make it good, in fact it might be the opposite, it might mean that the consultant has been lured into doing the same as last year without knowing or asking what might have changed.

De Novo solves that problem.  Here’s how:

  • Every plan comes with our exclusive Executive Summary which includes a management letter, issues report, trend analysis, roll forward projection, allocation bases comparative report with percent of SALLY (Same as Last Year) clearly noted and a look forward to next year’s plan.
  • Every Client receives our exclusive Project Workbook to document the project and prepare for next year.
  • Every Plan has a General Fund Reconciliation showing all Departments and which are included and which are not included in the plan.
  • When a Department is included in the plan:
    • It comes in as a whole and items that are not allocable are either excluded or allocated to General Government
    • This provides a clear audit trail to source of data
  • Narratives are robust and clearly explain how the schedule was developed, decisions that were made and how data was handled.
  • Schedule A will have three year comparative data (if available)
  • All lines of a financial report are brought in for clear audit trail back to financials.
  • All activities are clear and decisions noted on why the allocation basis was chosen.
  • Allocation activities are grouped if they make sense, but for clarity, we prefer more activities that clearly define the activity and the benefit derived.
  • We offer follow up training with EVERY plan we deliver!
  • We are price competitive.

You will see a difference in a De Novo Cost Allocation Plan from that of other providers. Call us for more information and pricing.

dianeblaschko@denovoconsultingsolutions.com  or 844-267-8752

What’s behind a really good Cost Plan?

An indirect cost plan is made up of lots of addition, subtraction, multiplication and division.   There are no hidden formulas and secret methods.   A really good cost plan is easy to follow, easy to understand and easy to trace every number from start to finish.   It all starts with a good reconciliation.   Every plan that we do will have a complete general fund reconciliation provided as part of the plan.   From that point, it is important to have logical activities, a reasonable basis for the allocation and good documentation.   A cost plan shouldn’t have secrets.

Across the country there are many indirect cost allocation software systems.   Each software system works a little different, but they all produce the same document, an indirect cost plan with summary schedules.   The document is used to claim your overhead that has been provided to your Federal, State and other departments, grants and funds.

One of the things that is most helpful is to have a fresh look at your cost plan.  After doing it for many years, sometimes just a change of consultant will provide that extra set of eyes to perhaps suggest a new method, a different basis and a new way to look at activities that will bring better information to the client, higher recoveries and a more understandable plan.

By the way, our byline is that we provide unique solutions, which in math means the only solution or the right solution. We believe that we do that with our unique approach to your plan. If you need help understanding your indirect cost plan, give us a call.  We’d be happy to spend some time explaining how the indirect cost plan works and how you can best read your plan.   We believe that the best plan is one that client fully understands.   Call us to see how we can help you get not just another cost plan, but a better cost plan!

** NEXT TIME:   Roll Forwards and How Do They Work Anyway? 

After the roll forwards we will head back to the new Super Circular to learn more about the changes coming to the Super Circular.

Super Circular: Computing Devices & Supplies

Capital Expenses & Direct Charging

The rule in the past has been that people and goods have to be 100% dedicated to a federal program or grant to be a direct charge.   Under the new guidance, it is recognized that in the case of computing devices, it is allowable to charge the costs directly (Not indirectly) to a grant if it is deemed “essential” and “allocable” to the performance of a federal award.   The question comes up, why charge it directly then and not indirectly through the cost plan.   Direct charges are paid out on a current basis.   Indirect charges are paid out on a reimbursement basis, generally in a two year delay.   If the expense occurs in 2014, then it will be claimed in 2016.

Capitalization

In addition, the final guidance clarifies that computing devices will be treated as supplies, provided that the acquisition cost is lesser of the capitalization level established by the institution for financial reporting purposes or $5,000, regardless of the length of the device’s useful life.     These items may have some impact on your indirect cost allocation plan.

 

Say Goodbye to Building Use, Hello Building Depreciation

Introduction

Nearly every County Cost Plan contains a first schedule called, “Building Use”.   This cost item recognized  the full cost of the building from the initial cost of the building to the present.   That cost was then converted to a building use charge of 2% of the total cost and divided amongst its occupants based on square footage.   The new guidance eliminates discussion of building use and discusses building depreciation.  Depreciation is to be calculated based on acquisition cost or FMV of the building or donated asset.

  • Assumes straight line method
  • Depreciation of  building can be as a whole or group into 3 areas:
  1. Building Shell
  2. Building Service Systems
  3. Fixed Equipment
  • Adequate property records and updates every two years will be necessary.

What does this mean for a County?

If the County has very old buildings, then this new guidance might have an impact on your allocation.   For most counties, switching to straight line depreciation over the building use will provide some benefits, particularly if the County takes advantage of depreciating service systems and fixed equipment separate from the building shell.    We’d be happy to talk with you about this issue and how your plan might be affected.

 

The Omni Circular and What it Means for Counties

Introduction

The new Super Circular, also known as the Omni Circular is going to change cost allocation, reporting and auditing of reporting entities.   One of the first purposes of the new Super Circular is to combine the very similar, but slightly different circulars that governed other areas such as Universities and Non-Profits.   All told, eight circulars are being combined into one.    All entities will be guided by the same principles.

Objectives of the OMB Omni Circular

  1. Eliminate duplication and conflicting guidance
  2. Focus on performance over compliance for accountability
  3. Encourage efficient use of information technology and shared services
  4. Provide for consistent and transparent treatment of costs
  5. Limit allowable costs to make the best use of federal resources
  6. Set standard business processes using data definitions
  7. Encourage non-federal entities to have family-friendly policies
  8. Strengthen oversight
  9. Target audit requirements on risk of waste, fraud, and abuse

Over the next few months, I will take a new topic from the SuperCircular and discuss it in detail and what it might mean for Counties.