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!
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