**FY07 Demand Pool Cost Assessments**

1**. Event Definition**. In this event, the Centers assess costs from
the remaining Center level service pools to the funding projects. Full
Cost Simplification for FY07 did not impact the operation of the Test,
Fabrication, Science & Engineering and SM&A pools at the Centers. Center
level pools are funded by funds distribution from the projects at the
Center and assessed costs processed based on project usage of the pool
services. In accordance with agency policy, cost assessments are based
on actual consumption.

2\. **Event Requirements**.

-   FMR Volume 7, Cost, establishes policy for assessing costs from the
    Center service pools to the projects.

-   Agency Full Cost draft policy identifies a process for standardizing
    policy/process for cost assessments through FY07 and FY08

-   Full Cost Simplification has deferred decisions for the demand
    pending further analysis by the Full Cost Reform Team.

3\. **Relationship to Other Events**. This event occurs once funding for
projects is received at the Center and distributed according to the full
cost plan as developed during budget formulation. Center level pools are
not recorded in either the Agency Operating Plan or Agency Execution
Plan (which goes no lower than Project by Center). As projects receive
services from the pools, costs are assessed from the pool to the project
based on actual civil service hours accrued and actual or planned
contractor hours accrued for all remaining pools except wind tunnels.

Center Level Pools will be phased in accordance with the policy and
schedule for phasing programmatic funds. Integration into programmatic
phasing plans will be done at the Center level, allocating the cost
phasing for Center Pool funding to the funding projects. Costs allocated
from Center Pools will be reported as obligations and costs at the
project level.

Demand pool costs reflect the burdened or indirect cost of direct
project activity as indicated by labor hours charged to the projects.
Assessments based on consumption of service activities create a
statistical obligation and cost posting against project WBS elements,
supporting accurate reporting by project by Center by full cost element.

4\. **Roles and Responsibilities**.

-   [Centers:]{.underline} Collect actual labor data (hours) as basis
    for assessment of costs. Process actual assessment cycles in SAP
    based on actual consumption and either actual financial costs or
    standard rates. Review reports and manage any variances between
    actual and assessed costs in accordance with current agency policy.

-   [Mission Directorates/Program Manager/Project Managers:]{.underline}
    Distribute project funding to the Centers based on total full cost
    Center level guidelines. Review reports and ensure variances between
    planned versus actual costs are managed so that costs do not exceed
    budget by project.

5\. **Inputs, Outputs, Outcomes**.

-   Inputs -- The inputs for the Center level service pool cost
    assessments are labor reports showing actual utilization of pool
    workforce, and either actual costs to be distributed or the
    formulated standard rate to be assessed.

-   Outputs -- The output of the cost assessments are statistical costs
    posted against project codes, supporting full cost project
    management.

-   Outcomes -- The outcomes are cost reporting against projects based
    on actual project activity, enabling better project management and
    control of project costs.

6.  **Process Explanation and Map**. The OCFO distributes project
    funding to the Centers based on overall full cost guidelines in
    accordance with funds distribution policies and processes. Once the
    funding is received at the Center it is distributed to the various
    full cost elements of labor, travel, procurement, and service pools.
    The Center level service pools obligate and cost the pooled funds
    which do not retain the original project identity. In order to
    collect all costs in the programmatic hierarchy, Centers must run
    assessment cycles to equitably distribute costs from the pools to
    the projects. Assessment cycles create statistical "9000 series"
    cost postings that support full cost reporting.

> There are two parallel standard processes for allocating these costs.
> Agency policy is currently under development to standardize the same
> process for all Centers based on application of standard rate
> assessments by FY08. Future decisions regarding the use of service
> pools at NASA may impact the current process. The detailed draft
> policy/process document as developed by SME's from all Centers is
> attached as Appendix A.
>
> At the end of each month the Center cost assessment maintainer
> collects actual consumption data based on BW labor reports for civil
> service labor. If actual contractor/WYE hours by project are
> available, this data will be used for assessments; if actual
> contractor/WYE consumption is not available then planned consumption
> may be used. This consumption data will be loaded into SAP. Assessment
> cycles will be processed by the Centers to post statistical obligation
> and costs from the service pool negative cost entry to the project
> positive cost entry.
>
> In order to support the quarterly Statement of Net Cost, Center
> service pool managers and/or cost assessment maintainers will evaluate
> reports comparing actual costs accrued in the pools with costs
> assessed to the projects. If necessary, a special adjustment
> assessment cycle may be required to allocate any variance.
>
> Once the month closes, project/program managers can pull BW reports to
> review the full cost status of the project and analyze project
> progress against financial plans.

![](media/image1.wmf)

7**. Schedule and Timeline**.

  ----------------------------------- -----------------------------------
  **Activity**                        **When**

  Distribute Project Funding to       October & as necessary for
  Center                              incremental funding

  Distribute Funding to Center Level  October & as necessary for
  Service Pools                       incremental funding

  Obligate/Cost Service Pools Funds   On-going

  Identify Consumption Data & Execute Monthly -- no later than 2^nd^
  Assessments                         business day of following month

  Reconcile Pool Costs                Monthly, minimum quarterly

  Adjustment Assessment Cycles        Quarterly

  Review Project Full Cost Status     Monthly after month close (3^rd^
                                      business day of following month)
  ----------------------------------- -----------------------------------

8\. **Systems and Tools**.

  --------------------- ------------------------ ------------------------
  **Required Tools**    **Tools Used Today**     **Proposed Tools\***

  BW                    BW                       

  SAP                   SAP                      

                                                 Tool to support
                                                 collection of WYE
                                                 actuals via CCR or other
                                                 methods
  --------------------- ------------------------ ------------------------

\*Additional tools that are not required but could be useful for
executing the process.

9.  **Other Considerations & Open Issues.**

    1.  **Center Level SMA Pools** will be managed as Center level pools
        in FY07 consistent with FY06 policy (based on the latest
        information from PA&E). The primary difference in cost
        management of the Center Level SMA Pool and other Center Level
        Demand Pools is in the collection of actual consumption data, as
        the SMA service pool does not have a direct consumption
        component (in order to preserve independence). Centers will
        utilize actual consumption data as available, but may substitute
        planned data if actual labor charges are not available.

    2.  **Carryover for Cancelled Pools (Center G&A, IT and
        Facilities).** The initial plan as identified in Appendix A for
        liquidation of cancelled pools was developed prior to the FY08
        Budget Process decisions regarding CM&O control totals and
        associated content cuts. It also did not reflect concerns over
        the down time for SAP associated with SVU and possible impacts
        on funds distribution. Appendix A has been annotated but not
        changed in order to preserve the original document developed by
        another team (Full Cost Super User Workshop, March 06).
        SomeCenters are planning on using carryover funding in these
        pools to offset FY07 shortfalls in CM&O, including possibly
        keeping some level of unobligated funding in the pools for
        unforeseen circumstances. The agency must review this policy in
        light of the downstream impact on project obligation and cost
        statistics. If a large amount of funding is carried over to
        mitigate FY07 budget issues, projects will not see obligations
        and costs assessed until financial costs are accrued in the
        cancelled pools. There is a trade off between mitigating risks
        from underfunded CM&O accounts, and risks to non-procurement
        project funding that will show up in reports as uncommitted and
        unobligated. See specific notes as marked in Appendix A for more
        information.

    3.  **Carryover for Continuing Demand Pools (Science & Engineering,
        SM&A, Fabrication, Test.** Other than modifications due to the
        expanded Technical Excellence project in CM&O, most Center
        demand pools will continue normal operations from FY06 to FY07,
        including carrying over prior year funds in the form of uncosted
        and unassessed balances. Carryover permits a smooth transition
        from one fiscal year to the next. The programmatic impact of
        Service Pool carryover is an apparent unobligated balance, since
        assessments post statistical obligations and costs at the same
        time; therefore, Centers should minimize carryover of Service
        Pool funds as much as possible given the need to support
        beginning of year startup activities. Service Pool carryover
        will be assessed based on current year consumption (see Appendix
        A).

    4.  ***Demand Service Pools in FY08:*** Original plan as developed
        by Cost SME's and OCFO/Policy was to standardize how the Centers
        managed the cost assessment process for all demand service
        pools, phasing in the changes over FY07. By FY08, all Centers
        were to assess costs based on actual consumption and standard
        rates. Currently, many Centers allocate actual financial costs
        in the service pool based on either plan or actual
        consumption---this results in allocation of relatively fixed
        costs with little to no control by the project manager. The
        question of how to manage pooled costs/pooled services beyond
        FY07 has been presented to the FCRT and deferred until after
        conclusion of the FY08 Budget Process. Until a firm decision is
        made regarding the future of demand service pools, it is assumed
        we will continue to pursue the original processes as documented
        in Attachment A. Standardization of the process, including
        relevant variance thresholds (percentage and/or absolute
        dollars) can be addressed as part of any overall full cost
        policy revisions but are not critical for beginning of year
        operations.

    5.  ***Reimbursable Funds:*** At this point, it is presumed
        management and assessment of reimbursable funds via the demand
        service pools will be handled similar to direct funds as is done
        today. Funds distribution of reimbursable funds to service pools
        remains an open item based on SVU changes to the reimbursable
        funds control & distribution process.

    6.  ***Detailed Process Flow:*** A more detailed process flow
        supporting the lower level information in Appendix A is being
        developed. The process flow included above provides high level
        information for integration into overall end-to-end execution
        process.

**[APPENDIX A: Assessment Execution Policy for FY07 Demand Pools,
3/17/06]{.underline}**

The following is the assessment process that will be implemented across
the agency in FY07. Centers will have the flexibility to assess using
either standard rates or actual financial costs for FY07; however, all
Centers will migrate to using standard rates and actual consumption
(where available) by FY08. This will enable Centers not currently using
actual consumption and standard rates to develop processes and training
prior to establishing a single standard policy agency-wide.

Although Centers are permitted to use either actual costs or standard
rates as the basis of allocation for FY07, each Center must adhere to
the standard process defined below.

Prior year carry over cost in the pools must be assessed using current
year consumption data as the basis of allocation. Unobligated funds in
the pool can be redistributed to customers if determined to be
appropriate. This policy does not apply to pools that will not exist in
FY07 or subsequent years.

**I. Actual Cost Assessment Process**

# 

# Policy

Actual cost assessments are based on allocating the actual posted
financial costs incurred in the service pool to all customers. After the
assessment cycle is complete, the actual financial cost and assessed
cost in the pool is equal. In order to smooth out periodic fluctuations
in cost, actual cost assessments are based on year-to-date cumulative
costs.

# Process

Service Pool costs should be assessed based on cumulative actual costs
incurred, using current year consumption data. In order to accomplish
this, the following steps must be taken:

1)  At the start of a fiscal year, the pools must be evaluated to
    identify the exact amount of prior year uncosted carry over by
    project. Uncosted carryover is defined as all uncosted available
    authority in the pool including uncommitted or unobligated funding
    that has not expired.

2)  When preparing to run the pool assessments each month, SAP and/or
    Business Warehouse (BW) financial cost data must be collected to
    determine the current fiscal year total cumulative actual costs
    incurred through the period in question, including activity against
    both current year and prior year funds. This is the total cumulative
    value of the Pool to be assessed.

3)  Uncosted carry over for a project without current year consumption
    must be assessed first using a special segment during the assessment
    cycle or the manual cost assessment process. The total value of
    assessed costs will not to exceed the actual financial cost incurred
    in the pool.

4)  The remaining financial cost after step three will be assessed to
    projects with current year consumption. Assessments will be based on
    each project's proportion of cumulative year-to-date consumption
    applied against the cumulative actual financial cost available for
    assessment.

5)  Uncosted carry over for a project with current year consumption must
    be fully assessed using the current year consumption. Prior year
    funding will be assessed for each project before any current year
    funding is assessed. If adequate financial cost has not been
    incurred to fully liquidate the uncosted carry over funding, then an
    assessment against the uncosted carry over will be made up to the
    value of the total actual financial cost incurred in the pool. The
    remaining uncosted carry over will be assessed in the subsequent
    month(s). This may be particularly the case in the earlier months of
    a fiscal year.

6)  Because assessments are processed by project, it may be possible to
    post assessments against current year funding for one project and
    prior year funding for another. However, the cumulative value of
    assessed cost from the service pool for any period will not exceed
    the cumulative value of actual financial cost incurred in the pool
    as of that period. There is no requirement to balance by fund.

7)  The assessment will be executed utilizing year-to-date cumulative
    consumption and year-to-date actual financial cost. The pool will be
    fully assessed or "zeroed out" on a monthly basis.

**Rate Based Assessment Process**

# Policy

Rate based cost assessments are based on allocating costs from the
service pool via a standard rate per unit of consumption. The standard
rate is calculated as projected annual actual financial pool costs
divided by projected annual pool consumption for the current fiscal
year. The standard rate must be updated at the beginning of each fiscal
year and may be updated periodically throughout the year as required.
Centers must have the assessed costs match the actual financial costs
incurred in the service pool by the close of the fiscal year.

Rates should be updated when the estimates for either the total annual
costs or the total annual consumption vary significantly from the
original plan, thus projecting a variance between actual financial costs
incurred in the pool and assessed costs *at fiscal year end*. Interim
variances are acceptable and to be expected depending on the phasing of
cost and consumption throughout the year.

Prior year carryover cost in the pools must be assessed using current
year consumption data and current year rates as the basis of allocation.

# Process

Service Pool costs should be assessed based on the current year's
monthly incremental consumption data at the standard rate for the
service pool. In order to accomplish this, the following steps must be
taken:

1)  At the start of a fiscal year, the pools must be evaluated to
    identify the exact amount of prior year uncosted carry over by
    project. Uncosted carryover is defined as all uncosted available
    authority in the pool including uncommitted or unobligated funding
    that has not expired.

2)  Uncosted carryover for a project without current year consumption
    must be identified before the pool standard rate can be calculated.
    All uncosted carryover for ended projects will be used to offset the
    rate, as these costs do not need to be recovered from current year
    customers.

3)  The pool standard rate must be calculated based on the following:

    a.  Total planned NOA for the Service Pool for the current year

    b.  Subtract any planned carryout for the end of year

    c.  The result will be estimated actual financial costs in the pool
        for current year funding only.

    d.  Add the total from step 1, the total uncosted carryover in the
        service pool.

    e.  The result will be the total anticipated actual cost for the
        year, regardless of fund.

    f.  The total uncosted carryover for projects without current year
        consumption will be subtracted from the total anticipated cost.

    g.  The result will be the total anticipated amount required to be
        collected from standard rate assessments to fully cover the
        actual financial costs incurred .

    h.  Divide the total anticipated cost from (g) by the estimated
        units of consumption to determine the appropriate beginning of
        year rate for the service pool.

    i.  Because the calculated beginning of year rate is based on
        adjusted cost rather than NOA, it may not match the rate
        determined in the budget formulation process.

4)  Uncosted carry over for a project without current year consumption
    must be assessed first using the manual cost assessment process.

5)  When preparing to run the pool assessments each month, current month
    consumption data must be collected and loaded into SAP (incremental,
    not cumulative). This consumption data will be assessed at the
    standard rate previously identified.

6)  After the cost assessment cycle is executed in SAP, if a project has
    uncosted prior year carryover, the manual cost assessment process
    will be utilized to move assessed costs from current year funding to
    prior year carryover until the prior year carryover is fully
    liquidated. Do we need to identify the option to use different
    assessment cycles to liquidate prior year carryover, rather than the
    KB15N? That seems much more involved and complicated than using
    KB15N to shift costs, so I recommend we use a single method to
    improve training and reduce confusion.

7)  The last month of the fiscal year will require a special cost
    assessment cycle to distribute any variance between the assessed
    costs and actual financial costs incurred by the pool during the
    fiscal year.

8)  Pool analysts and pool managers should review the projected variance
    at least quarterly to ensure the final adjusting assessment cycle is
    minimal.

**III. FY07 Pool Close Out**

Implementation of the Center Management and Operations account in FY07
requires modification of the policy for assessing prior year carryover
for those pools which will no longer exist in FY07---Center G&A, IT
Services, Facilities and Related Services, and ITA. The approach to
handling uncosted carryover in all pools that will not exist in FY07
will be handled in the following manner:

1\) Uncommitted funds in the pool must be redistributed to customers.
These cost pools are closed as of September 30^th^ and should not incur
any new activity in FY07. No new obligations will occur within these
pools after FY06, recognizing that adjustments may be required. Any
funds that are deobligated or decommitted in FY07 or subsequent should
be returned to the funding projects if possible.

2\) Uncosted obligations within the pools will be assessed to customers
when actual financial cost is incurred. At the beginning of the fiscal
year, all uncosted carryover by project will be determined. A fixed
percentage assessment cycle will be created based on each customer's
percentage of the remaining uncosted budget authority at the beginning
of FY07. The result will be an assessment based on actual costs and
fixed percentage, as no current year consumption can be measured for
closed pools.

**[NOTES:]{.underline}**

7/8/06: "*KSC has been working with HQS (our PAA and presentation to Rex
Geveden and Rick Keegan) to indicate that even with the approximately
\$8M worth of content cuts we are implementing for FY07 -- it was
absolutely critical that we be allowed to keep and use the roll thru
from G&A/IT/FAC to offset our FY07 shortfall. We have been trying to
protect these funds all year. That said, I would expect that a large
portion of this funding will be obligated -- so it wouldn't be an issue.
However, we would plan to keep some amount uncommitted/unob'd for
emergency prs, travel, labor depending on how successful the agency is
in implementing the funds distribution improvements that are in the
works. This being the first year (especially with the CMO/Corp. G&A/
Inst Inv) get pulled off the top, I would think we should be prudent and
maybe a little pessimistic just to make sure our funding issues can be
worked. So...KSC would not be planning a rebate of uncommitted funds
when we get out of FY06. I understand you are trying to put an orderly
process into place to deal with the closed pool -- but I would suggest
maybe a little more flexibility in the closeout process depending on the
Center situation*."

7/8/06: Proposed rewording of paragraph 1: *"Center G&A, IT Services and
Facilities and Related Services cost pools are closed as of September
30^th^ and should not incur any new activity in FY07. No new obligations
will occur within these pools after Fy06, recognizing that adjustments
may be required. Any funds from these closed pools that are uncommitted
in FY07, at the beginning of the year or throughout the year as a result
of deobligation or decommittment activities, may be returned to the
funding projects at the Center's discretion."*