Volume : II

Chapter :4
Section :C

COSTING AND COST ALLOCATION

1.00 OVERVIEW

Budget and Costing (B&C) Unit is responsible for costing and allocation of cost to
appropriate Cost Center (Budget Code). The following are the business process
under this activity:
• Cost Allocation
• Cost Transfer
• Costing
• Indirect Cost Rate Computation
This part of the Manual sets out the policies and procedures to be adopted to records
to be maintained, process and the related responsibilities to be discharged to ensure
that an expenditures are charged to the correct budget code.

This manual is last updated and reviewed by Director, Finance on February 2009.

2.00 POLICY GUIDELINES

Cost Allocation

Personnel Cost

2.01 Personnel costs consists salary and benefits for Local, International and
Bangladeshi International staff member, canteen subsidy, staff clinic cost
including laboratory test advised by staff clinic physician, transport subsidy for
pick-up & drop.
2.02 Personnel cost would be incurred according to approved budget. PI would
ensure that Personnel cost allocation reflects current work assignments.
2.03 Online time sheet (on percentage of effort basis) would be maintained for
allocation of personnel cost.
2.04 Online time sheet (cost allocation sheet) would be created by AO while
opening HR budget lines in the budget code.
2.05 Aggregate of personnel cost allocation would never exceed 100 percentage
at any point of time.
2.06 Any change in personnel cost allocation would be informed to Budget
Coordinator in writing by the PI by end of the month with necessary approval
of donor (in case of restricted funding), RRC (incase of protocol) and
Executive Director (in case of activity and unrestricted funding).
2.07 Personnel cost of each month would be allocated by cost allocation process
through ‘ERP System’ by System Analyst within 7th day of next month.
2.08 After completion of monthly personnel cost allocation process no change
would be allowed in allocation percentage for that month.
2.09 Bangladeshi International staff member’s salary would be calculated based
on monthly cost allocation percentage.

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2.10 Each Bangladeshi International staff member would submit their time sheet to
Controller Budget and Costing at the beginning of each year and before 8th of
each month if any change is required.
2.11 If any Bangladeshi International staff member is not able to submit time sheet,
Budget Coordinator would update allocation table based on approved budget.
2.12 Bangladeshi International staff member salary allocation would not be
changed for that month after completion of monthly international payroll
process.
2.13 Arrear of Bangladeshi International staff member salary would be paid with
next month salary.

Consumables
2.14 Consumables (stock and non-stock) would be charged to the respective
budget codes at actual basis based on approved on-line stock and non-stock
requisition including applicable procurement and material handling cost.

Local and International Travel

2.15 Local and International travel costs would be charged to the respective
budget code at actual as per approved on-line requisition.

Rent, Communication and Utilities

2.16 Rent for hired office space would be charged to the respective budget codes
at actual basis.
2.17 Communication includes cost of fax, e-mail, PABX, telephone, mobile bill
charges and would be charged based on actual monthly usage including
applicable interdepartmental recovery against interdepartmental services
provided.
2.18 Utilities costs include electricity; water, gas bill etc. would be allocated to
budget codes on the basis of usage, percentage. These chargeable
percentages would be computed by Engineering units based on office area,
electrical load etc. and would be reviewed / revised an yearly basis.

Repair and Maintenance

2.19 These costs would be charged to the respective budget codes based on
approved maintenance service requisition.

Training and Staff Development

2.20 Training, dissemination and staff development cost would be charged to the
respective budget codes at actual basis.

Printing and Publication

2.21 These costs would be charged to the respective budget codes based on
actual cost.

Capital Expenditure
2.22 Cost would be charged to the respective budget code based on on-line
requisition at actual cost including applicable procurement and materials
handling cost.

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Overhead
2.23 Overhead recoveries would be made at a percentage applied on project direct
cost based on agreements with the donors.

Cost Transfer
2.24 Cost transfer would be done transfer cost to appropriate budget code keeping
the General Ledger (GL) code unchanged.
Costing
2.25 Costing would be done for service centers that provide interdepartmental
services to other cost center e.g. transport, laboratories etc. based on
generally accepted costing principles so that the service center break-even
on an annual basis, if services are fully utilized.
2.26 The rates should be non-discriminatory i.e all internal and external users
would be charged with same billing rate. No discount or free service may be
allowed to any user.
2.27 All direct costs of service center operations, actually incurred and
documented, would be charged to the service centers. Expenses not
recorded in the service center would not to be used in the computation of the
billing rate.
2.28 All service center internal and external revenues must be credited to the
service center using the appropriate GL codes. In general, revenues from
external users would be in the form cash or cheque and revenues from
internal users would be recorded by way of journal entry.

Indirect Cost Rate Computation

2.29 In respect of research activities funded by any donor/agencies and pursued
by the scientific divisions, the Centre being a ‘Not for Profit Organization’
needs financial support which should invariably cover direct and indirect costs
relating to the projects and activities.
2.30 Indirect cost rate for the Centre would determine on yearly basis. This rate
would be used to negotiate with donors.

3.00 EXECUTION, APPROVAL AND MONITORING

3.01 RO and PIs would be responsible to review the cost reports on monthly basis
and ensure that all costs are charged in to the appropriate budget codes.
3.02 ROs would notify the AOs for any deviation in budget line. AOs would be
responsible for cost transfer and preparing cost adjustment vouchers. Budget
Coordinator/Manager B&C, Controller B&C, and Director Finance would be
responsible for review, approval, and authorization respectively.

3.03 Service providing units would maintain detail records (requisition etc.)
supporting charges of interdepartmental service to internal and external
users. Data Entry Operator / Data Management Supervisor would be
responsible for input, checking, editing and processing of interdepartmental
service related data under supervision of System Analyst.

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3.04 Cost Analyst would be responsible for computing interdepartmental services

rates under supervision of Manager, Budget and Costing. Director, Finance
would be responsible for review and approve service centers budget, billing
rate computation.
3.05 Director, Finance would recommend to the Executive Director for approval of
applications to establish new service center and the continuation of existing
service centers including billing rates.
3.06 Cost Analyst would be primarily responsible to compute the indirect cost rate,
Manager B&C would be responsible for review and Director, Finance would
authorize.
3.07 Director Finance would monitor all business peocess using FMFS and other
reports.

4.0 DEFINITION
4.01 Break-even Point refer to a financial position where the total revenues from
internal and external customers is equal the total operating expenditures of a
service center in a fiscal year.
4.02 Billing Rate refers to the rate per unit of a activity charged to customers to
recover the costs associated with providing services.
4.03 Cost Center refers logical grouping of one function/major business process
and/or organizational unit into a common pool for the purpose of identifying
the cost incurred for performing the function / business process.
4.04 Costing refers to the computation of billing rate or cost per unit of service
provided by Interdepartmental service areas based on financial data and
other quantitative information.
4.05 Direct Costs are those costs that can be accurately and wholly identified with
particular projects i.e. if the project is discontinued, those direct project costs
would not be incurred.
4.06 External Users users include outside of the organizational/administrative
structure of the Centre.
4.07 Indirect Cost (Overhead Pool) consists of those costs that cannot be clearly
charged to specific project without microanalysis of expenditures. These costs
would require considerable analysis and judgment in determining any
allocation to any specific project.
4.08 Indirect Cost Rate refers to the ratio of total indirect cost to its allocations
base, (direct cost) expressed as a percentage. The indirect rate serves as the
vehicle for reimbursement/funding of indirect cost.
4.09 Internal Users include users who are part of the organizational/administrative
structure of the Centre, including research, and administrative departments/
units.
4.10 Net Gain represents the excess of total internal and external revenues over
total expenses.
4.11 Net Loss represents the excess of total expenses over total internal and
external revenues.
4.12 Personnel Cost includes basic salary, allowances, benefits, subsidies and
tax.

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4.13 Service Center Direct Costs include costs that can be identified directly to
each service or product and could include personnel, consumables, utilities
and other allowable costs.

5.00 DOCUMENTS & RECORDS

The document and records should be used and reports to be generated in
connection with Costing and Cost Allocation are listed below:

Para Descriptions Annexure

Ref. Ref.
Cost Allocation
5.01 Time Sheet (Cost Allocation Table) CCA-SC-01
5.02 Edit List of Fixed Time Sheet (Local & International) CCA-SC-02
Para Descriptions Annexure
Ref. Ref.
Cost Allocation

5.03 Personnel Cost Allocation Report CCA-SC-03

5.04 Salary Details by Employee by Budget Code CCA-SC-04
Cost Transfer
5.05 Cost Adjustment Voucher CCA-SC-05
Costing
5.06 Cost Recovery Advice CCA-SC-06
5.07 Edit List of Telephone, Mobile and Intercom CCA-SC-07
5.08 Interdepartmental Recovery Report by Service Department CCA-SC-08
5.09 Income Expenditure Statement by Budget Code CCA-SC-09
5.10 Interdepartmental Cost Register CCA-SC-10
5.11 Present List of Interdepartmental Billing Rates CCA-SC-11
5.12 Computation Basis of Each Interdepartmental Billing Rates CCA-SC-12
Indirect Cost Rate Computation
5.13 Expenditure Statement for Restricted Budget Codes CCA-SC-13
5.14 Expenditure Statement for Unrestricted Budget Codes CCA-SC-14
5.15 Computation of Indirect Cost Rate CCA-SC-15

6.00 PROCEDURES FOR COST ALLOCATION

6.01 An approved agreement should lay out the effort estimate in terms of
percentage of time involved per month, duration and corresponding estimated
cost.
6.02 Based on approved agreement and as authorized by PI, AOs should update
time sheet (cost allocation table) of each staff member (refer Annexure CCA-
SC-01). The cost allocation table should laid out the allocation percentage to
one or more budget codes for each month in a year.

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6.03 Based on certification by PI and changes approved by donor AOs should

update time sheet (cost allocation table) each month before monthly cost
allocation process.

6.04 Manager, Payroll should notify by e-mail the cut-off date to Manager, B&C for
updating Bangladeshi International employee’s cost allocation each month.

6.05 AOs should update and Manager B&C should check Bangladeshi
International Employee’s time sheets based on efforts estimate laid out in
approved budgets and in accordance with policy guideline within the cut-off
date.
6.06 Budget Coordinator would take print out of Allocation Tables of Bangladeshi
Internationals upon confirmation of payroll processing from Manager, Payroll.
These print out would help controlling any changes in Allocation Table (if any)
at month end allocation processing
6.07 Once the monthly payroll is processed Manager, Payroll should made
monthly provision for all staff.
6.08 System Analyst should process all personnel related interdepartmental
services and update the table.
6.09 By the end of the month System Analyst should update employees allocation
table and should generate edit list of fixed time sheet (refer Annexure: CCA-
SC-02).
6.10 AO(s) under supervision of Budget Coordinator should make necessary
correction in cost allocation table by the end of month based on time sheet
provided by PIs and approved budget before completion of monthly cost
allocation process.
6.11 System Analyst should complete cost allocation process by 7th of the following
month and personnel cost should be allocated through ERP System using the
accumulated personnel cost and on-line time sheet (cost allocation table).
6.12 Monthly ‘Personnel Cost Allocation Report’ (refer Annexure CCA-SC-03)
should be generated by employee by budget code for future record.
6.13 AOs should review this report to identify the unallocated % and can advise PI
to take necessary action and report to Manager, B&C and Controller B&C, if
required.
6.14 AOs should also generate ‘Salary Details by Employee by Budget Code’
(refer Annexure-CCA-SC-04) to review cost in details by employee against
respective cost centre i.e. budget code for any month.
6.15 All other expenditure should be allocated to budget codes as and when the
vouchers are posted in GL codes. For each and every voucher a budget
codes should be used along with the GL code (expenditure head) to allocate
cost to the cost center i.e. budget code.

6.16 All non-personnel Interdepartmental service costs should be allocated to

budget code based on interdepartmental process as detailed in Section-C of
Chapter 6 of this manual on a monthly basis.

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7.00 PROCEDURES FOR COST TRANSFER

7.01 Cost transfer should be necessary in the following cases:
● Over and under allocation of cost;
● Cost allocation in a wrong budget code;
● Change in budget;
● Amendment of budget by donor;

7.02 Cost transfer would be effected by using Cost Adjustment (CA) Voucher.
7.03 PI would write to Manager B&C for any cost transfer with justification and
supporting documents.
7.04 If more than one department / unit are affected by the adjustment, the
department initiating the request would be also responsible for informing all
affected parties. This should be accomplished by taking concent from other
departments/unit with a copy of the memo sent to the Controller, B&C.
7.05 AOs should prepare CA voucher (refer Annexure CCA-SC-05) based on
memo from PIs subject to approval of Controller, B&C and in compliance with
donor agreement through ‘ERP System’.
7.06 AOs should select ‘Cost Voucher’ link under ‘Budget & Costing’ menu to open
cost voucher form AOs should click ‘Next Control’ button or press F3 key to
open a new form. A voucher number should be auto generated with date,
time & posting date. Then AO should select currency code; input document
receive date, time, narration, select budget code, account code, employee
code (if case of employee) input description, debit amount and credit amount.
7.07 The AO should click validate button, drop down the function button and click
authorization. If the voucher required to be edited after sent for authorization
the CA voucher should be rejected.
7.08 Manager, B&C should review the hard copy of CA voucher and submit to
Controller B&C within a working day after creation the voucher.
7.09 Controller, B&C should approve the voucher on-line based on hard copy of
voucher and other documents. Finally Director, Finance should authorize
based on predefined workflow in ‘ERP System’.
7.10 Senior Data Management Supervisor should post CA voucher based on
supporting documents related to the approved CA voucher.

8.00 PROCEDURES FOR COSTING

8.01 PI should submit request to Director, Finance for establishing new service
center for providing interdepartmental services with details of types services,
annual budget and justifications.
8.02 Cost Analyst should review annual budget, types of services and justfications
mentioned in 8.01.
8.03 Cost Analyst should discuss methodology with Director Finance and develop
computation based on generally accepted costing principles. Cost Analyst
should obtain necessary information e.g. cost component, no of services,
market rate (if available) from the service unit heads/PI. Cost Analyst should
compute the billing rates for the new service center.

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8.04 On completion of computation of billing rate for service area the draft should
be provided to the Unit head, PI for review, feedback and acceptance.
8.05 Director, Finance should approve and recommend to the Executive Director
for autorization.
8.06 Cost Analyst should identify batch name, debit and credit account code for
the new service center in consultation with Manager B&C and System Analyst
which should be approved by Director Finance.
8.07 On an approval of Director Finance, System Analyst should change the chart
of accounts.
8.08 Presently the following interdepartmental services are available:
• Audio Visual Services
• Bio Medical Engineering Cell
• Bio-Chemistry & Nutrition
• Computer Information Services
• Clinical Bio-Chemistry
• Clinical Microbiology
• Clinical Pathology Laboratory
• Employees Clinic - Dhaka
• Employees Clinic - Matlab
• Electrical and Telecom Engineering Services
• Environmental Microbiology – SS
• Estate Office for Renting House
• General Maintenance
• Guest House Services
• Hospital Patient Food - Dhaka
• HSID Data Management Services
• Immunization Services
• Information Services Section
• Land Transport – Dhaka
• Land Transport – Matlab
• Microbiology Lab - Matlab
• Matlab Clinical Research
• Media & Lyophilization Services
• Micro Biology Lab
• Molecular Biology
• Nutrition & Rehabilitation Dhaka
• Patient Study - Dhaka
• Patient Study Matlab
• PABX, Mobile Phone Services
• Procurement and Materials Services
• Publication Unit
• ROTA virus Test
• Specimen Reception Services
• Staff Canteen – Dhaka
• Staff Canteen – Matlab
• Traveller’s Clinic
• Travel Support Service
• Training Centre - Matlab
• Vehicle Maintenance Service

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• Water Transport – Matlab

• X-Ray and ECG
8.09 PI should maintain records of service provided with supporting requisition and
forward periodically cost recovery advice (refer Annexure CCA-SC-06)
indicating budget code and employee code (in case of personal use) to
System Analyst for incorporation the financial system through
interdepartmental cost recovery process.
8.10 Manager Electrical and Telecommunications, and Manager Travel & Estate
should provide PABX and mobile phone user edit list (refer Annexure CCA-
SC-07) respectively with budget code to Manager B&C, at the end of each
month.
8.11 Manager, B&C should check and forward to System Analyst for updating
master with budgetary clearance by AOs at the end of each month before
monthly processing.
8.12 Interdepartmental Recovery Report by Service Department (refer Annexure
CCA-SC-08) should be generated on monthly basis by service provider.
Costs should be debited to user department / unit and corresponding
(recovery) should be credited to the service provider department / unit
through the system.
8.13 Income Expenditure statement by Budget Code (refer Annexure-CCA-SC-09)
should generated through system that indicates income against expenditure
by budget code. This report is mainly used by PIs, Division Directors of
service provider and self-sustaining budget codes. Director, Finance should
review this report for decision-making and monitoring performance of each
service area.
8.14 Reviews of all service center net cost should be done by Cost Analyst twice in
every year and report to Director, Finance. The purpose of these reviews is to
determine whether the service center are operating at break even point
having a surplus or runing in a deficit.
8.15 Based on the result of the review Director Finance should discuss with PI of
the service centre.
8.16 Interdepartmental Cost Register (refer Annexure CCA-SC-10) should be
generated. Cost Analyst could use this register to review, check and further
computation of billing rates.
8.17 Cost Analyst should review the billing rates for all service once in every two
years with assistance from PI and notify Director, Finance.
8.18 Present list of Interdepartmental billing rates are annexed (refer Annexure
CCA-SC-11).
8.19 Basis of computation of each Interdepartmental billing rates are annexed
(refer Annexure CCA-SC-12).

9.00 POCEDURES FOR INDIRECT COST RATE COMPUTATION

9.01 All direct costs i.e. restricted funding by budget codes should be grouped into
a direct cost pool.

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9.02 The yearly expenditure statement for restricted budget code (refer Annexure–
CCA-SC-13) should be generated in ‘ERP System’. This report should
summarized direct cost by budget code and by GL groups.
9.03 Costs, which are incurred for a common or joint purpose benefiting more than
one objective and not readily ascertainable to any particular objective, are
accumulated in a group of budget codes.
9.04 The yearly expenditure statement for unrestricted budget codes (refer
Annexure CCA-SC-14) should be generated in ERP System. This reports
show summarized unrestricted cost by budget code and by GL groups.
9.05 From the unrestricted cost pool the cost of research protocols funded from
unrestricted fund is deducted by the item to arrive at indirect cost pool.
9.06 The following costs are deducted form indirect cost pool and direct cost pool
to arrive at indirect and direct cost base respectively.
• applicable credit (e.g. other receipts, exchange gain);
• capital expenditure;
• financial charges e.g. interest on overdraft;
• entertainment expenses, if any; and
• bad/doubtful debts.

9.07 Indirect cost rate is determined by dividing indirect cost base by direct cost
base and expressed as a percentage of direct cost.
9.08 Indirect cost rate computation (refer Annexure CCA-SC-15) for 2006 is
annexed as an illustration.

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