Aug 28 Presentation 28.08.2014

8/11/2019 Aug 28 Presentation 28.08.2014

1/15

28th

August 2014

Cost Allocation (CA)Process Flow


2/15

2

Nature of Costs 3 H-Energy I/O List 8Rational & Purpose for CA 5 Allocation Order & Basis 9

Components of Common Cost 6 Allocation Process Flow Charts 10

Initial Booking of Expenses 7 Additional Points to be Reckoned 14

Agenda


3/15

Nature of Cost

Direct Cost

Direct cost are those costs that can be attributed directly to a specific project.Direct cost will be incurred directly from specific project company.Indicative list of direct cost is as follows:

Salary cost of project specific employees;Cost of project specific studies and professional fees;Travelling cost incurred for project;Communication expenses in relation to project specific employees;Project site office related expenses.

3


4/15

Nature of Cost

Indirect Cost

Indirect costs are those costs that are incurred for common or joint interest andcannot be directly attributable to a single project.Major component of indirect costs are G&A exp, cost of support servicedepartment, common asset usage cost, lease rent etc.Indirect cost are allocated to various projects through CA process.

From October 2013, major Indirect costs are incurred by H-Energy (till September2013 by HEGCPL) and are allocated to subsidiary companies on the basis of time,facilities utilized by them.

To the extent possible we should ensure that all cost should be project specificdirect cost so that allocation of expenses can be minimize. This will provide morecontrol to project head over direct cost and also help in reducing projects outflowby way of reduction in service tax.

4


5/15

Rational & Purpose for CA

Rational for CA

For arriving accurate and transparent cost of each project.Consistent and logical allocation helps in proper explanation of cost to internalas well as external stakeholders.

Cost of each project is subject to audit by internal/ external auditors.

Purpose of CA

To allocate cost of common resources & facilities like infrastructure, office,assets and cost of common support service department.To provide accurate information needed for decision making and costmonitoring.To present true and fair financial statements to internal as well as externalstakeholders.

5


6/15

Components of Common Cost

Cost of Common Assets: Till September 2013 common assets were procured byHEGCPL. Benefits of these assets are enjoyed by HEGCPL as well as various groupcompanies. Assets usage cost is allocated to other group Companies by HEGCPL.

Cost of Common Facilities: At Mumbai location, common costs are incurred at twolocations viz. Olympia office & KPO. These costs are incurred by H-Energy and

allocated to subsidiaries who have received the benefit.

Cost of Common Support Service Functions: All service functions are employed byH-Energy. These employees are working for H-Energy and other group companies.Their time needs to be allocated to respective projects in order to arrive at accurateproject cost. Support service function includes following:

6

HR/ Admn / Delhi office/ MDs office Procurement & Commercial

Accounts Business Development

Finance Projects

Legal Advocacy & sales


7/15

Initial Booking of Expenses

In SAP system, while booking cost selection of either Work Breakdown Structure(WBS) or Internal Order (I/O) is mandatory.

WBS and I/O s are used in following manner:

WBS: To track Budget Line Item (BLI) wise expenditure for the project i.e. direct cost ofproject.

I/O: Used for booking of cost to be allocated

7


8/15

H-Energy List of I/O

Following Internal Orders have been created in SAP for tracking departmentwise cost:

8

200601000000 H-Energy General 200601000010 H-Energy - Accounts

200601000001 G&A P&L Charge 200601000011 H-Energy Finance

200601000002 G&A Cost Olympia 200601000012 H-Energy Legal

200601000003 G&A Cost HKPO 200601000013 H-Energy Procurement

200601000004 Admin/ HR/ MD office 200601000014 H-Energy Advocacy

200601000005 H-Energy HAPL 200601000015 H-Energy Common

200601000006 H-Energy H-Gas 200601000016 H-Energy HEECPL

200601000007 H-Energy HREPL 200601000017 H-Energy HEPL200601000008 H-Energy IFTI 200601000018 H-Energy BD

200601000009 H-Energy - HEGCPL 200601000019 H-Energy Projects


9/15

Allocation Order and BasisOrder and basis of allocation of accumulated cost in respective I/O is as follows:

9

Sr. No. Cost component Allocation basis

1 Depreciation of assets On the basis of actual usage of assets

2 Allocation of G&A cost - Olympia Equivalent work station occupied at Olympia

3 Allocation of G&A cost - Knowledge Park Equivalent work station occupied at KPO

4 Allocation of Admin/ HR/ MD office costTotal head count of H-Energy group excludinghead count of these department

5 Allocation of Accounts & Tax teams cost Time sheet

6 Allocation of Finance teams cost Time sheet

7 Allocation of Legal teams cost Time sheet

8 Allocation of P&C teams cost Time sheet

9 Allocation of Advocacy teams cost Time sheet

10 Allocation of BD teams cost Time sheet

11 Allocation of Project teams cost Time sheet

12 Invoice raising on various group companies


10/15

Allocation Process Flow Charts

Allocation of cost accumulated in Olympia I/O

10

Office Supplies& Maintenance

OfficeElectricity Exp

Telephone,Int.net & Com

Lease Rent forOlympia office

Office SecurityCost

Repairs &Maintenance

Other G&Aexpenses

IO Admin/HR/MD

Empl Exp.

IO H-Energy-Legal

IO H-Energy-P&C

IO H-ENERGY-Advocacy &

Sales

At Period end, Allocation is done based on Equivalent workstations Occupied at Olympiaoffice and Internal Order is made ZERO

G&A-Olympia officeInternal Order

Depreciationon Common

Assets ofOlympia office

Initial Cost Booking


11/15

Allocation Process Flow Charts (Contd )

Allocation of cost accumulated in KPO I/O

11

Office Supplies& Maintenance

OfficeElectricity Exp

Telephone,Int.rnet & Com

Lease Rent forHKPO Office

Office SecurityCost

Repairs &Maintenance

Other G&Aexpenses

G&A Cost-HKPO InternalOrder

IO HEnergy-Accounts &

Tax

IOHEnergy-Finance

IOHEnergy-H Gas

IOHEnergy-HREPL

IOHEenergy-

HEECPL

At Period end, Allocation is done based on Total Equivalent workstations Occupied andInternal Order is made ZERO

Initial Cost Booking

Depreciationon Common

Assets of HKPOoffice


12/15


Allocation of cost accumulated in HR/ Admn / MDs Office I/O

12

Admin/HR/MD/Delhi Office Empl Exp I/O(Pooled cost)

IOHEnergy-Finance

Allocation based on Total Headcount including Project Site (Excl. Admin/HR/MD/Delhi Office) andIO is made ZERO

Allocated G&ACost from Olympia

Internal Order

IOHEnergy-Accounts

IOHEnergy-Legal

IOHEnergy-P&C

IOHEnergy-Advocacy &Sales

IOHEnergy-HEECPL

IOHEnergy-HAPL

IOHEnergy-H-Gas

IO HEnergy-HREPL

Travel &Accommodation

cost pertaining toAdmin/HR/MD

Depreciation onIT assets used by

Admin/HR/MDdepartment

Salary & Benefitspertaining to

Admin/HR/MDDepartments

IOHEnergy-HEGCPL


13/15


Allocation of cost accumulated in Support Service Department I/O

13

Support Service Department Internal Order(Pooled cost)

Accounts & Tax IOFinance IO

Legal IO, Procurement IOAdvocacy & Sales

Gas IO

Internal Order HAPL

Internal OrderH-Gas

Internal Order HREPL

Internal Order HEnPL

Allocation based on timesheets of respective Dept and Support Service DepartmentInternal Orders are made ZERO

Internal Order H-Energy

Internal Orders Made ZERO after raising ofInvoice (Pooled Cost)

-Allocated G&A-HKPO IO

-Allocated Admin/HR/MD/Delhi Empl Exp IO-Allocated Support service Department IOs

Invoices are raised and Internal Orders are made ZERO

Allocated G&ACost from H-KPO

IO

Travel & Accom.cost pertaining

to SupportService Dept

Depreciation onIT assets used bySupport Service

department

Allocated G&ACost from

Admin/HR/ MDEmpl Exp IO


14/15

Additional Points to be Reckoned

Allocation of Salary Cost by HR Department

Below mentioned employee related cost to be allocated is provided by HRDepartment by following similar process of cost allocation:

Salary CostFixed Reimbursement of Expenses

Employers Contribution to Provident Fund Full & Final SettlementBonus/ PLIESIC Contribution

Cost Allocation of Rent and Depreciation

From October 2013 onwards Depreciation of assets acquired prior to September30, 2013, KPO Rent is allocated from HEGCPL all other common costs are allocatedfrom H-Energy.

14


15/15

15

Documents

Aug 28 Presentation 28.08.2014