WORKING CAPITAL FUND
Sections
8.07.05 Working Capital Fund - General
8.07.08 WCF Invested Equipment
8.07.09 Production of Standard Reference Materials
8.07.10 Production of Standards Reference Materials on Demand
Appendix A - Working Capital Fund Functionality
8.07.01
PURPOSE
This subchapter discusses the control and management of the capital
fund aspects of the NIST Working Capital Fund (WCF). These aspects include
the distribution of indirect charges to cost centers as overhead; the purchase
and/or manufacture of equipment and associated amortization charges; the
production of Standard Reference Materials (SRMs); and SRM and storeroom
inventories until they are sold.
8.07.02
SCOPE
With the exception of the information on storeroom inventories, this
subchapter applies to both Gaithersburg and Boulder. At Boulder, the Mountain
Administrative Support Center provides storeroom services for NIST and
other participating agencies.
8.07.03
POLICY
a. As currently established, the NIST WCF and cost accounting system
permit: (1) the investment of any net working capital (excess of current
assets over current liabilities) in assets of equipment and inventories;
(2) the distribution of indirect costs; and (3) the production of SRMs.
These capital fund functions are to be managed through proper accounting
principles and procedures and for the optimum benefit of NIST.August 2,
2000.
b. Institute and laboratory overhead accruals and WCF investments in: equipment, production costs of SRMs, and value of storeroom inventories are restricted to the amount allocated by the Deputy Chief Financial Officer.
c. Monies for the investment programs are obtained through increased
WCF capitalization gained through the appropriation process, through the
recovery of previous investments via equipment amortization charges, through
sales of SRM and storeroom inventories, and through replacement surcharges.
Management determinations of the amount of investment that can be permitted
take into account the potential for replenishment of the invested capital
and cash needed for current operations.
8.07.04
RESPONSIBILITIES
a. The NIST Director authorizes the use of the Working Capital Fund
and grants permission to the operating units (OUs) to purchase or manufacture
equipment as an investment of the WCF.
b. The Deputy Chief Financial Officer, through the Financial Policy Division, estimates WCF investment levels at the beginning of the fiscal year, with changes as necessary throughout the year; and through the Budget Division, recommends to the NIST Director specific WCF levels for investment in SRMs, equipment, and storerooms, and funding of overhead programs; authorizes cost center levels and reviews spending; and includes base adjustments for capital programs in official NIST budget requests, when appropriate.
c. The OUs estimate laboratory overhead and amortization costs, establish rates, monitor spending, and adjust rates when necessary to reflect changing situations, ultimately ensuring that spending and collections balance; and ensure that obligations and accruals in WCF program cost centers are made on a timely basis and within authorizations.
d. The Standard Reference Materials Program transfers completed SRMs to inventory and controls the inventory of SRMs.
e. The Acquisition and Assistance Division manages the NIST storerooms
within the approved authorization level and controls general storeroom
inventories.
8.07.05
WORKING CAPITAL FUND - GENERAL
a. The NIST WCF was established by the Deficiency Appropriation Act
of 1950 and included in the NIST Organic Act as 15 U.S.C. 278b. The NIST
Organic Act was amended on July 29, 1985, to allow NIST to recover through
charges, and retain as earnings, the current replacement value of its equipment
and inventories.
b. The WCF was established to act as a revolving fund, initially financing all NIST activities. The WCF finances all costs and is reimbursed monthly from NIST appropriations and reimbursable sources. Through a detailed cost accounting system, the actual cost of work performed for each task is recorded and identified with the appropriate source of financing.
c. In addition to its function as a revolving fund, the WCF serves as a capital fund, permitting: the handling of annual and sick leave on an accrued cost basis (see Subchapter 8.08); the acquisition of equipment as an investment to be recovered through amortization charges; the distribution of indirect charges to cost centers as overhead; the production of SRMs; and holding of SRMs and storeroom inventories until they are sold.
d. The amount of available capital in the WCF consists of the original
appropriated capital, Congressionally-approved transfers from NIST appropriations,
and replacement surcharges (see Subchapter 8.08). Reimbursements to the
WCF in excess of costs are recorded as earned net income or profits to
the corpus of the fund. Profits or losses may arise from charging fixed
prices for certain services and from applying certain costs on a rate basis.
At the end of each fiscal year, the amount of any earned net income resulting
from the operation of the fund is to be paid into the general fund of the
U.S. Treasury, provided that such earned net income may be applied first
to restore any prior impairment of the fund to ensure the availability
of working capital necessary to replace equipment and inventories.
8.07.06
INSTITUTE OVERHEAD
a. Most federal agencies receive a direct appropriation for the cost
of general administration, program direction, staff services, and other
similar costs. A separate appropriation for these functions is not provided
to NIST, and therefore such costs must be distributed as an overhead charge
to all cost centers not funded by Institute overhead. For control and management
purposes, separate cost centers are established in supported organizational
units to record the cost of the various overhead activities.
b. There are four major categories of Institute overhead activities:
(1) General administration and staff services, including assessments from the Department of Commerce, support for the National Academy of Sciences Board on Assessment, executive direction, financial management, human resources, management and organization functions, information services, procurement and contracting, and other NIST-wide services such as mail distribution, duplicating services, safety and security programs, storeroom management, and motor vehicle management.
(2) Operation and maintenance of facilities, including janitorial services and physical security, plant maintenance, utilities, rental of facilities, and telephone services.
(3) Technical support, including occupational health and safety, administrative systems support, administrative printing, and library services.
(4) Activities where operating efficiency, practicality, or equality are gained by centralizing the activity.
c. NIST management decides which activities shall be funded through Institute overhead. All Institute overhead activities are reviewed periodically to ensure that they are financed by the most efficient and equitable method. Several criteria applied in this review are:
(1) Operating Efficiency - Is there a management advantage to using overhead versus direct charging for the services? In some cases, there is a more efficient use of resources if project managers pay the costs directly. However, in other cases, central financing and management achieve greater efficiency.
(2) Practicality - What is the most practical and inexpensive way to identify the customer and record the appropriate cost?
(3) Equity - Does the cost distribution mechanism place the costs where they belong? A service may be centrally provided to support technical programs, but, unless its use is widely dispersed, charging through overhead produces not only unrealistic but also inequitable charges.
d. The NIST Congressional budget, as appropriated, serves as the foundation for the overhead budget formulation process so that increases to the total overhead level track to the technical program expansion, the approved adjustments to base (ATBs), and other appropriately documented increases in "uncontrollable" costs. Certain expenses which are dictated by external circumstances, such as utilities, are designated as "uncontrollable" and, by definition, are authorized at the level required to cover the cost. The budget appropriation process offers the following mechanisms for securing funding and human resources for Institute overhead areas:
(1) ATBs are calculated to include the appropriation's share of inflationary increases in overhead costs; and
(2) Initiative pricings are calculated to include the impact of the larger technical program on overhead services and other expanded overhead needs.
e. Determination of Institute overhead authorization levels for the coming year is a multi-stage process. Each spring the Budget Division develops and issues base and nonbase target levels to each OU with Institute overhead support. These levels reflect adjustments such as pay raise and other ATBs, annualizations, and other anticipated changes.
OUs prepare and submit detailed budget requests for review and approval. Any increase over the target level is included as an initiative. The Budget Division evaluates each OU's overhead budget request and makes recommendations to management. The Director makes the final program level decisions which may be based on input from the Senior Management Board, the Business Council, and the Budget Division.
f. The funding allocated to each OU having an Institute overhead authorization is summarized at the OU and division levels and distributed as "operating budgets" to the OUs. Requests for changes in authorizations, including moving funds between labor and other objects, should be submitted in writing to the Budget Division. The Director for Administration and Chief Financial Officer and the NIST Director must be consulted before any action is taken which requires the commitment of additional funds in future years.
g. All overhead costs are paid directly from the WCF and the fund is reimbursed through several mechanisms:
(1) The Institute overhead rate is applied to the direct labor and benefits charged to cost centers in all funding sources other than Institute overhead and Construction of Research Facilities. The rate is determined by the Budget Division and is adjusted as necessary throughout the year to accommodate technical labor base fluctuations and approved overhead spending changes. The rate itself is not an indication of the relative size of the Institute overhead program (see Subchapter 8.08 Appendix F for the current Institute overhead rate).
(2) Outside organizations utilizing NIST space or overhead services are billed for their share of the cost according to cost rates determined by the Budget Division.
(3) A contracts/grants surcharge was enacted in 1994 as a third mechanism to offset costs. Several organizations within NIST have a proportionately larger share of contracts/grants activities and a proportionately smaller labor base in terms of total program dollars. To ensure that those organizations pay an equitable share of overhead costs, the contract/grants surcharge was implemented. The surcharge is applied to all grants and cooperative agreements in object class 41.1 and all contracts of $25,000 or more in object classes 27.0, 27.4, 27.7, 28.4, and 28.7. (See also Subchapter 8.08 Appendix B.)
h. Institute Overhead Cost Center Series - The following cost center numbering series must be used for Institute overhead cost centers. (See also Subchapter 8.02 Appendixes A and B.)
Controllable Base - xxxx950-974
Controllable Nonbase (from OU Reserve) - xxxx975-978
Controllable Nonbase (from NIST Director's Reserve) - xxxx979
Uncontrollable - xxxx980-989
Nonbase allocations are generally for only one year and are not allocated in a subsequent year.
i. Institute overhead cost centers operate on an accrual accounting
basis where both current-year and prior-year accrued costs must be covered
by collections. Estimated accruals should be submitted to the Financial
Operations Division at year-end for all goods and services received but
not yet accrued (e.g., maintenance contracts, telephone bills) so that
costs and the associated income are recorded in the appropriate fiscal
year (see Subchapter 8.08).
8.07.07
LABORATORY OVERHEAD
a. Laboratory Overhead Costs - Laboratory overhead cost centers
accumulate the costs of developing, managing, and coordinating the overall
program of the Laboratory. Costs properly chargeable to Laboratory overhead
may include:
(1) Salaries, leave, personal benefits and applicable overhead surcharges, and performance bonuses for Laboratory office staff, the Laboratory Director, division chiefs, senior management advisor, administrative officers and assistants, and secretaries; and other positions offering Laboratory-wide support;
(2) Other objects essential to effective Laboratory office operations, including supplies, materials, travel, and special Laboratory-wide program studies;
(3) Selected training costs of employees attending broad program training at the request of the Laboratory Director. Specialized training identifiable with programs within a division should not be charged to Laboratory overhead;
(4) Moving or reorganization costs resulting from the move of several offices or an entire division ordered by the Laboratory Director to consolidate operations, to provide space for new programs, or to improve overall Laboratory efficiency; and
(5) Equipment amortization expense.
Examples of costs not properly chargeable to Laboratory overhead include:
(1) Costs which can be identified with a specific program;
(2) Technical activities normally financed by direct appropriations or reimbursements; and
(3) Start-up or termination costs associated with technical programs.
b. Distribution of Cost - Laboratory overhead costs are offset by collections from benefitting cost centers using rates which are applied to labor and benefits charged to Laboratory cost centers each pay period. The laboratory has the option of handling amortization charges for WCF invested equipment either centrally or on a division basis, as described below.
Option I:
One laboratory rate is set to collect funds to cover all overhead costs, including equipment amortization expenses, at the laboratory and division level.
This option consolidates and monitors equipment amortization charges at the Laboratory level and is used if the distribution of the amortization charges at the Laboratory level is determined to be equitable. Biweekly equipment amortization charges are made to designated Laboratory overhead cost centers in the 910-919 series. Thus, all benefitting cost centers throughout the Laboratory will fund a share of the equipment amortization expense of the entire Laboratory.
Option II:
One laboratory rate is set to collect funds to cover overhead costs at the laboratory and division levels, including only equipment amortization charges assigned to the Laboratory office. All benefitting cost centers throughout the Laboratory fund a share of the equipment amortization expense of the Laboratory office.
Separate division equipment amortization overhead rates are set to collect funds to cover the amortization charges on equipment benefitting the division. All benefitting cost centers in the division fund a proportionate share of the biweekly equipment amortization charges made to designated cost centers in the 900-909 series.
This option should be used when separate monitoring of equipment amortization charges is required at the division level to ensure equitable financing.
Prior to the start of the fiscal year, each OU should determine if its current option is still appropriate. If a change is necessary, a memorandum should be transmitted to the Financial Policy Division, with a copy to the Budget Division, stating the option selected. The memorandum should be transmitted at the same time the cost center title file information is provided for the upcoming fiscal year.
c. Laboratory Overhead Cost Center Series - The following cost center numbering series must be used for Laboratory overhead cost centers (see Subchapter 8.02 Appendixes A and B):
--Laboratory Overhead Expense (options I and II) - xxxx910-919
--Division Equipment Amortization Overhead - Expense xxxx900-909 (option
II only)
d. Laboratory overhead cost centers operate on an accrual accounting basis where both current-year and prior-year accrued costs must be covered by collections. Estimated accruals should be submitted to the Financial Operations Division at year-end for all goods and services received but not yet accrued (e.g., maintenance contracts, telephone bills) so that costs and the associated income are recorded in the appropriate fiscal year (see Subchapter 8.08).
e. Establishing the Laboratory Overhead Rate - Form NIST-627, Notification of Predetermined Overhead Rate, is used to establish or change a Laboratory overhead or a division equipment amortization overhead rate. Form NIST-627 is prepared and approved in the OU, submitted to the Budget Division for review, and entered into the accounting system by the Financial Policy Division. Subchapter 8.08, Appendix D, contains the procedure for establishing predetermined overhead rates via Form NIST-627.
f. Adjustments for Prior-Year Local Overhead Profits or Losses - The net end-of-fiscal-year profit or loss associated with each OU's local overhead accounts (laboratory-level and division equipment amortization accounts) will be carried forward to the next fiscal year. This total net credit or debit will affect an OU's current-year laboratory account only, not division amortization accounts. Each OU should submit a memorandum to the Financial Policy Division, with a copy to the Budget Division, indicating the amount of net profit or loss to be carried forward and credited or debited to the OU's laboratory office local overhead cost center. The cost center number should also be supplied in the memorandum. In addition, the OU's overhead collections in the new fiscal year should be adjusted via Form NIST-627 to include the credit or debit received from the prior fiscal year's profit or loss.
g. Monitoring Spending - Each Laboratory overhead rate and division
equipment amortization overhead rate should be calculated by the OU to
result in collections equal to the total estimated costs. It is the responsibility
of each Laboratory to review the accuracy of its overhead rate(s) and to
revise the rate(s), as necessary, to prevent any significant over- or under-collections.
The Deputy Chief Financial Officer has the discretion to determine the
appropriate action to recover any loss to the WCF, including repayment
from STRS appropriated funds in the following fiscal year.
8.07.08
WCF INVESTED EQUIPMENT
a. Equipment costing $10,000 or more and with a useful life of more
than one year may be purchased or manufactured as an investment of the
NIST WCF (IE Funds). At the discretion of OU management, equipment costing
between $2,500 and $10,000 and with a useful life of more than one year
may also be purchased using IE funds. In all cases when WCF IE funds are
used, the equipment is carried as an asset rather than being charged as
a direct operating expense. The purchasing division or OU repays the WCF
through biweekly amortization charges.
b. Permission to purchase or manufacture equipment with Working Capital funds is granted each year to OUs by the Director in the form of a WCF invested equipment allocation. Allocation levels are based on the general availability within the WCF, specific allocations related to initiatives approved in the formal budget process, the prior-year unobligated balances for initiative related and special equipment allocations, and the ability of the OU to reimburse the WCF through the biweekly equipment amortization charge and surcharge (see Subchapter 8.08).
c. OU Directors are responsible for reviewing and approving the investment level of each subordinate unit. Authorizations must be made at the cost center level.
d. At the time that equipment is received or manufactured, the equipment is recorded in the Property System and in the General Ledger Accounts. A useful life is assigned for each piece of equipment based on guidelines established by the Department of Commerce and NIST.
e. Biweekly amortization charges, based on the cost and useful life of each item of equipment, plus surcharges, are made to the appropriate OU.
f. Further information on categories and management of equipment is
contained in Subchapter 7.01, Personal Property Acquisition, Accountability,
Control, and Utilization. Information on equipment amortization charges
to reimburse the WCF are contained in Subchapter 8.11, Equipment Financing.
8.07.09
PRODUCTION OF STANDARD REFERENCE MATERIALS
a. Standard Reference Materials (SRMs) are units certified for their
chemical or physical properties which are produced and issued for sale
by NIST.
b. The production of SRMs, including procurement and processing of materials, acceptance and homogeneity testing, measurement of properties, and certification, is financed by investing Working Capital funds. (Gifts and other-agency support may supplement the WCF investment.) The inventory of finished SRMs and the value of SRMs still in production (work-in-process) are considered to be assets of the WCF and are so shown in the NIST accounting statements until the SRMs are sold or determined to be obsolete. The WCF is reimbursed through the selling price of the SRM as it is sold.
c. The Standard Reference Materials Program submits its sales forecast and proposed budget to the Budget Division before the beginning of the new fiscal year, where it is reviewed and forwarded to the NIST Director through the Director for Administration and Chief Financial Officer with recommendations for action. The production allocation takes into consideration the following: (1) estimated return of funds to the WCF, using income (cost of goods sold and replacement surcharge) data from previous years; (2) additional capital appropriated by the Congress for transfer to the WCF specifically for production of SRMs; (3) the condition of the WCF and priorities assigned to other WCF uses; (4) the status of work-in-process; and (5) special needs within the Standard Reference Materials Program. The WCF allocation for production expenses is made annually by the NIST Director. If circumstances warrant, the WCF allocation may be adjusted by the Director during the course of the year.
d. Each OU submits a prioritized list by SRM requesting funds for SRM production to the Budget Division. The Budget Division allocates SRM production funding to each requesting OU based on the OU's three-year average of income generated through the sale of its SRMs. Form NIST-630, Request for Cost Center Authorization or Change, establishing SRM production cost centers in the 700-799 series should be submitted by the OU through the SRM Program to the Budget Division. In receiving the SRM Production allocation, the OU agrees to underwrite the allocation for any failed work-in-process with its STRS appropriated funds allocation. The OUs are responsible for ensuring that proper charges are made on a timely basis to authorized cost centers. Both the SRM Program and the OUs are responsible for monitoring spending by cost center to ensure that charges are within the authorized amount.
e. SRMs are transferred to finished-goods inventory only after all production
and certification activities have been completed. Inventory management
consists of both physical inventory control and computerized inventory
and sales recordkeeping.
8.07.10
PRODUCTION OF STANDARD REFERENCE MATERIALS ON DEMAND
To provide on demand to customers those SRM's which are not feasible
to produce in batches, the following procedures apply:
a. SRMs produced on demand are listed in the SRM catalog with a notation that they are available via special order only.
b. Customers call the SRM Program to order the SRM.
c. The SRM Program will inquire of the organizational unit the
length of time for certification
and convey this information to the purchaser. NIST guarantees
delivery within twelve months of placement of the order.
d. The SRM Program must receive an official purchase order from the customer stating the customer's intent to purchase the SRM.
e. The SRM Program sends a copy of the purchase order to the Budget Division and the organizational unit.
f. WCF Production funds are advanced from the Budget Division to the organizational unit to produce the SRM.
g. As with all SRM production work, the Laboratory's STRS will underwrite the WCF Production allocation for failed work-in process.
h. The Laboratory's STRS will underwrite the WCF Production allocation for cancelled orders due the Laboratory's inability to deliver the SRM within twelve months, as promised in the order.
i. All SRM surcharges are added to the price of the SRM.
8.07.11
STOREROOM INVENTORIES
a. NIST maintains inventories of frequently used supplies, materials,
equipment, and gases. These inventories are purchased by the WCF and are
carried as assets of the fund until they are requisitioned for use. At
that time, the cost of the inventory item and a replacement surcharge (see
Subchapter 8.08) are charged to the requisitioning cost center.
b. Ceilings are set by the NIST Director for the level of inventory that is authorized for the various storerooms. Ceilings are monitored by the Budget Division and the Financial Policy Division to ensure that they are not exceeded and to determine when they should be adjusted.
c. Management of inventories is assigned to the Acquisition and Logistics Division.
d. Storeroom inventory cost centers are established in the 920-939 series (see Subchapter 8.01 Appendixes A and B).