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Topics: Estimating, Procurement Management
How can you split the costs for the procurement of a vehicle over several projects?
I am working in the area of development cooperation. We would like to buy a new car for the mission, but we there is no budget line to cover the entire purchase price. We have to cover the costs from multiple multiannual projects. What questions come to your mind in such a situation?

Your kind help would be very much appreciated!
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How are you currently managing your project budgets? Are you using MS Project? MS Excel? Or are you using something else?
"Color of money" is a potential issue. I am by no means a finance expert, but different projects may have different accounting requirements. For example, in the US, there are different tax implications for expenses when a project is still in a development phase, than when customers are signed up and the project is generating revenue. I would get accounting and finance specialists involved.
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1 reply by Pascal Houben
Jun 20, 2019 12:28 PM
Pascal Houben
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Hey Keith,

thanks for your thoughts on this. Never heard about the term 'color of money'. Can you please explain a little bit further what do you mean by this? I am sorry but as a German I sometimes struggle with some English terms ... :-)
Hey Eric,

thanks a lot for your quick response. I haven't been thinking about IT related issues yet.

My question is rather a foundational one. We receive funding from different donor organizations for the implementation of different projects. We have to finance the purchase of a new car for our mission that will be needed for all these projects. However, as per guidelines of our sponsors, we don't have the possibility to fund the vehicle entirely via one project only. So, I have to become creative and figure out how I can split these costs proportionally among all projects and how to 'sell' the respective cost lines to our sponsors. From project to project the car usage may differ quite a bit depending on the need for transportation.

I hope this explanation sheds more light on my question. Thanks!
Jun 20, 2019 12:10 PM
Replying to Keith Novak
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"Color of money" is a potential issue. I am by no means a finance expert, but different projects may have different accounting requirements. For example, in the US, there are different tax implications for expenses when a project is still in a development phase, than when customers are signed up and the project is generating revenue. I would get accounting and finance specialists involved.
Hey Keith,

thanks for your thoughts on this. Never heard about the term 'color of money'. Can you please explain a little bit further what do you mean by this? I am sorry but as a German I sometimes struggle with some English terms ... :-)
Color of money is a term used to describe different categories of expenses such as R&D vs. production, and labor vs. materials, that are treated differently by accounting/fiance. An example would be how capital expenses like a car lose value over time, and that depreciation is written off on taxes as a loss.

Because they are treated differently, they must be handled separately. You can't "mix money of different colors", meaning if I don't have any money left in the budget from labor, you can't take money budgeted for capital expenses, even though it's going to the same project. There a number of situations where the accounting policies require keeping budgets separated between different parts of a project, or between different projects, like if you accounted for the car under one project, but used it on several projects.
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1 reply by Pascal Houben
Jun 20, 2019 2:34 PM
Pascal Houben
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Keith,

thanks for the clarification. Much appreciated.
Pascal,

You can split it based on percentage use of the vehicle, for example by miles driven associated with each project or the number of days/hours when the vehicle is used for the project. You can split it among few projects as needed based on your estimates. Also check online for cost allocation accounting models. It will help to see other cost allocation basis ideas.

Hope this helps.
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1 reply by Pascal Houben
Jun 20, 2019 2:33 PM
Pascal Houben
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Liliya,

thanks for the good advice!!!
Jun 20, 2019 2:22 PM
Replying to Liliya Sablukova, MBA, PMP
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Pascal,

You can split it based on percentage use of the vehicle, for example by miles driven associated with each project or the number of days/hours when the vehicle is used for the project. You can split it among few projects as needed based on your estimates. Also check online for cost allocation accounting models. It will help to see other cost allocation basis ideas.

Hope this helps.
Liliya,

thanks for the good advice!!!
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1 reply by Liliya Sablukova, MBA, PMP
Jun 20, 2019 3:34 PM
Liliya Sablukova, MBA, PMP
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You are welcome!
Jun 20, 2019 1:56 PM
Replying to Keith Novak
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Color of money is a term used to describe different categories of expenses such as R&D vs. production, and labor vs. materials, that are treated differently by accounting/fiance. An example would be how capital expenses like a car lose value over time, and that depreciation is written off on taxes as a loss.

Because they are treated differently, they must be handled separately. You can't "mix money of different colors", meaning if I don't have any money left in the budget from labor, you can't take money budgeted for capital expenses, even though it's going to the same project. There a number of situations where the accounting policies require keeping budgets separated between different parts of a project, or between different projects, like if you accounted for the car under one project, but used it on several projects.
Keith,

thanks for the clarification. Much appreciated.
Your car can become part of your overhead, just like an office would be. An accountant would work it out for you.
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1 reply by Pascal Houben
Jun 20, 2019 2:46 PM
Pascal Houben
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Stephane,

that sounds also very appealing to me. Thanks!
Jun 20, 2019 2:38 PM
Replying to Stéphane Parent
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Your car can become part of your overhead, just like an office would be. An accountant would work it out for you.
Stephane,

that sounds also very appealing to me. Thanks!
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