Engineering Encyclopedia

Saudi Aramco DeskTop Standards

Expenditure Reporting

Note: The source of the technical material in this volume is the Professional
Engineering Development Program (PEDP) of Engineering Services.
Warning: The material contained in this document was developed for Saudi
Aramco and is intended for the exclusive use of Saudi Aramco’s employees.
Any material contained in this document which is not already in the public
domain may not be copied, reproduced, sold, given, or disclosed to third
parties, or otherwise used in whole, or in part, without the written permission
of the Vice President, Engineering Services, Saudi Aramco.

Chapter : Project Management For additional information on this subject, contact

File Reference: PMT10305 J. McKissack
Engineering Encyclopedia Project Management
Expenditure Reporting

Contents Pages

INTRODUCTION................................................................................................................ 1

COST COLLECTION AND COST ACCOUNTING............................................................ 2

Cost Collection.......................................................................................................... 2
Labor Costs............................................................................................................... 2
COST COLLECTION AND COST ACCOUNTING............................................................ 4
Invoice Construction Contract Costs ......................................................................... 4
Material Costs ........................................................................................................... 4
Engineering Related Charges ..................................................................................... 5
Materials Related Charges ......................................................................................... 5
SAMS and LDOR Materials...................................................................................... 5
DC Materials............................................................................................................. 5
Construction Related Charges ................................................................................... 6
Invoicing Processing.................................................................................................. 6
Prorate Allocations.................................................................................................... 6
TYPES OF EXPENDITURE REPORTS.............................................................................. 7
AGL9 Series Expenditure Reports............................................................................. 7
AFTF Series Expenditure Reports ............................................................................. 7
ACAC Series Expenditure Reports ............................................................................ 7
MVX-36-03 Material Cost Report............................................................................11
Consolidated Microfiche...........................................................................................11
Research of Mischarges............................................................................................11
Procedures for Error Correction ...............................................................................11
Computerized Reporting System ..............................................................................14
Data Availability and Schedule .................................................................................14
PROJECT STATUS REPORTING......................................................................................15
Project Status Reports..............................................................................................15
Project Planning Update Report (PPU).....................................................................15

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Proposal Budget Item Summary Report (PBISR) .....................................................15

Project Completion Schedule (PCS) .........................................................................19
Monthly Project Update Report (MPU)....................................................................19
Budget Item Summary Report (BISR)......................................................................19
Project Status Reporting...........................................................................................19
PES/DES Reports ....................................................................................................23
Proposal Engineering Statistics (PES) Reports..............................................23
Detail Engineering Statistics (DES) Reports..................................................23
GLOSSARY........................................................................................................................26

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INTRODUCTION

This module introduces the Participant to the cost collection and accounting procedures, which
are used at Saudi Aramco to report the ongoing cost of capital projects and to prepare project
status reports. To accomplish this objective, we will discuss the applicable Company methods,
procedures and guidelines.

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COST COLLECTION AND COST ACCOUNTING

Cost Collection

After a Budget Item number, Job Order numbers, and phases are established in the financial
master, the accounting system will accept expenditures and produce cost reports. Charges against
capital projects are booked by entry code at whatever lowest phase levels have been established.
The booked charges are summarized into cost elements. Cost elements are summarized into cost
categories. Cost categories are summarized into Job Orders. Summary reports are produced on
both a JO and ER level that detail the approved funds, funds spent for the month, funds spent year
to date, and total funds spent through the life of the project.

Three TC (type code) accounts are associated with capital projects. Expenditures prior to ER
approval are TC-68. Expenditures after financial close-out are TC-67, Special Project Account,
which is discussed in the following module. In this module, the use of TC-60 accounts for funded
capital projects will be discussed. These accounts represent over 85% of the total funds spent by
the project. After ER funding, the TC-68 expenditures are charges to the TC-60 account, and
they will be reported in the various project cost reports.

Figure 1 illustrates the flow of cost collection charges. In that figure an example budget item, BI
1234, has been subdivided into job orders. Under phase 011, work is ongoing in contractor
engineering with charges accumulating in entry code 387, Arab/International Contractor
Engineering Services. As shown, invoices that are submitted for the related efforts of contractors
A, B and C are coded with account number 60-12341-011 and entry code 387. The use of entry
codes results in the proper accumulation, accounting and reporting of these costs.

Considerable thought must be given to the structure of the phases and entry codes to be used
during the life of the project. It is within this framework that all costs will be reported. The AFE,
56D, and ER estimate were described in previous modules. These documents are used to establish
the budget for the capital project. If the cost collection structure closely matches the ER estimate,
the cost engineer will be able to monitor expenditure progress against identified work units. When
used with forecasting the work remaining to be completed, the cost engineer can observe those
areas where significant cost deviations will occur and take early corrective action and minimize
project cost overruns or schedule slippage.

Labor Costs

Labor costs of Saudi Aramco employees performing work on capital projects are primarily
associated with the project departments, Maintenance Department, Inspection Department, and
Support Services Department.

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BI
1234

12340 12341 1234X JOs

PHASE/
PHASE IXX SCA

PHASE IIX

PHASE III

ENGINEERING MATERIALS CONSTRUCTION

SAPMT CONTRACTORS DC SAMS CONTRACTORS
MTS _
CONTRACTORS
_ _
U T P R A B

ENTRY CODES

308 309 330 387 ARAB/INTERNATIONAL

CONTRACTOR/
ENGINEERING SERVICES

MATERIALS ENTRY
TC PRIME ACCOUNTING No. ( JO ) SUB ITEM ( PHASE ) CODE

60 12341 111 387

CONTRACTOR "A" INVOICES CONTRACTOR "B" INVOICES CONTRACTOR "C"

Figure 1 Cost Collection Flow Chart

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COST COLLECTION AND COST ACCOUNTING

For SAPMT labor costs, each project department transmits monthly the total number of actual
hours worked by Saudi Aramco labor, against each JO/phase, to the manager of FA&WIPAD.
The SAPMT cost engineer verifies the job account numbers and actual worked manhours.
FA&WIPAD calculates the labor charges at a composite labor rate. The composite labor rate is
known as the Reallocated Labor Rate, which is subject to change annually. Only the actual work
hours, including overtime, are redistributed.

For contractors who are working in lieu of Saudi Aramco personnel and casual labor, the time
card system is used to determine the cost of labor to be charged to the project.

Maintenance, inspection and support services labor are reallocated, based upon the worked hours
that are shown in maintenance work orders or job logs. The rates are found in General Instruction
216.965 and are subject to annual change.

The payroll for United States dollar employees working out-of-Kingdom is transferred to the
ASC payroll. Actual costs, salary, allowances and other associated expenses are collected into an
ASC holding account and transferred monthly to the project account that is designated by the
SAPMT. The payroll for non-US employees is reallocated monthly by means of a memorandum
to FA&WIPAD that indicates the number of hours worked, the dollar amount to be reallocated,
the project account to be debited, and the department overhead account to be credited.

Invoice Construction Contract Costs

Non-Saudi Aramco employee labor costs are handled through the invoice processing system. The
invoice processing system is discussed later in this module. The charged rates are determined from
the contract with the labor supplier. The monthly time sheets and rates are verified by the SAPMT
cost engineer, approved by the Contracting Review and Cost Compliance Department
representative, and forwarded for payment and charge to the project.

Material Costs

The cost of DC, SAMS and LDOR materials is charged directly to the benefiting project. DC
material charges are collected in cost category P, while SAMS and LDOR material costs are
collected in cost category R. The collection of material charges in cost categories permits the
SAPMT to verify the charges in the respective material reports. Transfers between projects,
returns to AMS stock, and transfers to DC surplus materials result in credits to the project
material accounts.

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Engineering Related Charges

The engineering cost element consists of two cost categories: U for SAPMT engineering and T
for contractor engineering.

Materials Related Charges

The material cost elements consist of two cost categories: R for SAMS/LDOR material and P for
Direct Charge material.

SAMS and LDOR Materials

SAMS and LDOR material requirements are determined by the engineering design organization or
contractor and are reflected in material takeoff (MTO) documents. The MTOs are entered into
the material reservation system (MARS) as stock number allocations. MARS is an SAO-based
computer system that contains up-to-date storehouse material requirements for construction,
testing, and inspection. The MTOs are reserved and protected based upon material required dates.
Estimated requirements for long lead time material may be entered in MARS as bulk allocations
approximately one year prior to the material required date. Bulk allocations generate purchasing
activity if there is not sufficient stock on hand to satisfy requirements.

Material takeoffs are assigned to phase 099 that is not used for cost segregation and charges are
not recorded against it. As requirements are defined, the MTO is divided into the legitimate
phases where phase numbers by JO are assigned. After legitimate phases are assigned, the
expenditures will appear under the proper phases in the material cost reports.

DC Materials

DC materials are procured by the project design offices, which submit requisitions to the
appropriate purchasing department. The requisitions are usually prepared from a formal
assessment of the user's material needs, such as a list of material requirements contained in the
project proposal. The majority of the DC requisitions are generated by out-of-Kingdom design
offices and processed by the ASC Purchasing Department. While operating under TC-68 funding,
the design office may prepare purchase requisitions. Purchase orders, however, cannot be placed
until TC-60 funding has been approved and all required AFE approvals have been secured.

Purchase requisitions are input into the Purchasing and Traffic Information System (PATIS). The
PATIS system is used to track purchase order development and shipping information. PATIS
interfaces with the material costing system (MCS), which produces the EC15-02 material cost
report by using the information from the purchase requisitions and purchase orders. It is important
to note that the cost of materials as indicated in the EC15-02 does not included shipping charges;
therefore, the SAPMT must add all non-purchase order charges to determine total DC material
commitments.

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Construction Related Charges

The construction cost element consists of seven cost categories:

A construction contracts,
B MTS contractors,
E Saudi Aramco labor/US dollars,
F Saudi Aramco labor/Saudi Riyal,
H equipment usage,
K miscellaneous direct costs,
L prorates, reallocations and other indirect charges.
Invoicing Processing

Contractors and vendors submit their invoices to the Accounting Department. These invoices,
which are prepared to meet contractual and Saudi Aramco requirements, are processed in
accordance with the Saudi Aramco Accounting Manual and related general instructions. The
SAPMT cost engineer works closely with the assigned Material Supply Organization
representative, FA&WIPAD job accountant, and other responsible Accounting Department
personnel to process invoices and thereby to ensure that all company and contractual
requirements are met. The cost engineer also checks with the appropriate project engineer, to
determine the validity of invoice charges and the accuracy of the completed work claimed by the
contractor.

The cost engineer assigns a job order and phase number to the invoice and obtains the appropriate
approval. The original invoice and two copies are forwarded to Accounting for final processing. A
copy of the invoice is returned to the cost engineer by Accounting for logging and filing. The cost
engineer is responsible for ensuring that the invoice appears in the cost reports under the proper
job order and phase.

Prorate Allocations

The Engineering and Project Management prorate is calculated as a percentage of the total
project expenditures. The E&PM prorate is booked to phase 190 on a monthly basis.

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TYPES OF EXPENDITURE REPORTS

The are several series of expenditure reports that are available to the cost engineer. Only the type
code 60 reports will be discussed in the text that follows. The AGLI and AFTF series are also
available for type code 68 (preliminary engineering funding) and type code 67 (special project
account funding). Since they contain the same information discussed below and are similar in
appearance, they will not be discussed. A full description is available in the Saudi Aramco Cost
Manual.

AGL9 Series Expenditure Reports

The GLI9-60 is the monthly subledger report for type code 60 expenditures. It reflects all
construction project expenditures and itemizes incremental and cumulative charges by entry code
for each job order and phase. The GLI9-60 is useful to SAPMTs because it reports cost
information by accounting system classification, and it identifies both the voucher through which a
charge was booked and the source document generating that charge. Figure 2 illustrates a typical
page from the AGL9-60 report.

AFTF Series Expenditure Reports

The AFTF-05 is the monthly capital invoice cost report. It supports the AGLI9-60, and it itemizes
invoice payments by capital project (TC-60), job order and phase. Furthermore the report
provides a monthly listing of invoice cost that includes vendor or contractor name, contract and
invoice number and other related data. The AFTF-05 is not cumulative; therefore copies of each
month's report should be retained over the duration of a project. Figure 3 illustrates a typical page
from the AFTF-05 report.

The AFTF-05 can assist the SAPMT cost engineer who is responsible for verifying invoice
charges that are reported in the AGLI9-60 monthly subledger. By itemizing contractor name,
invoice number and contract number for each invoice, one can make a comparison may be made
between recorded expenditures and approved invoices.

ACAC Series Expenditure Reports

The ACAC series expenditure reports provide summary information that is compiled from data
that was used to generate the AGLI9-60 subledger for construction projects. The most useful
report in the ACAC series is the ACAC-06 which provides expenditure costs by ER category for
each job order. Expenditure data in the ACAC series permits a direct comparison with project
estimates and budgets which, in turn, is required for project management and cost control
purposes. The ACAC-06 report is also an excellent source of the summary numbers that are
required for the Monthly Project Update report. Figure 4 illustrates a typical page from the
ACAC-06 report.

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(insert page from AGLI9-60 as an illustration)

Figure 2 Sample Page From AGLI9-60 Monthly Subledger

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(insert page from AFTF-05 as an illustration)

Figure 3 Sample Page From AFTF-05 Monthly Capital Invoice Report

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(insert page from ACAC-06 report as an illustration)

Figure 4 Sample Page From ACAC-06 Expenditure Report

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MVX-36-03 Material Cost Report

The MVX36-03 material cost report reflects monthly expenditures for SAMS, LDOR, DC and
material transfer charges for all current job orders and phases. The MVX36-03 report is the best
source of information on new transactions for use in monitoring costs on a line item basis and for
researching questionable charges. Detailed information contained in the MVX36-03 report
supports the monthly AGLI9-60 expenditure report. The MVX36-03 report is not cumulative,
and, therefore, it reflects only the detailed costs that are incurred during the report month. Figure
5 illustrates a typical page from the MVX36-03 report.

Consolidated Microfiche

In addition to normal hard copies of the various reports, many Saudi Aramco cost reports are
placed on microfiche. Packed microfiche may contain at least ten various reports. The microfiche
is issued monthly for each job order. The microfiche provide a simple format for ease of use,
handling, storage and retrieval. Distribution of the interleaved microfiche reports takes place
about four days following the close of the previous month's books. The microfiche are distributed
to the individual cost engineer by the Project Controls Division of the Project Support & Controls
Department.

Research of Mischarges

The research of mischarges often requires examination of documents and records that are stored
in the voucher vault; therefore, the SAPMT cost engineer must maintain regular contact with
personnel in the Accounting Departments and Material Supply Organization. Prior to contacting
the job accountant or examining documents, the cost engineer should use the available cost
reports back to the original transaction. If an error is located, the voucher number, date, and batch
information should be recorded.

Procedures for Error Correction

Micharges are corrected by using Saudi Aramco form 774-9, Journal Entry - Correction of
Accounting Charges in Job Orders. Figure 6 illustrates this Form SA-774-9. An alternative
method is to write a letter to the FA&WIPAD job accountant that details the mischarge and
requests correction or transfer of the mischarges to the proper account.

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(insert page from MVX36-03 report as an illustration)

Figure 5 Sample Page From MVX36-03 Material Cost Report

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(insert contracting process flowchart as an illustration)

Saudi Aramco Form 774-9,

Figure 6 Journal Entry - Correction of Accounting Charges in Job Orders

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Computerized Reporting System

Most cost reports can also be obtained by using a personal computer (PC) equipped with a
mainframe connection. It is possible to download individual job order reports into the PC for
subsequent hard copy printing. This downloading provides access to the information several days
prior to receipt of the interleaved microfiche copies.

Data Availability and Schedule

The accounting vouchers close during the evening of the fifth working day following the end of
the month. The next morning, the Cost Services Division (CSD) issues update instructions to the
computerized cost reporting system. That afternoon, SAPMT personnel can access most
information.

Hard copy reports are prepared and sent to CSD usually by the seventh working day. Microfiche
is sent to CSD by the ninth working day, and it is distributed shortly thereafter to the individual
cost engineers.

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PROJECT STATUS REPORTING

Project Status Reports

Timely and effective project status reporting is a primary concern to an SAPMT. Reporting
responsibilities are most often handled by a business manager, who is assisted by a cost engineer
and a planning/scheduling engineer. Various Saudi Aramco cost reports, contractor reports, and
other related reports flow into the SAPMT and are used to generate several key project status
reports to Saudi Aramco management. Figure 7 illustrates SAPMT project status reporting.

During the proposal development and preliminary engineering stage (TC-68), a Project Planning
Update Report (PPU) report is prepared monthly, and, under certain circumstances, is
complemented by a Proposal Budget Item Summary Report (PBISR). Subsequent to ER funding,
a Monthly Project Update Report (MPU) is reported, and, under certain circumstances, is
complemented by a Budget Item Summary Report (BISR). A Project Completion Schedule (PCS)
is prepared by the scheduling engineer and information is taken from the PCS for incorporation
into the PPU, PBISR, MPU, and BISR reports.

Project Planning Update Report (PPU)

The Project Planning Update Report (PPU) is used by the SAPMT to communicate status
information on projects in preliminary design to their department managers. The PPU report
includes all project proposal work, preparation of an ER estimate, development of the bid
package, and other engineering activities that are accomplished under TC-68 funds. The first
report is submitted for the month following TC-68 funding approval. The report is prepared
monthly. The final report is submitted for the month in which any TC-60 funding is approved.
Figure 8 illustrates the PPU report (Saudi Aramco form 7057).

Proposal Budget Item Summary Report (PBISR)

The Proposal Budget Item Summary Report (PBISR) is used by the SAPMT to report significant
status information about Budget Items (BIs) that have budget brief cost estimates of $50 million
or more and have not received ER funding. The first report is submitted, as with the PPU, for the
month following TC-68 funding approval, and the final report for the month in which partial or
full ER funding is approved. The numerical information on the PBISR is extracted directly from
the PPU reports. Then, variances are calculated and reported, and appropriate comments are
added. PBISRs are reviewed within Engineering & Project Management and then by MANCOM.
Figure 9 illustrates the PBISR report (Saudi Aramco form 7036-1).

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Figure 7 SAPMT Project Status Reporting Flowchart

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Figure 8 Project Proposal Update Report, Saudi Aramco Form 7057-1

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(insert proposal budget item summary report as an illustration)

Figure 9 Proposal Budget Item Summary Report, Saudi Aramco Form 7036-1

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Project Completion Schedule (PCS)

The Project Completion Schedule (PCS) is the monthly progress plan for detail engineering,
material procurement, and construction. During the project proposal stage, a PCS is usually
developed in support of the budget brief. The PCS is prepared immediately after approval of ER
funding because the milestone dates are required for MPU and BISR reporting. The initial PCS,
revision 00, should be submitted with the first MPU. A revised PCS must be prepared if an
activity slips and has an impact on the BI onstream date. If slippage has no impact on the BI
onstream date, a revised PCS may be prepared at the discretion of the BI's responsible project
manager. When a JO is assigned to another department or project manager, a separate PCS is
prepared and updated by the assignment project manager. The overall progress plan for the total
BI scope is reflected on one PCS and approved by the responsible general manager. Figure 10
illustrates the Project Completion Schedule (Saudi Aramco Form 6974).

Monthly Project Update Report (MPU)

The Monthly Project Update Report (MPU) is used by the SAPMT to communicate project status
information to upper management. The first MPU is submitted for the month following ER
funding approval. The last MPU report is submitted when financial closure of TC-60 funds occur,
and this report must state in the comments section "This is the last report". Figure 11 illustrates
the MPU report (Saudi Aramco form 6975).

Budget Item Summary Report (BISR)

The Budget Item Summary Report (BISR) is used by the SAMPT to report summary level status
on active projects with ER funding (TC-60) of at least $50 million. A BISR is also required on an
active project with ER funding of at least $10 million but less than $50 million that has:
1) a forecast total cost exceeding approved funds by 10% or more,
2) a cumulative value of approved project change requests, additions and
deletions taken separately, than reach 10% of approved ER funds,
3) forecast onstream dates or ERC dates that have slipped three or more
months from the date last reviewed by the management committee or the
original plan, if not previously reported, or
4) forecast annual expenditures that exceed the approved capital plan by $10
million or more.

Project Status Reporting

The first BISR is submitted for the month following ER approval and the last report when
financial closure of TC-60 funds occurs. Figure 12 illustrates the BISR (Saudi Aramco Form
7036).

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Figure 10 Project Completion Schedule, Saudi Aramco Form 6974

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Figure 11 Monthly Project Update Report, Saudi Aramco Form 6975-1

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Figure 12 Budget Item Summary Report, Saudi Aramco Form 7036

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PES/DES Reports

Proposal Engineering Statistics (PES) Reports

Proposal Engineering Statistics (PES) reports are used to reflect all engineering that precedes ER
funding. The PES includes all engineering studies and other engineering prior to ERA, studies of
economic alternatives, models, the preparation of the ER estimate, development of the bid
package, and other engineering activities that are accomplished under TC-68 funds. The PES also
becomes a confidential exhibit in the quarterly review package. Figure 13 illustrates the PES form.

Detail Engineering Statistics (DES) Reports

Detailed Engineering Statistics (DES) reports are used to reflect all design office activities that
follow ER approval. The DES includes all engineering studies and models that are prepared after
ERA, drawings, computer aided drawings, material take offs, purchase requisitions, vendor
drawings, technical manuals, other design engineering, procurement of SAMS and DC material,
project control and support activities, and abandoned engineering. The DES also becomes a
confidential exhibit in the quarterly review package. Figure 14 illustrates the DES form.

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Figure 13 Proposal Engineering Statistics Report

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Figure 14 Detail Engineering Statistics Report

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GLOSSARY

BISR Budget Item Summary Report. A report for upper manage-ment

that provides a summary of the project status as of the month of
issue.
Cost An accounting procedure that divides entry codes into eleven
Category subdivisions for grouping by major types of accounting charges.
DC Direct Charge. A type of material that is purchased solely for a
specific use and not held in open stock inventory.
DES Detail Engineering Statistics. A report that is prepared to monitor
and evaluate the progress of a design engineering contractor.
LDOR Local Delivery Order Request. A type of material that is
purchased from sources within the Kingdom. LDOR material may
be for SAMS stock or specifically ordered for a project.
MARS The Material Reservation System is a mainframe accounting
system used by the Material Supply Organization to input material
takeoffs necessary to reserve material for a specific user.
MTO Material Takeoff. A form that is used by a SAMPT to enter
SAMS material reservations for a capital project.
MPU Monthly Project Update report. A report that is prepared by the
SAPMT to advise project management of the status of a project.
It contains information on progress against the approved
schedule, commitment and expenditures by cost element, and a
cash flow forecast. Space is provided for comments by the
project manager.
MTS Management Technical Services Contractor. A contractor that
Contractor provides personnel to be used by an SAPMT in lieu of Saudi
Aramco employees.
PATIS Purchase and Traffic Information System. A main-frame computer
system used by the Material Supply Organization to record direct
charge material purchase status. SAPMT personnel may inquire of
PATIS to determine the status of their material and, they may use
this information to develop their forecasts.
PBISR Proposal Budget Item Summary Report. A report that is prepared
by the SAPMT to report significant status information about BIs
with budget brief cost estimates of $50 million or more while
operating under TC-68 funding.

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PCS Project Completion Schedule. A progress plan that is prepared by

the SAPMT to establish major milestones and monthly percentage
progress for detail engineering, material procurement, and
construction.
PES Proposal Engineering Statistics. A report that is prepared to
monitor and evaluate the progress of a proposal engineering
contractor prior to ER funding. After funding, the DES is used
for a similar purpose.
PPU Project Planning Update. A report that is prepared by the SAMPT
to advise project management of the status of a project during
preliminary engineering (TC-68).
Requisition A document prepared by an SAPMT to advise the Purchasing
Department of direct charge material needs and field required
dates. The requisition is used for quotation development and
subsequent purchase order placement.
SAMS Saudi Aramco material system. SAMS material represents
cataloged materials in inventory and issued by the Materials
Supply Organization to projects, maintenance organizations, and
other users.
Slippage The amount of time deviation from the approved PCS progress
dates. Slippage is expressed in whole months.
Status The name for a group of reports that are prepared by an SAPMT
Reports to advise project management of the status of capital projects.

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