DHHS
Cost Allocation
Fundamentals
DHHS Controller’s Office
Cost Accounting Branch
2010
1
Types of Cost Plans




Indirect Cost Rate - DPH, Schools for the Deaf
Cost Allocation Plan (Non PA) - DIRM, Controller’s
Office, Central Administration, DSBDHH, Dix rent
Public Assistance Cost Allocation Plan (PACAP) DHSR, DDS, DSS, DMH/DD/SAS, DVR
In general, a greater variety of federal funding
sources and/or a greater variety of activities
performed indicates the need for a Cost Allocation
Plan rather than an Indirect Cost Rate.
2
Why Use Cost Allocation?


NC wants to maximize federal revenues but the
feds want to be sure they pay no more than their
fair share - cost allocation provides a way to
document costs justifiably attributable to various
programs.
Provides way for general administrative functions,
managerial and supervisory personnel to earn
federal funds based upon services performed or
employees supervised.
3
Where to Start?




Review Organizational chart. What do employees actually
do? With which programs do they work ? Who supervises
whom? Group like functions together into Cost Centers.
Identify available funding sources - what services/activities
are allowable under each source. Which programs
“benefit” from the services performed?
Choose statistical allocation bases. Analyze the functions
being performed. What information is already available
and what statistics will have to be gathered?
All activities in an RCC should benefit the same programs
and be allocated on the same basis. If staff costs are
included in an RCC, all staff must have the same
4
supervisor.
Examples of Allocation Bases

Staff/Support
Functions:
Purchasing - # PO’s
processed
IT - # workstations
maintained
Personnel, clerical support
- FTE’s served


NonEmployee:
Cost of space square footage
Motor Pool - miles
driven
Photocopying copies made

Direct workers:
Consistent, measurable
output - applications
processed, calls
received, case/recipient/
client counts, etc.
Timesheets
Supervisors: Positions supervised
5










Examples of Allocation Bases
Currently Used in DHHS
Division FTE’s
Positions supervised
# PCs
County worker time
Weighted data fields in EIS
Computer usage recorded
against specific application
codes
# of contracts
Calls received by program
# of transactions
County expenditures









Positions supported
Timesheets
Case counts - Medicaid,
Economic Independence;
Food Stamps, WF, etc.
Client eligibility - Foster Care:
IV-E, TANF, IV-B 1, etc.
Purchase Order lines
# of appeals hearings
# of items mailed
Systems operated
6
Direct charge
A Word about Direct
Charges and Allocating


In order to direct charge to a federal funding
source, all of the activities and all of the clients
being served (if applicable) must be eligible for
that funding source - for instance, EBT benefits
only eligible Food Stamp clients.
When you allocate costs to more than one
federal program, you must include ALL benefiting
programs.
7
Develop Cost Percentages for
each Cost Center

Develop percentages based upon allocation in
each cost center. Example: 1110264299
Purchasing and Support Services - 2 Positions
Allocated Based upon Purchase Order Lines Keyed
Step 1:
Funding Source
State Funds
Food Stamps
TANF MOE Admin.
Title IV-E Admin.
IV-B 1, Child Welfare
IV-D, Child Support
Title IV-B 2, Safe & Stable Families
Refugee Medical Asst.
Medicaid
SSBG
Chafee Independent Living
CAPTA
Community Based Family Resource Grant
Total
FRC
00
F1
T5
K1
35
39
43
68
C5
QA
7R
37
54
Lines
Keyed by
Funding
Source
(Per NCAS
Report)
189
46
133
15
23
805
37
13
2
7
2
3
5
1,280
% to
Total
14.77%
3.59%
10.39%
1.17%
1.80%
62.88%
2.89%
1.02%
0.16%
0.55%
0.16%
0.23%
0.39%
100.00%
Position
Equivalent
0.2954
0.0718
0.2078
0.0234
0.0360
1.2576
0.0578
0.0204
0.0032
0.0110
0.0032
0.0046
0.0078
2.00
8
Cost Percentages
(Con’t)

Step 2 : Use Percentages to Allocate Cost Total cost for month of January = $6,423.45
Funding Source
State Funds
Food Stamps
TANF MOE Admin.
Title IV-E Admin.
IV-B, Child Welfare
IV-D Child Support
Title IV-B II, Safe & Stable Families
Refugee Medical Assistance
Medicaid
SSBG
Chafee Independent Living
CAPTA
Community Based Family Resource Grant
Total
FRC
00
F1
T5
K1
35
39
43
68
C5
QA
7R
37
54
FFP
0.00%
50.00%
0.00%
50.00%
75.00%
66.00%
100.00%
100.00%
50.00%
75.00%
80.00%
100.00%
100.00%
Allocation Total Cost Federal State/State
Percentages Allocated Revenue
Match
14.77%
948.74
0.00
948.74
3.59%
230.6 115.30
115.30
10.39%
667.4
0.00
667.40
1.17%
75.15
37.58
37.57
1.80%
115.62
86.72
28.90
62.88%
4039.07 2,665.79
1,373.28
2.89%
185.64 185.64
0.00
1.02%
65.52
65.52
0.00
0.16%
10.28
5.14
5.14
0.55%
35.33
26.50
8.83
0.16%
10.28
8.22
2.06
0.23%
14.77
14.77
0.00
0.39%
25.05
25.05
0.00
100.00% 6,423.45 3,236.23
3,187.22
9
Step-Up Cost Example
Family Planning
Coordinator (2 FTEs)
RCC 2308
Family Planning
Program(3 FTEs)
Family Planning Admin.
Support (1 FTE)
RCC 2318
RCC 2312
(Direct Charge)
(Time Sheet)
10
Family Planning Admin Support
Time Sheet Summary
(per time record)
MCH Block Grant
Medicaid
Family Planning
WIC Admin
Preventive Health Block Grant
Sub-total
Leave,Other
Totals
FRC
AP
C3
FP
GE
PH
Totals
FRC
AP
C3
FP
GE
PH
RCC2312
Hours
10.45
66.91
21.69
15.94
69.00
184.00
Hours
Totals
10.00
64.00
20.75
15.25
66.00
176.00
8.00
184.00
RCC2312
Percent
5.68
36.36
11.79
8.66
37.50
100.00
Leave
TOTAL
Distr. RCC HOURS
0.45
10.45
2.91
66.91
0.94
21.69
0.69
15.94
3.00
69.00
8.00
184.00
8.00
184.00
RCC2312
Pos. Eq.
0.0568
0.3636
0.1179
0.0866
0.3750
1.0000
11
Employee Percentages

Family Planning Admin. Support
Funding Source
MCH Block Grant
Medicaid
Family Planning
WIC Admin
Preventive Health Block Grant
FRC
AP
C3
FP
GE
PH
Total
Percentage
5.68%
36.36%
11.79%
8.67%
37.50%
Position
Equivalent
0.0568
0.3636
0.1179
0.0866
0.3750
100.00%
1.0000
•Family Planning Program
Funding Source
FRC
Family Planning
FP
Percentage
100.00%
Position
Equivalent
3.0000
12
Family Planning Coordinator
(Step Up from Employees)
Funding Source
FRC
2312 FTE
2318 FTE
Total FTEs
Percentage
2308 FTEs
MCH Block Grant
AP
0.0568
0.0568
1.42%
0.0284
Medicaid
C3
0.3636
0.3636
9.09%
0.1818
Family Planning
FP
0.1179
3.1179
77.94%
1.5588
WIC Admin
GE
0.0867
0.0867
2.17%
0.0434
Preventive Health Block Grant
PH
0.3750
0.3750
9.38%
0.1876
4.0000
100.00%
2.0000
Total
1.0000
3.0000
3.0000
13
Components of the Cost
Plan
NC DHHS DSS Cost Allocation Plan
RCC: 3035




Organizational
Chart
Cost Center
Narratives
Allocation
Bases
Identification of
Benefiting
Programs
Section: V - AdFam
Title: Local Support - Adult Programs Representatives
Effective Date: 8-1-97 (retroactive to 7-1-97)
Annual Budget: $631,734.00
Replaces:
DCA Reference: NC DHHS DSS 97-7
Date Approved: 10-7-98
Description of Services Provided: The Adult Programs Representatives are responsible for
providing supervision and guidance to county departments of social services regarding the services
programs for aging and disabled adults and their families. The goal of the Adult Programs
Representatives is to enable counties to develop, implement, and strengthen Adult Protective
Services, In-Home Services, Adult Placement Services, Adult Care Home Case Management, AtRisk Case Management, State/County Special Assistance, and related services focused on
independence, self-sufficiency, and family preservation. The Adult Programs Representatives work
with the county departments to ensure compliance with Federal and State laws and policy and to
promote good practice standards.
Positions assigned to this cost center consist of (10) Social Services Regional Representatives.
Allocation Base Definition: Costs are allocated to State/County Special Assistance, SSBG Admin.
and Medical Assistance based on the ratio of filled positions in the 100 county DSS's.
Source of Statistical Data: Final distribution Report for DSS-1571 reports reimbursed to counties.
Time Period used: Prior Month
X Benefiting
Primary Program(s)
list:
SSBG Admin.
Medical Asst.
State - S/C-SA
14
Critical Elements of Narrative
The narrative is the only document that goes to the federal
agencies (DHHS: Division of Cost Allocation, ACF, CMS.
USDA, etc.) for approval. Key pieces are:


The cost center title. Seems elementary, but sometimes
RCCs are re-used and the title isn’t changed. It’s very
confusing to federal reviewers when the Description of
Services and the Title don’t match.
Description of services. Must be complete enough to explain
activity in cost center and must clearly relate to the funding
sources listed. Should not include NC acronyms or special
program names, terminology, etc.., unless they are defined.
15
More Critical Elements


Allocation base definition must provide enough
information to explain choice of statistics to
readers not familiar with detail of our processes.
Listing of funding sources.
 Titles
MUST correspond to federal terminology.
16
Plan Amendments


Required for organizational changes, adding cost centers,
change in activities resulting in change in benefiting
programs, adding or deleting a funding source.
Per OMB Circular A-87, Attachment D, Item D “State public
assistance agencies are required to promptly submit
amendments to the cost allocation plan to HHS for review
and approval. ...The effective date of the plan or plan
amendment will be the first day of the quarter following the
submission of the plan or amendment, unless another date
is specifically approved by HHS.”
See also 45CFR95.515
17
Amendments - Who
Does What?
Division Responsibilities:

Unit Supervisor
makes organizational changes, identifies change in activities,
identifies addition or loss of funding stream
 notifies other areas - Budget Office, Personnel, etc.
Personnel - prepares PD 105s or PD 118s as necessary.
Budget Office
 coordinates creation of new cost centers
 verifies funding stream changes
 prepares 606’s
 notifies Cost Allocation Branch and coordinates receipt of
information needed by Branch for CAP Amendment.
 prepares CAP Update Request form. (See next slide.)



18
CAP Update Request Form
CAP Update Request
 New Cost Center
Directions for Completing CAP Amendment Request
 Revision to Existing Center
Effective Date:__________________________
RCC # __________ Name ______________________________________Check if Title change
Data for New RCC or Reasons for Change (check all that apply) :
 Inactive
 Add positions
List:
Positions Charged to RCC:
 Delete positions:
 Narrative update
(explain in Justification)
 # Change
only – old
# __________
 Add
List:
 Supervising RCC
RCC # ________
Funding Sources:
 Delete
List:
Contracts:
 Add
List:
Programs or Areas Cost Center Benefits:
 All or  Other (List):

Delete
List:
Allocation Basis Requested:
Justification: (Include information on reorganizations, changes in State laws/mandates, changes in federal
laws/mandates, previous audit findings, guidance from State or federal agencies, etc.)
Requested by:
Section:
Program Section Official
Date:
Budget Officer
1. Check appropriate box to indicate a request for a new cost center or a change to an existing
center. Complete effective date. This should always be the beginning of a month.
2. Fill in the RCC number and title. If the request is for a new RCC, the Division Budget Office
will assign the number. Check the box as appropriate to indicate a change in the RCC title.
3. Complete the appropriate boxes in the Data section:
a. Inactive - a cost center that is no longer is use – and is not anticipated to be used for the
previous purpose – should be amended to be inactive.
b. Positions Charged to RCC – positions should be listed by classification, e.g. 4 Social
Services Program Consultants and 1 Office Assistant.
c. Narrative update – check this box and explain in the justification section if the only change
needed is a modification in the narrative. For example, the name of a lawsuit has changed
because of a change in Secretary (Alexander vs. Flaherty) or the name of a group of clients
has been changed (Thomas S. to mentally retarded/mentally ill [MR/MR]).
d. Supervising RCC – indicate the RCC that supervises the staff in the RCC being created or
indicate if the supervisory cost center has changed, thereby requiring an amendment. In the
case of non-personnel RCCs, this block should be completed to indicate the RCC
responsible for the activities in the RCC for which the form is being completed or, in the
case of contracts, the RCC of the contract administrator.
e. Funding Sources – list funding sources by the full, current title and indicate, if applicable,
any qualifiers, such as Administration, Training, etc.
f. Contracts – list contracts by Contractor.
g. For new cost centers the Supervising RCC and Funding Sources sections must be
completed. If the center will include charges for positions the Positions Charged section
must be completed and for centers that include charges for contracts the Contracts section
must be completed.
4. Check to indicate if the cost center benefits all functional areas and programs of the Division or
list the areas it benefits by section and/or funding source. For example, list Economic
Independence or Adult Mental Health if the cost center benefits all funding sources in those
sections. If the cost center only benefits specific funding sources, list those sources, e.g. TANF
and Food Stamps.
5. Indicate the allocation basis requested. In most cases this should be discussed in advance with
the Cost Accountant in the Cost Accounting Branch assigned responsibility for the Division.
Examples include: direct charge to one specific funding source, allocation based on positions
served or supervised, Area Program payments for all services or for a specific disability only,
County Worker FTEs, caseload by program, etc.
6. Complete the justification for the new center or for the change. The Cost Accountant in the
Cost Allocation Branch will use this justification as the foundation for the Cost Center
Narrative, so justifications should be as thorough as possible.
7. Fill in the name and Division Section of the person completing the form and indicate the date
completed.
8. Fill in the name of the Division Program manager and the name of the person in the Budget
Office with direct responsibility for the RCC.
19
Amendment Duties
(con’t)
Controller’s Office Responsibilities:


Cost Allocation Branch
 prepares or revises narrative description of cost center with
input from programmatic section and Division Budget Office.
 establishes or revises statistical base, if applicable, in
collaboration w/Budget Office and program section.
 prepares financial impact analysis for affected cost centers
 submits amendment to feds for approval
 updates cost allocation databases to incorporate changes
Federal Funds/Financial Reporting Branch
 establishes or inactivates federal fund codes if applicable
 processes federal draws based upon revised plan
 prepares federal financial reports
20
Mechanics of Cost Allocation
(What actually happens during the month?)


A/P processes invoices, Payroll processes payroll
- items to be cost allocated are tagged with FRC
99, direct charges are tagged with FRCs denoting
specific funding sources.
Division personnel submit required timesheets,
activity reports, logs, etc. from prior month to Cost
Branch. Various statistical reports are generated
by the Division & the Controller’s Office to develop
allocation percentages for cost centers.
21
What happens (con’t)



Cost Allocation prepares updated allocation
statistics in Excel workbooks.
Cost downloads or keys updated statistics
into Access databases. Near end of the
month, Cost prepares a simulated (“sim”) cost
allocation.
Various reports are processed following a sim
to check for keying errors, missing
validations, etc.
22
What happens (con’t)


When General Accounting and the Division
Budget Office confirm that all entries for the
month have been completed and are correct,
Cost prepares a non-simulated (“non-sim’) cost
allocation run that interfaces with NCAS
(“injects cost.”)
Injecting cost creates multiple automatic
entries that post revenues earned to the
applicable RCCs and affixes the appropriate
FRC to costs previously tagged with FRC 99.
23
How the entries look - Redistribution
Scenario # 1 Payment made from 1140-2460-99 FRC 99 to be redistributed:
a) A/P issues check for $10,000 to a vendor for printing services.
Account 532850
DR
CR
$10,000.00
Cash
DR
CR
$10,000.00
b) Cost injects and expenditures are allocated:
Account 537170
Center 1140-2460-99
DR
CR
$10,000.00
Account 537170
Center 1140-2460-XX where XX is new FRC
DR
CR
FRC 10
$286.00
FRC K1
340.00
FRC L2
403.00
FRC 35
96.00
FRC QA
8,871.00
FRC 7R
4.00
$10,000.00
24
Redistribution (con’t)
c. Cost allocation interface posts the earned revenues to the applicable RCC and the receivable to
Fund 1810.
53887K
53887L
53887F
53887Q
53887N
Center 1140-2460
DR
CR
(FFP 50%)
$170.00
(FFP 50%)
201.50
(FFP 75%)
72.00
(FFP 75%)
6,653.25
(FFP 80%)
3.20
7,099.95
53887K
53887L
53887F
53887Q
53887N
Center 1810
DR
$170.00
201.50
72.00
6,653.25
3.20
7,099.95
CR
d. End results:
Account 532850
DR
CR
$10,000.00
Account 537170
DR
CR
$10,000.00
$10,000.00
$0.00
FRC 99
DR
$10,000.00
CR
$10,000.00
$0.00
NOTE: The YTD balance for FRC 99 should always be $0 in the FRC expenditure report
(DAPG 2605) after the cost interface. YTD balance for account 537170 is also $0.
25
How the entries look direct charge
Scenario # 2 - Payment issued with FRC QA - Direct charge to SSBG
a) Accounts payable issues a check for $10,000 to a vendor for printing
1140-2461-QA
Account 532850
DR
CR
$10,000.00
Cash
DR
CR
$10,000.00
With a direct charge, the redistribution account is not used. The expenditure will already
show up in the FRC expenditure report (DAPG 2605) to the appropriate FRC.
b. Cost injects and the cost allocation interface posts the earned revenues to the applicable RCC and the
receivable to Fund 1810.
(75% FFP)
Account 53887Q
Center 1140-2461
DR
CR
$7,500.00
Account 53887Q
Center 1810
DR
CR
$7,500.00
26
Budgeting with Cost
Allocation

When transferring funds between Centers - even for what
would otherwise be a Type 14 internal 606 - must take into
account the relative amount of state $’s in each center.

For example, need to increase Office Supplies in the Director’s
Office (1110-1010-99) by $300. There is money available in the
Information Systems Manager RCC (1110-1020-99). However,
increasing $300 in center 1110-1010-99 only requires $78 in State
funds (uncapped funds can be increased with no problem and this
example assumes there is availability in all of the capped funding
sources, such as SSBG). Reducing office supplies by $300 in
center 1110-1020-99, however, frees up $134 of State funds.
27
SCHEDULE OF ANTICIPATED FEDERAL REVENUE FOR FUND BUDGET REQUIREMENTS, BY REVENUE OBJECT
For Division of Public Health
Based on the Divisional Cost Allocation Plan for the Month of:
FUND:
OBJ
============== = ========= ================== =================================== ======================== ============ ==========
NCAS Acct. No.
53886C
5388AP
5388BK
5388AK
5388CB
5388AQ
5388BC
5388CD
FRC Number:
C3
AP
PH
FP
GE
AQ
NC
WW
------- ------------------ -------------------------------------------------------------- ------------------------------------------- --------------------- -----------------RCC No.
|
|| FFP:
50.00%
57.14%
100.00%
100.00%
100.00%
100.00%
100.00%
75.00%
-------------------------- | ---------------- -|| ================================================== ======================== ============ ==========
RCC1010
|
$300.00 ||
3
7
24
8
10
12
1
3
RCC1020
|
$300.00 ||
0
21
15
7
6
7
8
2
============ ========== ====================== ========== == ========== =================
5388BJ
5388BQ
5388BN
5388CF
5388CM |
Total
Total
JJ
NL
FJ
JM
FM
|
Federal
NonCHECK
--------------------- ------------------ ---------------------------------------- ------------------ |
Share
Federal
Fed. + Non-Fed.
100.00%
75.00%
80.00%
100.00%
83.33%
|
Share - State
= Total
============ ========== ====================== ========== == ========== ================= ==========
1
148
2
2
1 |
222
78
300
0
98
1
1
0 |
166
134
300
28
Budgeting (con’t)

When budgeting new funding sources you must
consider step-up costs (overhead) associated
with supervisory and support positions as well as
the remaining indirect cost pools.
29
Questions?
30