Riverside County California
Cost Allocation Plan Overview and Applications
August 27, 2008
Eric Parish & Sara Beemer
PRM, a Subsidiary of MGT of America, Inc.
Purpose of Presentation
1. Explain the cost allocation project including
preparation, applications and benefits.
2. Gain feedback and input from County
personnel.
3. Answer questions.
PRM / MGT Introduction
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Consulting firm focused on local government
cost issues
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Cost allocation plans
Indirect cost rate proposals
User fee studies
Rate studies
State mandated reimbursement (SB90)
26 consultants
140+ clients in 20 states
5th year providing cost allocation work for the
County
Cost Allocation Presentation Outline
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What is cost allocation
Benefits of cost allocation
Preparing a cost allocation plan
Continuous improvement process
Example results of a cost allocation plan
OMB A-87 cost plan vs. Full Cost plan
Applications of cost allocation
Questions throughout
What is Cost Allocation (Theory)
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Method to identify and distribute County
indirect costs
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Direct costs (specific)
Indirect costs (shared)
Administrative
 Support
 Overhead
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What is Cost Allocation (Theory)
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Direct vs. Indirect
Direct costs
Costs that can be assigned, or directed, to a
specific task, activity or program
What is Cost Allocation (Theory)
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Direct vs. Indirect
Indirect costs.
Costs that cannot be assigned, or directed, to a specific task,
activity or program.
Costs incurred for a common or joint purpose benefiting more
than one task, activity or program.
Indirect costs cannot be directly assigned without making an
effort disproportionate to the results achieved.
What is Cost Allocation (Theory)
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Accomplished through an annual cost
allocation plan
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Concept recognizing operating programs should
pay for the general fund County support received
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Document identifying and distributing County
indirect (administrative, support, overhead) costs
to benefiting departments/divisions/programs
Benefits of Cost Allocation
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Recover allowable indirect costs from federal and
state programs
Allocate appropriate indirect costs to other funds,
programs or activities
Critical component of
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SB90 claims
Fee calculation
Subsidy decisions
Resource allocation
Preparing a Cost Allocation Plan
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Collect financial and operational data
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Prior year actual expenditures
Communicate with department representatives
Identify department functions
Identify and request allocation data
Match expenditures and allocations
Process cost allocation plan
Review, correct, re-process
Continuous Improvement
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Annually present overview of cost plan
Identify annual area(s) of emphasis
Annual department meetings
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Three ways to ask the same question
Management Report
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Variance Analysis
 Unit Costs
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Communicate year-round with cost plan
stakeholders
Reviewing a Cost Allocation Plan
15001 County Counsel
6 Legal Services
Direct Hours per dept/agency County Counsel
11301 Human Resources
7 HR Services
Direct Cost per Dept Id
73001 Purchasing
8 Purchasing Services
8 Support Services
# of Purchase Orders per dept
Direct Cost of Svcs
Reviewing a Cost Allocation Plan
A. DEPARTMENT COSTS
Dept:8 73001 Purchasing
Amount
Salaries
S1
$1,230,137
P
513,706
1,743,843
SUPPLY & SERVICES COST
Services & Supplies
572800 Intra- misc
572900 Intra Person
573500 Intra Training
Capital Asset
Sal Rev Reimb
Off the top
DEPARTMENT Cost Total
P
D
D
D
D
P
P
ADJUSTMENTS
572800 Intra- misc
572900 Intra Person
573500 Intra Training
Capital Asset
D
D
D
D
Total
Purchasing
Services
$0
Support
Services
$686,307
$543,830
.00%
55.79%
44.21%
0
0
513,706
1,200,013
0
543,830
362,397
(1,530)
(368,340)
(8,200)
8,468
(386,208)
(15,342)
(408,755)
0
0
0
0
0
0
0
0
362,397
0
0
0
0
(386,208)
(15,342)
(39,153)
0
0
0
0
0
0
0
0
1,530
368,340
8,200
(8,468)
0
0
0
0
0
0
0
0
0
0
0
0
1,704,690
0
1,160,860
543,830
Salary % Split
Benefits
General
Admin
Reviewing a Cost Allocation Plan
B. INCOMING COSTS - (Default Spread Salary%)
Department
First
Incoming
3 Admin Services
3 Gen Admin
Subtotal - 11001 County Executive Office
4
4
4
4
4
Payroll Service
Budget Prep/Cost Plan Prep
Claims & Disb
Fixed Asset
General Acctg
Subtotal - 13001 Auditor Controller
6 Legal Services
Subtotal - 15001 County Counsel
Dept:8 73001 Purchasing
Second
Incoming
Purchasing
Services
Support
Services
18,663
1,586
20,249
0
0
0
10,412
885
11,297
8,251
701
8,952
2,050
777
806
493
1,514
5,640
0
0
0
0
0
0
1,144
433
450
275
845
3,147
906
344
356
218
669
2,493
30,087
30,087
0
0
16,786
16,786
13,301
13,301
Reviewing a Cost Allocation Plan
B. INCOMING COSTS - (Default Spread Salary%)
Department
Dept:8 73001 Purchasing
First
Incoming
Second
Incoming
Purchasing
Services
Support
Services
10 RV 958
Subtotal - 72002 FM Custodial/Housekeeping
0
0
22,675
22,675
12,651
12,651
10,024
10,024
11 Single Occupant Maint
11 RV 958
Subtotal - 72003 FM Maintenance
0
0
0
(1,621)
0
(1,621)
(904)
0
(904)
(717)
0
(717)
12 Square Footage Maint
Subtotal - 72004 FM Real Estate
0
0
405
405
226
226
179
179
64,450
54,091
66,135
52,406
$1,823,231
$1,226,995
$596,236
Total Incoming
C. TOTAL ALLOCATED
Reviewing a Cost Allocation Plan
Purchasing Services Allocations
3
4
5
6
7
11001 County Executive Office
13001 Auditor Controller
13002 Internal Audit
15001 County Counsel
11301 Human Resources
135 45001 Waste Management
150 73005 Fleet Services
Subtotal
TOTAL
Dept:8 73001 Purchasing
# of
Purchase
Orders per
dept 299
1,554
90
22
1,647
Allocation
Percent
First
Allocation
Direct Billed Department
Allocation
Second
Allocation
Total
0.05%
0.26%
0.02%
0.00%
0.28%
$600
3,120
181
44
3,307
$0
0
0
0
0
$600
3,120
181
44
3,307
$0
0
0
0
0
$600
3,120
181
44
3,307
10,009
1.68%
20,094
0
20,094
510
20,604
8,347
1.40%
16,758
0
16,758
425
17,183
596,138
100.00%
1,196,817
0
1,196,817
30,178
1,226,995
1,196,817
1,226,995
Reviewing a Cost Allocation Plan
Support Services Allocations
Dept:8 73001 Purchasing
Direct Cost
of Svcs
16
125
129
132
137
152
155
999
10002 Clerk of the Board
41004 MH Administration
42003 CHA Admin
43001 Riv Co Reginal Medical Center
51001 DPSS Admin
74001 Information Technology
924001 Trial Court Operations/ Admin
2nd Allocation Orphans
Subtotal
TOTAL
Allocation
Percent
First
Allocation
Direct Billed Department
Allocation
Second
Allocation
Total
29,936
59,408
170,000
91,652
109,297
83,537
0
0
5.50%
10.92%
31.26%
16.85%
20.10%
15.36%
0.00%
0.00%
$31,504
62,521
178,907
96,454
115,023
87,914
0
0
$(29,936)
(59,408)
(170,000)
(91,652)
(109,297)
(83,537)
(12,417)
0
$1,568
3,113
8,907
4,802
5,726
4,377
(12,417)
0
$1,316
2,612
7,475
4,030
4,806
3,673
0
(0)
$2,885
5,725
16,382
8,832
10,532
8,050
(12,417)
(0)
543,830
100.00%
572,323
(556,247)
16,076
23,913
39,989
572,323
596,236
Reviewing a Cost Allocation Plan
ALLOCATION SUMMARY
Department
3
4
5
6
7
11001 County Executive Office
13001 Auditor Controller
13002 Internal Audit
15001 County Counsel
11301 Human Resources
Dept:8 73001 Purchasing
Purchasing
Services
Support
Services
Total
600
3,120
181
44
3,307
0
0
0
0
0
600
3,120
181
44
3,307
135 45001 Waste Management
20,604
0
20,604
150 73005 Fleet Services
17,183
0
17,183
152 74001 Information Technology
16,903
8,050
24,953
1,226,995
596,236
1,823,231
Total
Results of Cost Allocation Plans
Identify annual dollar amount of general fund
support (indirect, administrative, overhead)
allocated to benefiting departments, divisions
or programs.
Results of Cost Allocation Plans
SUMMARY SCHEDULE
Department
1
2
3
4
5
6
7
8
9
10
11
12
13
14
Building Use Allowance
Equipment Use Allowance
11001 County Executive Office
13001 Auditor Controller
13002 Internal Audit
15001 County Counsel
11301 Human Resources
73001 Purchasing
72001 FM - Admin
72002 FM Custodial/Housekeeping
72003 FM Maintenance
72004 FM Real Estate
72006 FM Energy
72007 FM Parking
TOTAL CURRENT ALLOCATIONS
73005 Fleet
Services
$36,707
0
11,021
39,943
0
0
5,075
17,183
0
17,041
(9,832)
5,230
104,106
0
74001
Information
Technology
$58,460
0
47,805
50,988
37,905
107,764
17,324
24,953
0
143,521
67,180
(14,131)
195,817
621
226,474
738,207
Applications of Cost Allocation
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Request reimbursement from Federal and State grants
Transfer dollars from non-general funds to general
fund
Understand true or full cost of providing services
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Subsidy decisions
Resource allocation
Performance measures
Integrate into user fee calculations
Integrate into SB90 claims
OMB A-87 vs. Full Cost
Two types of cost allocation plans:
1. OMB A-87 Cost Allocation Plan
2. Full Cost Allocation Plan
OMB A-87 vs. Full Cost
OMB A-87
 External purposes
 Strictly follows Federal
guidelines
 Produces a conservative
view of Countywide
indirect costs
Full Cost
 Internal purposes
 Follows generally
accepted full cost
principles
 Produces an accurate
view of Countywide
indirect costs
OMB A-87 vs. Full Cost
OMB Excludes
 Auditors Office
 Treasurers Office
 Board of Supervisors
 County Executive
~ Amount Excluded
 15%
 100%
 100%
 31%
Full Cost ~ 15% less than OMB
Cost Allocation Quiz
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The cost allocation plan identifies and
distributes ____________ costs.
Cost Allocation Quiz
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The cost allocation plan identifies and
distributes indirect costs.
Cost Allocation Quiz
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Indirect costs are also referred to as
_____________, _____________, and/or
___________________ costs.
Cost Allocation Quiz
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Indirect costs are also referred to as
administrative, support, and/or
overhead costs.
Cost Allocation Quiz
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What is a department that typically has
indirect costs?
Cost Allocation Quiz
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What is a department that typically has indirect costs?
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Auditor Controller
County Executive
County Counsel
Facilities
Information Technology
Internal Audit
Human Resources
Purchasing
Cost Allocation Quiz
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What are the reasons for preparing an annual
cost allocation plan?
Cost Allocation Quiz
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What are the reasons for preparing an annual cost
allocation plan?
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Request reimbursement from Federal and State grants
Transfer dollars from non-general funds to general fund
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Understand true or full cost of providing services
Subsidy decisions
Resource allocation
Performance measures
Integrate into user fee calculations
Integrate into SB90 claims
Cost Allocation Quiz
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Who at the County can you contact with
questions or to review the cost allocation plan?
Cost Allocation Quiz
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Who at the County can you contact with
questions or to review the cost allocation plan?
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Teresita Soriano