HomeMy WebLinkAbout04-17-2018 Item 09 Cost Allocation Plan and Cost of Services
Meeting Date: 4/17/2018
FROM: Derek Johnson, Interim Finance Director
Prepared by: Rico Pardo, Accounting Manager/Controller
SUBJECT: 2016-17 CENTRAL SERVICE COST ALLOCATION PLANS AND COST
OF SERVICES FEE CALCULATION
RECOMMENDATION
1. Approve the 2016-17 Central Service Cost Allocation Plans dated March 2017; and
2. Approve the Cost of Services Fee Calculation.
DISCUSSION
Cost Allocation and Reimbursement to the General Fund
Consistent with best practices, the City has prepared a formal Central Service Cost Allocation Plan
(CAP). One of the primary uses of the CAP is to quantify in dollars, the relationship between
administrative and support services contained within the General Fund, also known as central
service cost centers, and the programs they support throughout the City to provide reimbursement
for those services to the General Fund. In other words, and as examples, the CAP identifies the costs
to provide service to the City’s enterprise funds (Water, Sewer, Parking and Transit) for activities
such as issuing paychecks to all employees, conducting recruitments or providing other support to
these departments which are paid for by the General Fund. The CAP can also be used to determine
the appropriate amount of administrative and support costs that may be charged to an existing or
new grant.
The CAP is prepared using actual operating expenses from one year and the resulting cost
allocations are programmed into the City’s budget two years later. Basing the CAP on actual
amounts allows the City to avoid the need to recalculate and true-up the allocations at a later date,
making it easier for the programs to manage the costs represented by the calculation. In this case,
the CAP is based on 2016-17 actual costs and the cost allocations are reflected in the 2018-19
proposed budget.
Two CAP Documents Required
There are two CAP documents presented. The first is a full cost plan which considers all
administrative and support costs that are allocated across all programs. The second CAP is the 2
Code of Federal Regulations Part 200 Uniform Administrative Requirements, Cost Principles, and
Audit Requirements for Federal Awards (2 CFR 200). The 2 CFR 200 supersedes, consolidates,
and streamlines requirements from the Office of Management & Budget Circular A-87 which was
the previous document that dictated out the reporting requirements for charging indirect costs to
federal grant programs – such as transit. The purpose of 2 CFR 200 is to streamline Federal
government’s guidance on administrative requirements, costs principles, and audit requirements to
more effectively focus Federal resources on improving performance and outcomes and disclose the
costs of services and goods provided using federal funds. Under the 2 CFR 200, the costs of certain
Packet Page 75
9
functions, such as the City Council, are not to be allocated to other programs.
The full cost version of the CAP establishes the allocable costs shown in the table below for the
Water, Sewer, Parking and Whale Rock Funds. There are no “Direct Billing Adjustments” to
offset the allocable costs; however, this column is included for presentation purposes only.
“Direct Billing Adjustments” would represent amounts that offset the CAP-generated cost
allocation to the Enterprise Funds as certain costs initially allocated to the Enterprise Fun ds may
be charged back to the General Fund. The “Actual” column is the net amount that will be
transferred to the General Fund.
2018-19 Reimbursement Transfers (Full CAP)
Fund
Cost Allocation Based
on 2016-17 Actuals
Direct Billing
Adjustments Actual
Water 1,326,787$ -$ 1,326,787$
Sewer 1,554,446 - 1,554,446
Parking 526,529 - 526,529
Whale Rock 128,141 - 128,141
Total 3,535,903$ -$ 3,535,903$
The table below reflects the costs from the 2 CFR 200 that are allocable to the Transit Fund.
2018
-19
Reimbursement Transfers (2 CFR 200)
Upon approval by the Council, the 2 CFR 200 certification will be signed by the Finance
Director/City Treasurer.
Cost of Services Analysis
In addition to the Cost Allocation Plan, the City has also prepared a Cost of Service Analysis
which establishes the annual cost of providing the Water and Sewer Enterprise Funds with access
to the City’s right of way property as well as the cost of providing police and fire protection for
both funds. As part of the fee analysis that was prepared, enterprise facilities that are not within
the city limits were excluded from consideration. The cost of service calculation yielded the
following amounts for the years shown. For 2017-18, actual costs from 2015-16 were used and
for the 2018-19 calculation, actual costs from 2016-17 formed the basis for these calculations.
Fund
Cost Allocation
Based on 2016-17
Actuals
Direct Billing
Adjustments Actual
Transit 381,760$ -$ 381,760$
Total 381,760$ -$ 381,760$
Packet Page 76
9
Water Enterprise 2016-17 2017-18 2018-19
Public Safety $ 229,410 $ 248,055 $ 215,759
Right of Way 331,835 356,411 393,733
Total $ 561,245 $ 604,466 $ 609,492
Sewer Enterprise
Public Safety $ 259,982 $ 214,629 $ 194,867
Right of Way 230,337 247,692 274,049
Total $ 490,319 $ 462,321 $ 468,916
CONCURRENCES
The Public Works and Utilities Departments have reviewed this report and participated in the Cost
Allocation Plan. The future Cost Allocation Plan will analyze different methodologies for assigning
costs based on new approaches to distributing public safety costs.
ENVIRONMENTAL REVIEW
This is not a project under CEQA.
FISCAL IMPACT
The 2016-17 Central Services Full Cost Allocation Plan, net of direct billing adjustments results in a
total cost recovery of $3,917,663 in 2018-19. This amount is $250 thousand lower than the 2015-16
Cost Allocation Plan. The main factor contributing to the variance is the fact that the Utilities
Department has taken on the personnel and operating costs associated with utility billing in fiscal
year 2016-17. The $3,917,633 is $375 thousand lower than the budgeted amount in 2018-19 and
will result in an adjustment with the 2018-19 Supplemental Budget. The amount is also
approximately $160 thousand lower than ongoing assumptions for the long-term forecast and the
assumptions will be reviewed with the next financial plan development.
The cost of services fee calculation identified a total of $1,078,408 in costs that are allocable to the
Utility Enterprise Funds for 2018-19.
ALTERNATIVE
The City Council could choose not to accept the CAP’s findings. Staff does not recommend this
alternative because the General Fund would bear the full costs for various programs, grants,
contracts, and agreements.
Packet Page 77
9
Attachments:
a - Summary of FY 2016-17 Full CAP
b - Summary of FY 2016-17 2 CFR 200
c - Cost of Services Fee Calculation
d - Council Reading File - FY 2016-17 San Luis Obispo Full CAP
e - Council Reading File - FY 2016-17 San Luis Obispo 2 CFR 200
Packet Page 78
9
Packet Page 79
9
Packet Page 80
9
Packet Page 81
9
Packet Page 82
9
Packet Page 83
9
This Page Intentionally Left Blank Packet Page 84
9
Packet Page 85
9
Packet Page 86
9
Packet Page 87
9
Packet Page 88
9
Packet Page 89
9
Packet Page 90
9
Packet Page 91
9
Packet Page 92
9
Packet Page 93
9
Packet Page 94
9
Packet Page 95
9
Packet Page 96
9
Packet Page 97
9
Packet Page 98
9
Packet Page 99
9
Packet Page 100
9
Packet Page 101
9
Packet Page 102
9
Packet Page 103
9
Packet Page 104
9
Packet Page 105
9
This Page Intentionally Left Blank Packet Page 106
9
Packet Page 107
9
Packet Page 108
9
Packet Page 109
9
Packet Page 110
9
Packet Page 111
9
Packet Page 112
9
Packet Page 113
9
Packet Page 114
9
Packet Page 115
9
Packet Page 116
9
Packet Page 117
9
Packet Page 118
9
Packet Page 119
9
Packet Page 120
9
Packet Page 121
9
Packet Page 122
9
Packet Page 123
9
Packet Page 124
9
Packet Page 125
9
Enterprise Cost of Services Allocation Summary‐2015‐16 using 2013‐14 Actual Amounts
Allocation Type
Water
Enterprise
Sewer
Enterprise
Total Enterprise
Allocation
Public Safety 148,054$ 219,357$ 367,411$
Right‐of‐Way Maintenance 321,554$ 227,076$ 548,630$
Direct Credit for Private Sec. ‐$ (3,360)$ (3,360)$
Total 469,608$ 443,073$ 912,681$
Enterprise Cost of Services Allocation Summary‐2016‐17 using 2014‐15 Actual Amounts
Allocation Type
Water
Enterprise
Sewer
Enterprise
Total Enterprise
Allocation
Public Safety 229,410$ 259,982$ 489,392$
Right‐of‐Way Maintenance 331,835$ 234,337$ 566,172$
Direct Credit for Private Sec. ‐$ (4,000)$ (4,000)$
Total 561,245$ 490,319$ 1,051,564$
Enterprise Cost of Services Allocation Summary‐2017‐18 using 2015‐16 Actual Amounts
Allocation Type
Water
Enterprise
Sewer
Enterprise
Total Enterprise
Allocation
Public Safety 248,055$ 214,629$ 462,684$
Right‐of‐Way Maintenance 356,411$ 251,692$ 608,103$
Direct Credit for Private Sec.‐$ (4,000)$ (4,000)$
Total 604,466$ 462,321$ 1,066,787$
Enterprise Cost of Services Allocation Summary‐2018‐19 using 2016‐17 Actual Amounts
Allocation Type
Water
Enterprise
Sewer
Enterprise
Total Enterprise
Allocation
Public Safety 215,759$ 194,867$ 410,627$
Right‐of‐Way Maintenance 393,733$ 278,049$ 671,782$
Direct Credit for Private Sec.‐$ (4,000)$ (4,000)$
Total 609,493$ 468,916$ 1,078,409$
Packet Page 126
9