HomeMy WebLinkAbout02/03/2004, C3 - 2003-05 COST ALLOCATION PLAN 1
council °°°° 2-3-04
j aGEnaa izepont 1�Nb G .
CITY OF SAN LUIS OBISPO
FROM: Bill Statler, Director of Finance &Information Technology
Prepared By: Carolyn Dominguez, Finance Manager
Debbie Malicoat, Accounting Supervisor
SUBJECT: 2003-05 COST ALLOCATION PLAN
CAO RECOMMENDATION
Approve the 2003-05 Cost Allocation Plan.
DISCUSSION
Background
The City prepares a formal Cost Allocation Plan bi-annually to identify the total cost of providing
specific services in San Luis Obispo based on the two-year Financial Plan adopted by the Council.
As discussed in the plan, costs in virtually all organizations—both in the private and public
sectors—generally fall into two categories:
1. Direct Costs. Readily identifiable with a specific program, such as street maintenance, police
protection and water service.
2. Indirect Costs. Benefit more than just one program, such as finance, human resources and legal
services.
In order to identify the total cost of delivering services—both direct and indirect—some
methodology for determining and distributing indirect costs to direct cost programs needs to be
developed, which is the purpose of the Cost Allocation Plan: to allocate indirect costs in a
reasonable and consistent manner.
The introduction to the accompanying 2003-05 Cost Allocation Plan fully sets forth its purpose as
well as the methodology used in allocating indirect costs to direct cost programs. The basic
methodology used to prepare the plan has not changed since the Council approved the 2001-03
Cost Allocation Plan in February 2002.
Uses of the Cost Allocation Plan
Enterprise Fund Reimbursements. As noted in the introduction to the Cost Allocation Plan, one
of its key uses is to determine the level of General Fund support to the enterprise funds, and to
establish appropriate reimbursement amounts. The following summarizes the level of enterprise
fund reimbursements calculated for 2003-04. In total, these amounts are somewhat higher than
budgeted estimates, reflecting a modest 4% increase ($141,200)from the 2003-05 Financial Plan:
C3- 1
\ i
2003-05 Cost Allocation Plan Page 2
2003-04 Reimbursement Transfers
Budget Actual Variance
Water 1,272,200 1,321,200 49,000
Sewer 1,086,600 1,076,900 (9,700)
Parking 332,300 413,800 81,500
Transit 287,300 285,800 (1,500)
Golf 120,600 103,200 (17,400)
Whale Rock 1 83,900 1 123,200 1 39,30
Total $ 3,182,900 $ 3,324,100 $ 141,20H
While individual fund differences can be attributed to a wide range of changes, including increases
in the operating budgets of both direct and indirect programs, key differences from the 2001-03
Cost Allocation Plan are summarized below, which account for 97% of the change:
SummwXof Plan Chan es
Water Fund ■ Increase in allocation from Public Works Administration 49,600
■ Increase in services from Transportation Planning 20,500
■ Decrease in CIP Project Engineering (80,600)
■ Increase in City Clerk services 24,600
■ Increase in Risk Management insurance costs 25,700
Parking Fund ■ Increase in allocation from Public Works Administration 26,200
■ Increase in allocation from CIP Project Engineering 35,400
■ Increase in Risk Management insurance costs 16,800
Golf Fund ■ Decrease in allocation from Parks&Recreation.Admin. (18,500)
Whale Rock ■ Natural Resources allocation for preparation of the 15,000
Habitat Conservation Plan
■ Increase in allocation from CIP Project Engineering 22,000
Total $136,700
Provided in Attachment 1 is a detailed example of how the Cost Allocation Plan works using the
Golf Fund as an example.
Grant Administration. Recovering indirect costs related to administering grant programs is
another key use of the Cost Allocation Plan. Under federal cost accounting guidelines (Circular
OMB A-133), the indirect cost rate established under our Cost Allocation Plan (36.4% for 2003-05)
can be used in recovering administration, legal, accounting, human resources, building maintenance
and similar indirect costs that are incurred in delivering grant program services. For example, if we
have identified$100,000 in direct grant program costs, we are allowed to recover up to $36,400 for
the indirect costs we will also incur. We have already successfully used the Cost Allocation Plan
for two key grant programs:
.e3-a
i 1
2003-05 Cost Allocation Plan Page 3
1. Transit System. The U.S. Department of Transportation, Federal Transit Administration
(FTA), reviewed and approved the 1993-95 Cost Allocation Plan in July 1995. The FTA
approval is valid until there is a change in our accounting system, or the plan varies significantly
from the rates approved in July 1995. No significant changes since then have been made.
2. Community Development Block Grant (CDBG) Program. Under CDBG program
guidelines, we are eligible for indirect cost recovery of up to 25% of direct program costs (or
20% of total program costs). The Cost Allocation Plan is one element of support for this level
of indirect cost recovery.
Labor Rates. The information provided in the Cost Allocation Plan is also used as one of five
cost factors in setting full-cost labor rates for City staff services. The plan includes schedules
that set forth labor rates for each of the City's regular positions by functional area (public safety,
public utilities, transportation, leisure, cultural & social services, community development and
general government).
As reflected in these schedules, in addition to direct salary costs, there are other significant cost
components that should be considered in determining the total hourly cost of staff services,
including:
1. Annual Salary. Generally based on the top of the salary range for each position (about 60% of
all City employees are at the top of their salary range).
2. Benefits. Retirement, workers' compensation, Medicare, unemployment, group insurance and
other paid benefits.
3. Productive Hours. Annual regular hours (generally 2,080, except for sworn fire staff at 2,912
hours annually) less vacation, sick leave,holidays and break hours.
4. Citywide Indirect Costs. As set in the Cost Allocation Plan, services such as legal,
accounting,human resources,insurance and building maintenance.
5. Departmental and Program Administration and Support Costs. Support costs internal to
the operating departments (like records and dispatch in the Police Department) that are not
allocated as part of the Cost Allocation Plan.
The introduction to the labor rates section of the plan fully describes the methodology used in
determining hourly labor rates. As noted in this introduction, while the Cost Allocation Plan itself
is updated bi-annually, labor rates are revised at least annually each July to stay current with salary
and benefit changes.
FISCAL IMPACT
As noted above, the 2003-05 Cost Allocation Plan results in a modest increase of 4% in
reimbursement transfers to the General Fund of $141,200 in 2003-04 compared with budget
estimates. This amount includes a reduction of $17,400 from the Golf Fund, which lowers the
C3 - 3
2003-05 Cost Allocation Plan Page 4
General Fund support to the Golf Fund by a similar amount. For 2004-05, these reimbursements
will be adjusted by 3%, which is consistent with the cost-of-living factors used in preparing the
2003-05 Financial Plan. If approved by the Council as part of the 2003-05 Cost Allocation Plan,
the revised reimbursements will be reflected in the Mid-Year Budget Review scheduled for Council
consideration on February 17, 2004.
ATTACHMENT
Golf Fund Cost Allocation Example
ENCLOSURE
2003-05 Cost Allocation Plan (Copy available for public review in City Clerk's office.)
G:Cost Allocation Plan/2003-05/Council Agenda Report
C3-
Attachment l
2003-05 COSI ALOCation plan
EXAMPLE - GOLF FUND
ProgramIndirect Cost
Legislation& Policy Council Agenda Items $101,300 0.5% $500
City Administration Operating Budget 540,100 0.8% 4,400
Public Works Administration Work Load Analysis 905,400 0.1% 900
Engineering:CIP Mgt Work Load Analysis 1,142,500 0.0% -
Transportation Planning Work Load Analysis 410,200 0.0% -
Parks&Recreation Admin Work Load Analysis 552,000 5.0% 27,600
Legal Services Operating Budget 384,700 1.0% 31900
City Clerk Services Council Agenda Items 388,900 0.5% 2,000
Human Resources Staffing ("FTE's") 624,200 1.6% 9,700
Risk Management Staffing ("FTE's") 1,044,100 1.6% 16,500
General Finance Operating Budget 708,800 1.0% 7,100
Payroll Staffing("FTE's") 137,200 1.5% 2,100
Utility Billing Water&Sewer Funds 252,800 0.0% -
Business Tax/TOT Gen Fund Oper Budget 101,200 0.0% -
Information Technology
Citywide Support Assigned Workstations 911,300 0.4% 3,900
Telemetry Water, Sewer,Whale Rock 112,400 0.0% -
Radios, Cell Phones, Pagers Assigned Equipment 242,400 0.2% 400
Telephones Assigned Telephones 198,700 0.5% 900
Copier Maintenance& Paper Operating Budget 28,400 1.1% 300
Postage Staffing("FTE's") 47,700 2.1% 1,000
Ventures&Contingencies General Fund FTE's 90,000 0.0% -
Other Support Services Operating Budget 73,000 1.0% 700
Geographic Services(GIS) Work Load Analysis 295,900 0.0% -
Building Maintenance Assigned Space 841,200 0.2% 2,100
Vehicle Maintenance Assigned Vehicle Value 593,400 1.7% 10,300
General Facilities Use Assigned Space 3,038,200 0.3% 8,900
General Equipment Use Assigned Equipment 564,000 0.0%
TOTAL 14,330,000 0.7% 103,200
Similar summaries for all direct cost programs are provided on pages 6 through 11 of rhe Cost Allocation Plan.
The Golf Fund accounts for 1.0% of direct program costs, compared with receiving 0.7% of allocated
indirect costs. The largest indirect cost allocation--department administration ($27,600)-accounts for
about 25% of the total indirect costs allocated in this example. We believe this shows that the Cost
Allocation Plan provides a "reasonable" basis for allocating indirect costs-which is its purpose: to
identify indirect costs,and to allocate them to direct programs in a logical and consistent manner. 2
�2