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DHHS Cost Allocation Fundamentals

DHHS Cost Allocation Fundamentals. DHHS Controller’s Office Cost Accounting Branch 2010. 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

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DHHS Cost Allocation Fundamentals

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  1. DHHS Cost Allocation Fundamentals DHHS Controller’s Office Cost Accounting Branch 2010

  2. 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.

  3. 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.

  4. 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 supervisor.

  5. Staff/Support Functions: Purchasing - # PO’s processed IT - # workstations maintained Personnel, clerical support - FTE’s served Non-Employee: Cost of space - square footage Motor Pool - miles driven Photocopying - copies made Examples of Allocation Bases • Direct workers: • Consistent, measurable output - applications processed, calls received, case/recipient/ client counts, etc. • Timesheets • Supervisors:Positions supervised

  6. 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 Direct charge Examples of Allocation Bases Currently Used in DHHS

  7. 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.

  8. Lines Keyed by Funding Source (Per NCAS % to Position Funding Source FRC Report) Total Equivalent State Funds 00 189 14.77% 0.2954 Food Stamps F1 46 3.59% 0.0718 TANF MOE Admin. T5 133 10.39% 0.2078 Title IV-E Admin. K1 15 1.17% 0.0234 IV-B 1, Child Welfare 35 23 1.80% 0.0360 IV-D, Child Support 39 805 62.88% 1.2576 Title IV-B 2, Safe & Stable Families 43 37 2.89% 0.0578 Refugee Medical Asst. 68 13 1.02% 0.0204 Medicaid C5 2 0.16% 0.0032 SSBG QA 7 0.55% 0.0110 Chafee Independent Living 7R 2 0.16% 0.0032 CAPTA 37 3 0.23% 0.0046 Community Based Family Resource Grant 54 5 0.39% 0.0078 Total 1,280 100.00% 2.00 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:

  9. Cost Percentages (Con’t) • Step 2 : Use Percentages to Allocate Cost - Total cost for month of January = $6,423.45

  10. Step-Up Cost Example Family Planning Coordinator (2 FTEs) RCC 2308 Family Planning Program(3 FTEs) RCC 2318 (Direct Charge) Family Planning Admin. Support (1 FTE) RCC 2312 (Time Sheet)

  11. Family Planning Admin SupportTime Sheet Summary

  12. Employee Percentages • Family Planning Admin. Support • Family Planning Program

  13. Family Planning Coordinator (Step Up from Employees)

  14. Components of the Cost Plan • Organizational Chart • Cost Center Narratives • Allocation Bases • Identification of Benefiting Programs

  15. 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.

  16. 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.

  17. 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

  18. 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.)

  19. CAP Update Request Form

  20. 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

  21. 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.

  22. 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.

  23. 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.

  24. How the entries look - Redistribution

  25. c. Cost allocation interface posts the earned revenues to the applicable RCC and the receivable to Fund 1810. Center 1140-2460 Center 1810 DR CR DR CR 53887K (FFP 50%) $170.00 53887K $170.00 53887L (FFP 50%) 201.50 53887L 201.50 53887F (FFP 75%) 72.00 53887F 72.00 53887Q (FFP 75%) 6,653.25 53887Q 6,653.25 53887N (FFP 80%) 3.20 53887N 3.20 7,099.95 7,099.95 d. End results: Account 532850 Account 537170 FRC 99 DR CR DR CR DR CR $10,000.00 $10,000.00 $10,000.00 $10,000.00 $10,000.00 $0.00 $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. Redistribution (con’t)

  26. 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 Cash DR CR DR CR $10,000.00 $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. Account 53887Q Account 53887Q Center 1140-2461 Center 1810 DR CR DR CR (75% FFP) $7,500.00 $7,500.00 How the entries look - direct charge

  27. 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.

  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?

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