Riverside County California Cost Allocation Plan Overview and Applications August 27, 2008

1. Riverside County California Cost Allocation Plan Overview and Applications August 27, 2008 Eric Parish & Sara Beemer PRM, a Subsidiary of MGT of America, Inc.

2. Purpose of Presentation • Explain the cost allocation project including preparation, applications and benefits. • Gain feedback and input from County personnel. • Answer questions.

3. PRM / MGT Introduction Consulting firm focused on local government cost issues 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

4. Cost Allocation Presentation Outline • 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

5. What is Cost Allocation (Theory) • Method to identify and distribute County indirect costs • Direct costs (specific) • Indirect costs (shared) • Administrative • Support • Overhead

6. What is Cost Allocation (Theory) • Direct vs. Indirect Direct costs Costs that can be assigned, or directed, to a specific task, activity or program

7. What is Cost Allocation (Theory) • 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.

8. What is Cost Allocation (Theory) • Accomplished through an annual cost allocation plan • Concept recognizing operating programs should pay for the general fund County support received • Document identifying and distributing County indirect (administrative, support, overhead) costs to benefiting departments/divisions/programs

9. Benefits of Cost Allocation • Recover allowable indirect costs from federal and state programs • Allocate appropriate indirect costs to other funds, programs or activities • Critical component of • SB90 claims • Fee calculation • Subsidy decisions • Resource allocation

10. Preparing a Cost Allocation Plan • Collect financial and operational data • 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

11. Continuous Improvement Annually present overview of cost plan Identify annual area(s) of emphasis Annual department meetings Three ways to ask the same question Management Report Variance Analysis Unit Costs Communicate year-round with cost plan stakeholders

12. Reviewing a Cost Allocation Plan

13. Reviewing a Cost Allocation Plan

14. Reviewing a Cost Allocation Plan

15. Reviewing a Cost Allocation Plan

16. Reviewing a Cost Allocation Plan

17. Reviewing a Cost Allocation Plan

18. Reviewing a Cost Allocation Plan

19. Results of Cost Allocation Plans Identify annual dollar amount of general fund support (indirect, administrative, overhead) allocated to benefiting departments, divisions or programs.

20. Results of Cost Allocation Plans

21. Applications of Cost Allocation • Request reimbursement from Federal and State grants • Transfer dollars from non-general funds to general fund • Understand true or full cost of providing services • Subsidy decisions • Resource allocation • Performance measures • Integrate into user fee calculations • Integrate into SB90 claims

22. OMB A-87 vs. Full Cost Two types of cost allocation plans: OMB A-87 Cost Allocation Plan Full Cost Allocation Plan

23. 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

24. 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

25. Cost Allocation Quiz • The cost allocation plan identifies and distributes ____________ costs.

26. Cost Allocation Quiz • The cost allocation plan identifies and distributes indirect costs.

27. Cost Allocation Quiz • Indirect costs are also referred to as _____________, _____________, and/or ___________________ costs.

28. Cost Allocation Quiz • Indirect costs are also referred to as administrative, support, and/or overhead costs.

29. Cost Allocation Quiz • What is a department that typically has indirect costs?

30. Cost Allocation Quiz • What is a department that typically has indirect costs? • Auditor Controller • County Executive • County Counsel • Facilities • Information Technology • Internal Audit • Human Resources • Purchasing

31. Cost Allocation Quiz • What are the reasons for preparing an annual cost allocation plan?

32. Cost Allocation Quiz • What are the reasons for preparing an annual cost allocation plan? • Request reimbursement from Federal and State grants • Transfer dollars from non-general funds to general fund • Understand true or full cost of providing services • Subsidy decisions • Resource allocation • Performance measures • Integrate into user fee calculations • Integrate into SB90 claims

33. Cost Allocation Quiz • Who at the County can you contact with questions or to review the cost allocation plan?

34. Cost Allocation Quiz • Who at the County can you contact with questions or to review the cost allocation plan? • Teresita Soriano