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Cost allocations (Essay Sample)

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Case assignment expectations: Below are several required readings on the topic of cost allocation. You are to read and review these readings and answer the questions below the readings in an integrated essay. US Army Corps of Engineers - Walla Walla Project retrieved August 17, 2009 from: US Army Corps of Engineers Walla Walla District 1. Introduction 1.1 Scope The purpose of this Cost Allocation Chapter is to examine a range of possible cost allocation approaches that could be used to distribute costs of the proposed alternatives. The primary purpose of allocating project costs is to identify repayment responsibility with respect to cost recovery, cost sharing, or both (as may be required). This chapter does not recommend a preferred approach at this time. However the cost implications of the approaches are shown using the preliminary construction costs and the unrecovered Federal investment. 1.2 PURPOSE From a Federal perspective, cost allocations are made to derive an equitable distribution of project costs among authorized project purposes, or those proposed for authorization. Laws and regulations requiring reimbursement or cost-sharing generally specify recovery of costs incurred for the service or function. Cost allocation is, therefore, required for most Federal multipurpose projects having reimbursable purposes. The cost allocation is an essential part of the multipurpose planning process where cost-sharing will be required. It provides information needed to determine the magnitude and share of estimated project costs that are reimbursable. This information is essential to the tests of financial feasibility and plan acceptability. During subsequent planning and construction, it provides the information required for allocating actual expenditures and insures that cost accounts are maintained consistent with the plan formulation and allocation principles. The authorizing document for the Lower Snake River projects, PL 79-14, designated the Federal Power Commission (now FERC) as the agency responsible for defining the allocation of costs to the authorized purposes of navigation and hydropower. The Final Cost Allocations were completed by FERC in 1965 for Ice Harbor, and 1984 for Lower Monumental, Little Goose, and Lower Granite. FERC completed the allocation studies based on data and preliminary allocations done by the Corps of Engineers. Any new cost allocations for these projects will be coordinated with FERC. It has been Corps policy not to request reallocation of storage and/or project costs unless a major reformulation of a project is required. Such a reformulation might include the addition of a new purpose, deletion of a purpose, a major change in apportionment of storage among purposes already authorized, or a major change in project scope. Any of these actions would require Congressional authorization. Since some of the actions that may be recommended in this Feasibility Report (FR) would meet this criteria, authorization by Congress will be required. The Congressional authorization could contain directive language concerning the allocation of costs. In the absence of such directive language, the Corps of Engineers' administratively developed procedures will be utilized to allocate the project costs. 2. ALLOCATING COSTS 2.1 ASSUMPTIONS Both Drawdown and Flow Augmentation alternatives could possibly affect the existing cost allocations. Draw Down because of the possible deletion of an authorized purpose (navigation and hydropower), and Flow Augmentation because of the possible major change in apportionment of storage. Implementation of the Draw Down alternative would likely result in new cost allocations being considered for all the projects being proposed for breaching (Lower Granite, Little Goose, Lower Monumental, and Ice Harbor). A change in the existing allocations would not only affect how implementation costs are allocated, but also the existing debt on the projects. Because the economic benefits at these multi-purpose projects would be significantly altered between purposes, they can be considered for new cost allocations. The following table displays which alternatives are likely to require new cost allocations. Table 1 Alternatives Requiring New Cost Allocations Alternatives New Cost Allocations Necessary A-1 Existing Condition - Base Case A-2a Maximum Transportation A-2b w/Maximized Transport (High Cost) A-2c w/Maximized Transport (Low Cost) A-2d Adaptive Migration A-3 Dam Breaching A-6a W/ In-River Migration and Additional MAF A-6b w/In-River Migration & Zero Augmentation A-6d w/In River Migration and 427 AF No No No No No Yes Yes No No Approaches to cost allocation will be quite different depending on the alternative recommended. As long as the measures do not significantly effect the current authorized purposes, the costs would be allocated to mitigation according to the existing joint-use percentages. Historically, costs for fish transportation and bypass measures have been defined as mitigation. It is assumed similar alternatives like transportation and fish bypass improvements would also be assigned to mitigation and cost shared according to the original joint-use percentages. Therefore, it is expected that new cost allocations would only be necessary for Draw Down and Flow Augmentation. The following table shows the construction joint-use percentages for the lower Snake River projects as established by the initial allocations. Table 2 Joint-Use Percentages for Construction Costs by Project Purposes Projects Percent Allocated to Power Percent Allocated to Navigation Lower Monumental Ice Harbor Little Goose Lower Granite 94.1 78.6 93.3 98.4 5.9 21.4 6.7 1.6 2.2 METHODOLOGY Alternatives being considered for this Feasibility report could be described as either mitigation or restoration of endangered salmon runs. Enhancement was also considered as a possible description of some of the alternatives. However because enhancement implies an improvement of salmon runs beyond pre-project historical levels, and current Corps policy does not support priority funding for enhancement projects, enhancement was dropped as a possible description. How the alternatives are characterized would change the way the costs are allocated. Mitigation measures are joint-use costs allocated based on the original firm cost allocations. Joint-use costs are assigned to those facilities that serve more than one purpose. Currently, barging of juvenile fish and bypass measures at the projects are considered mitigation actions. Restoration measures by comparison would be allocated solely to ecosystem restoration. The unrecovered Federal debt is comprised of investment costs allocated to power for the four lower Snake Projects (Lower Granite, Little Goose, Lower Monumental, and Ice Harbor). Total remaining debt as of the end of 1998 was approximately $479 million for construction of the dams and $271 for the Lower Snake River fish hatcheries and fish mitigation. The Bonneville Power Administration repays this debt to the Federal government from power revenues. The four lower Snake projects began producing power between 1962 and 1975. For illustrative purposes, the unrecovered Federal debt is considered part of the implementation costs and is allocated according to the requirements for mitigation or restoration for the Draw Down Alternative. At this point however, it is not clear what obligation, if any, BPA would have to repay this out-standing debt in the event the dams are breached. BPA's obligation would likely be determined based on legal opinion, congressional direction, and negotiation. 2.3 FLOW AUGMENTATION The Flow Augmentation alternative is also likely to impact the current operations of a number of projects. Because these changes in operation are likely to be significant, a number of Federal projects would also be considered for new cost allocations. No detailed studies have been completed to estimate how the costs for these projects would be reallocated. However if the original cost allocations were reanalyzed, fewer costs would be allocated to irrigation and power and more to ecosystem restoration. All of the projects that would be considered for cost re-allocations as a result of Flow Augmentation are Bureau of Reclamation projects, and are listed in the following table. Table 3 Projects That May require Cost Re-Allocations as a Result of the Flow Augmentation Alternative USBR Projects Jackson Lake Palisades Ririe American Falls Minidoka Anderson Ranch Arrowrock Lucky Peak Cascade Deadwood Owyhee 3. APPROACHES TO ALLOCATING COSTS FOR DRAWDOWN It should be recognized that when Congress provides the authorizing legislation for any of the alternatives being investigated in this feasibility report, they can designate what cost allocation or cost sharing approach they so wish. As such, the possible alternative approaches to allocating costs are infinite. This section, however, presents two possible approaches for allocating Draw Down costs that follow the current administrative guidelines. 3.1 COST SHARE AS MITIGATION Under this option the cost of the Drawdown would be treated as a mitigation cost. The concept of this option is that the construction and operation of these projects for the hydropower and navigation purposes has resulted in declining wild salmon and steelhead stocks that represent an unmitigated loss that has accrued to the projects. If the Drawdown alternative is recommended for implementation as a mitigation project, it would be on the basis that it is the most effective mitigation, or only effective mitigation for this loss. Therefore, the cost of achieving this mitigation is properly assigned back to the project purposes that necessitated the mitigation. This has been the approach for recent fish and wildlife measures at Columbia and Snake River dams. An issue is whether costs should be allocated to project purposes that have been eliminated. The costs would be allocated based on existing joint use percentages. Nearly 90% of the cost would be allocated to hydropower and repaid to the U.S. Treasury by BPA through collections from power customers. The navigation purpose would be allocated 10% of the cost and these costs would be Federal and not recoverable. The remaining unrecovered hydropower debt on the Lower Snake River dams would continue to be paid to the U.S. Treasury through collections from power customers. Any operation and maintenance costs associated with the Draw Down alternative (for example maintenance of the locks and remaining dam in caretaker status) would be allocated to the hydropower and navigation purposes and shared as the operation and maintenance costs of these purposes are shared. If one assumes that breaching of the dams is an additional or new feature for mitigation purposes, costs should be allocated as joint-use construction costs. The joint-use cost percentages would be the basis for this allocation. The tables below estimate how the unrecovered debt and implementation and O&M costs would be allocated for the Draw Down alternative (A-3). Table 4 Mitigation - Allocated Investment Costs and Unrecovered Debt Option A-3 Preliminary Costs - Allocated by Purpose (000's) Purpose Investment Cost Unrecovered Debt Hydropower Navigation Non-Reimbursable Costs 875,334 86,572 6,826 750,000 0 0 TOTAL 968,732 750,000 Source: Section 3.10, Implementation and Avoided Costs (Table 1) Table 5 Mitigation - Allocated O&M Costs Option A-3 Preliminary O&M Costs - Allocated by Purpose (000's of 1998 Dollars) Purpose Operation and Maintenance Cost Hydropower Navigation 4,375 481 TOTAL $4,856 Source: Section 3.10, Implementation and Avoided Costs (Table 7) 3.2 COST SHARE AS RESTORATION Under this option, the cost of the Drawdown alternative would be shared as an ecosystem restoration cost and would require a non-Federal cost sharing sponsor. Remaining unrecovered hydropower debt on the Lower Snake River dams would also be included as a restoration cost. Any operation and maintenance costs associated with the Drawdown alternative (for example maintenance of the locks and remaining dam in caretaker status) would be financed 100% by a non-Federal sponsor. Section 210 of the Water Resources Development Act of 1996 established the non-Federal cost share for environmental protection and restoration as 35% non-Federal with operation and maintenance of the ecosystem restoration project being 100% non-Federal. However, there may be precedent for 50% non-Federal cost sharing for ecosystem restoration activities which result in adverse impacts to purposes of an existing Federal project as in the case of the Kissimmee River Restoration and Everglades and South Florida Ecosystem. The operation and maintenance costs of the restoration remain non-Federal. If one assumes that breaching of the dams is a restoration measure, costs could be allocated solely to this purpose. Because Drawdown results in a single project purpose (ecosystem restoration), all costs should be allocated to this new project purpose. The tables below estimate how the unrecovered debt and implementation and O&M costs would be allocated for the Draw Down alternative (A-3) assuming restoration is the sole purpose. Table 6 Restoration - Allocated Investment Costs and Unrecovered Debt Option A-3 Preliminary Costs - Allocated to Ecosystem Restoration (000's) Purpose Investment Cost Unrecovered Debt Ecosystem Restoration 968,732 750,000 TOTAL 968,732 750,000 Source: Section 3.10, Implementation and Avoided Costs (Table 1) Table 7 Restoration - Allocated O&M Costs Option A-3 Preliminary O&M Costs - Allocated to Ecosystem Restoration (000's of 1998 Dollars) Purpose Operation and Maintenance Cost Ecosystem Restoration $4,856 TOTAL $4,856 Source: Section 3.10, Implementation and Avoided Costs (Table 7) 3.3 FINANCIAL ANALYSIS If all costs were allocated to ecosystem restoration, there would also be an issue of cost sharing for this purpose. A non-Federal sponsor would need to be identified for cost sharing. A non-Federal interest is a legally constituted body with full authority and capability to perform the terms of its agreements and to pay damages, if necessary, in the event of failure to perform. The non-Federal share of the implementation costs and unrecovered debt would be 35%. The non-Federal sponsor would also be responsible for 100% of operation, maintenance, and replacement costs for a restoration project. The following table displays the cost sharing portions for the Federal and non-Federal sponsor if the action is determined to be restoration. Table 8 Restoration - Unrecovered Debt Investment Cost Option A-3 Preliminary Costs - Allocated to Ecosystem Restoration (000's) Sponsor Investment Cost Unrecovered Debt Federal (65%) Non-Federal (35%) 629,676 339,056 487,500 262,500 TOTAL 968,732 750,000 Source: Section 3.10, Implementation and Avoided Costs (Table 1) Table 9 Restoration - O&M Costs - Cost Sharing for the Federal and Non-Federal Sponsor Option A-3 Preliminary O&M Costs - Allocated to Ecosystem Restoration (000's of 1998 Dollars) Purpose Operation and Maintenance Cost Non-Federal (100%) $4,856 TOTAL $4,856 Source: Section 3.10, Implementation and Avoided Costs (Table 7) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- City of Seattle Budget for 2009 - 2010 retrieved August 17, 2009 from:2009 Adopted and 2010 Endorsed Budget -695- Central Service Departments and Commissions 2009-2010 Cost Allocation Factors Central Service Department Cost Allocation Factor Office of Arts and Cultural Affairs Negotiated MOA* City Auditor 2006 and 2007 audit hours by department Civil Service Commission 2003-2007 number of cases by department Mayor's Office 100% General Fund or by MOA* Office of Civil Rights 2006-2007 cases filed by department Office of Intergovernmental Relations Staff time and assignments by department Office of Sustainability and Environment 2009-2010 Work Plan Office of Policy and Management 100% General Fund or by MOA* Office of Economic Development 100% General Fund or by MOA* Fleets and Facilities Department Various factors and allocations. See Appendix B(1) for details on services, rates, and methodologies. Department of Executive Administration (DEA) and Department of Finance Various factors and allocations. See Appendix B(2) for details on services, factors, and methodologies. Department of Information Technology Various factors and allocations. See Appendix B(3) for details on services, rates, and methodologies. Law Department 2006-2007 hours by department for Civil Division; Public and Community Safety Division is charged 100% to the General Fund. Legislative Department City Clerk's Office based on number of Legislative items; Central Staff and Legislative Assistants on assignments; City Council 100% General Fund or by MOA.* Department of Neighborhoods Customer Service Bureau estimate by staff time. Personnel Department Various factors and allocations. See Appendix B(4) for details on services, factors, and methodologies. State Examiner (State Auditor) 75% by Summit rows of data; 25% by Adopted 2008 FTEs Emergency Management 2008 Adopted Budget dollar amount *Memorandum of Agreement (MOA) on charges Cost Allocation 2009 Adopted and 2010 Endorsed Budget -696- FLEETS AND FACILITIES DEPARTMENT BILLING METHODOLOGIES – B(1) Service Provider Org Service Provided Billing Methodology Billing Method Fleet Services Vehicle Leasing A2212 - Vehicles owned by, and leased from, Fleet Services - Vehicles owned directly by utility departments - Calculated rate per month based on lease-rate components for vehicle depreciation, replacement inflation, routine maintenance, and overhead. - Calculated rate per month based on lease-rate components but charged for overhead only as outlined in MOU with utility. Rates Rates Motor Pool A2213 As needed daily or hourly rental of City Motor Pool vehicle Actual Motor Pool-vehicle usage based on published rates. Rates differ for car vs. van/truck and have hourly or mileage minimum and maximum rates. Rates Vehicle Maintenance A2221 - Vehicle Maintenance labor - Vehicle parts and supplies - Actual maintenance hours used for vehicle maintenance services not included in vehicle lease rate, billed at $98.00 per hour for all maintenance labor. - Actual vehicle parts and supplies used for vehicle maintenance services not included in vehicle lease rate billed at cost plus 14% mark-up for tires and 25% mark-up for other maintenance parts and supplies. Rates Rates Fueling Services A2232 Vehicle fuel from Cityoperated fuel sites Actual price per gallon of fuel consumed plus 20 cents per gallon mark-up at unattended sites and 68 cents per gallon mark-up for tanker fuel service. Rates Facility Services Real Property Management A3322 Office & other building space - Total costs of Property Management Services by sector divided by rentable square-foot by space type equals rentable square-foot rate. - Schedule 1 rate = $34.34 - Schedule 2 rate = $7.24 Cost Allocation to Departments and General Fund Real Property Management A3322 Office & other building space Service agreements with commercial tenants, building owners and/or affected departments. Direct Charges Building Maintenance A3323 Crafts Services: - Plumbing - Carpentry - HVAC systems - Electrical - Painting - Regular maintenance built in to office space rent and provided as part of space rent. - Non-routine services charged directly to service user(s) at $100 per hour. Rates Cost Allocation 2009 Adopted and 2010 Endorsed Budget -697- FLEETS AND FACILITIES DEPARTMENT BILLING METHODOLOGIES – B(1) Service Provider Org Service Provided Billing Methodology Billing Method Fleet Services Janitorial Services A3324 Janitorial services Janitorial services included in Schedule 1 rate charges in certain downtown buildings. Internal transfer – costs are collected as part of building space rent Parking Services A3340 Parking services Monthly parking costs for City vehicles are charged to department based on actual use. Hourly parking vouchers are sold to departments in advance of use, as requested. Vouchers for private tenants and personal vehicles of City staff are sold on monthly and hourly bases, as requested. Rates Warehousing Service A3342 - Surplus materials - Records storage - Material storage - Paper and handling - Data delivery - Special deliveries - Commodity type, frequency, weighting by effort and time - Cubic feet and retrieval requests - Square-footage of space used - Paper usage by weight - Volume and frequency of deliveries - Volume, frequency, and distance of deliveries All Department Cost Allocation Mail Messenger A3343 Mail delivery Actual pieces of mail delivered to client during 20+ day sample period Cost Allocation to Six Funds Technical Services Capital Programs A3311 - Project management - Space planning and design - Move coordination - Project management hours billed at prevailing hourly rate ($150 per hour), determined by dividing division revenue requirement by annual forecast of project management billable hours. Rates Real Estate Services A3313 Real estate transactions including acquisitions, dispositions, appraisals, etc. Historical percentage of net operating budget after deducting resale expense, cost of service for CIP projects, and cost of 2 FTE dedicated to property disposition and master planning work related to City property in the neighborhoods. Cost Allocation to Relevant Funds Cost Allocation 2009 Adopted and 2010 Endorsed Budget -698- DEPARTMENT OF EXECUTIVE ADMINISTRATION (DEA) AND DEPARTMENT OF FINANCE (DOF) COST ALLOCATION METHODOLOGIES – B(2) Service Provider Org Service Provided Billing Methodology Department of Executive Administration Executive Management for DEA C8108, C8109, C8170 Provide administrative services and policy direction for the department Composite percent of all other Dept. of Executive Administration cost allocations Risk Management C8160 Provide liability claims and property/casualty program mgmt., loss prevention/ control and contract review Percent of actual number of claims paid over the past five years (2003-2007) Accounting/Payroll C8210 - Central accounting - Citywide payroll - Percent of staff time per department - 2008 Adopted Budget FTEs Technology C8410 Desktop computers and small capital equipment Composite percent of other DEA cost allocations Applications C8420 Maintain and develop City Information Technology (IT) applications Project and staff assignments; allocated to six funds plus FFD and DoIT Summit C8480 Maintain and develop the City's accounting system System data rows Human Resource Information System (HRIS) C8481 Maintain and develop the City's personnel system Weighted number of paychecks for active employees and retiree checks per year Construction & Consultant Contracting C8711 - Provide contracting support and admin. - Minority Business Devel. Fund admin. - 2006-2007 number of Contract Awards (50%) and dollar amount of Contract Awards (50%) to major users - 100% General Fund Purchasing C8721 Provide centralized procurement services and coordination Percent of staff time and assignments by department Treasury Operations C8312 Bank reconciliation, Warrant issuance Staff time, voucher counts Cost Allocation 2009 Adopted and 2010 Endorsed Budget -699- DEPARTMENT OF EXECUTIVE ADMINISTRATION (DEA) AND DEPARTMENT OF FINANCE (DOF) COST ALLOCATION METHODOLOGIES – B(2) (cont.) Service Provider Org Service Provided Billing Methodology Department of Executive Administration (cont.) Special Assessment District Admin. C8312 Business Improvement Area (BIA) fiscal management 100% General Fund Investments C8320 Investment of City funds Percent participation in the investment pool. Remittance Processing C8330 Processing of mail and electronic payments to Cash Receipt System Number of Transactions Parking Meter Collections C8340 Collection of parking meter revenue 100% General Fund Animal Control C8560 Animal care and animal control enforcement 100% General Fund Spay and Neuter Clinic C8570 Spay and neuter services for pets of low-income residents 100% General Fund Revenue and Licensing C8510 Collection and enforcement of City taxes and license fees 100% General Fund Consumer Affairs C8550 - Verify accuracy of commercial weighing and measuring devices - Enforcement of Taxi Code 100% General Fund Department of Finance Finance CZ615 City financial policies, planning, budget, and controls Staff time and assignments Financial Advisor CZ120 Advisory Committee and special debt management analysis 2003-2007 Number of Bond Sales Debt Management CZ620 Debt financing for the City 2003-2007 Number of Bond Sales Except as noted, DEA and DOF charges are generally six-fund allocated to the General Fund, SCL, SPU, SDOT, DPD, and Retirement. Cost Allocation 2009 Adopted and 2010 Endorsed Budget -700- DEPARTMENT OF INFORMATION TECHNOLOGY (DOIT) COST ALLOCATION METHODOLOGIES – B(3) Program Org Allocation Formula Departments Affected Data Backbone and Internet Services D3308 Percent of adopted budget Six/funds Data Network Services D3308 Billed on use of services; hourly rates for service changes; connection charge for all central campus offices except SCL All departments except SCL, SPL Enterprise Computing Services D3301 Allocated to customer departments based on pages printed, devices supported, number of batch jobs, number of gigabytes, number of units of cabinet storage, and number of CPUs Participants Messaging, Collaboration, and Directory Services D3302 Allocated to customer departments based on number email addresses (and BlackBerry units, where applicable) All departments except SPL Mid-Range Computing Services (Server Support) D3303 Allocated to customers based on number of email addresses, number of CPUs, number of applications, number of operating systems, and number of Citrix accounts Participants Technical Support Services (Desktops) D3304 Allocated to customer departments based on number of desktops and printers Participants Service Desk D3310 Allocated to customer departments based on number of email addresses Participants Telephone System Services D3305 Telephone rates; IVR: funded based on historical usage Telephone Rates: All departments IVR: Participants Radio Network D3306 Radio network access fee; monthly charge for leased equipment Access fee: Police, Fire, SPU, Seattle Center Monthly lease charge: Participants Communications Shop D3307 Labor rates Police, Fire, SPU, Seattle Center; other departments may select this service Telecommunications Engineering & Project Management D3311 Labor Rates Optional Citywide Web Team D4401 Percent of adopted budget Six/funds Cost Allocation 2009 Adopted and 2010 Endorsed Budget -701- DEPARTMENT OF INFORMATION TECHNOLOGY (DOIT) COST ALLOCATION METHODOLOGIES – B(3) (cont.) Program Org Allocation Formula Departments Affected Community Technology D4403 Cable Subfund External customers Office of Cable Communications D4402 Cable Subfund Constituents Seattle Channel D4404 Cable Subfund All departments Technology Leadership and Enterprise Planning D2201 Percent of adopted budget Six/funds Project Management Center of Excellence D2201 Percent of adopted budget Six/funds Project Management Project Support D2201 Percent of adopted budget Participants Department Management, including Vendor and Contract Management D1101 Based on percent of each Fund's contribution to overall DoIT revenue recovery Six/funds Cost Allocation 2009 Adopted and 2010 Endorsed Budget -702- PERSONNEL DEPARTMENT COST ALLOCATION METHODOLOGIES – B(4) Service Provider Org Service Provided Billing Methodology Commercial Driver's Licenses N1230 - CDL administration # of CDLs by Department Alternative Dispute Resolution N1145 - Mediation and facilitation - Conflict resolution training 2008 Adopted Budget FTEs Police and Fire Examinations N1150 Administer exams for potential fire and police candidates General Fund allocation and participant fees Training Development and EEO (TDE) N1160 - Administer employee training and recognition programs - Consulting 2008 Adopted Budget FTEs Employment N1190 Recruit for open positions 2008 Adopted Budget FTEs Benefit Administration N1240 Administer Citywide health care insurance programs 2008 Adopted Budget FTEs Human Resources N1311 Provide policy guidance for Citywide personnel issues 2008 Adopted Budget FTEs Director's Office N1315 Provide policy guidance for Citywide personnel issues 2008 Adopted Budget FTEs Information Management N1360 Maintain Citywide personnel information 2008 Adopted Budget FTEs Contingent Workforce Program N1370 Administer temporary, work study, and intern programs 2008 Adopted Budget FTEs Management Services, Finance and Technology N1390 Provide finance, budget, and technology services 2008 Adopted Budget FTEs Classification and Compensation N1430 - Design and maintain classification and pay programs - Determine City position titles Number of Job Classifications Labor Relations N1440 - Administer labor statutes - Negotiate and administer collective bargaining agreements and MOUs Number of Represented Positions Cost Allocation 2009 Adopted and 2010 Endorsed Budget -703- PERSONNEL DEPARTMENT COST ALLOCATION METHODOLOGIES – B(4) (cont.) Service Provider Org Service Provided Billing Methodology Personnel Department-Administered Subfunds Deferred Compensation N1220 Administer deferred compensation (457 Retirement Plan) for City employees. Service fee charged to program participants. Industrial Insurance (Safety and Workers' Compensation) N1230 and N1250 Collaborate with the Washington State Department of Labor and Industries, manage medical claims, time loss, preventative care, and workplace safety programs. Supported by the Industrial Insurance Subfund, billing is based on actual usage and pooled costs are based on three years of historical usage/data. Cost Allocation 2009 Adopted and 2010 Endorsed Budget -704- Central Service Cost Allocations by paying funds – Informational Only These transfers reflect reimbursements for general government work performed on behalf of certain revenue generating departments. Summit Account Interfund Transfers 2009 Proposed 2010 Proposed DEA/DOF 16,045,606 16,749,029 Personnel 7,008,254 7,347,671 Miscellaneous 13,482,936 13,999,242 Total 36,536,796 38,095,942 Interfund Transfers for DEA/DOF 541990 SCL 5,305,883 5,536,334 541990 SPU 4,994,851 5,210,602 541990 SDOT 2,962,474 3,089,624 541990 DPD 1,153,635 1,199,762 541990 Retire 537,487 558,120 541990 Other 1,091,276 1,154,588 Total IF Transfers for DEA/DOF 16,045,606 16,749,029 Interfund Transfers for Personnel 541990 SCL 1,898,278 1,950,614 541990 SPU 1,526,817 1,569,079 541990 SDOT 972,939 999,390 541990 DPD 455,645 468,272 541990 Retire 11,562 11,900 541990 Other 2,143,012 2,348,416 Total IF Transfers for Personnel 7,008,254 7,347,671 Interfund Transfers for Misc. 541990 SCL 3,675,565 3,814,435 541990 SPU 3,595,740 3,732,705 541990 SDOT 3,511,941 3,646,419 541990 DPD 2,646,057 2,749,805 541990 Retire 53,633 55,878 541990 Other - - Total IF Transfers for Misc. 13,482,936 13,999,242 Totals SCL 10,879,726 11,301,383 SPU 10,117,409 10,512,387 SDOT 7,447,354 7,735,433 DPD 4,255,337 4,417,839 Retire 602,682 625,897 Other 3,234,288 3,503,005 Total 36,536,796 38,095,942 US Department of Human Services, Financial Accounting, Division of Cost Allocation retrieved August 17, 2009 from: Table of Contents Who We Are ........................................................................................................................................................................................................................v What We Offer....................................................................................................................................................................................................................vi Organizational Overview ............................................................................................................................................................................................... vii Administrative Operations Service................................................................................................................................................................................vii Federal Occupational Health Service ...........................................................................................................................................................................vii Financial Management Service......................................................................................................................................................................................vii Information and Systems Management Service.........................................................................................................................................................vii Strategic Acquisition Service.........................................................................................................................................................................................vii Customers ........................................................................................................................................................................................................................ viii Acquisition Services........................................................................................................................................................................................................11 HHS Consolidated Acquisition Solution Operations and Maintenance ...................................................................................................................11 Negotiated Contracts.......................................................................................................................................................................................................12 Purchase Card Management..........................................................................................................................................................................................13 Simplified Acquisitions.....................................................................................................................................................................................................14 Customer Success Story: HHS' HSPD-12 Program Office.....................................................................................................................................15 Commissioned Corps Support Services.......................................................................................................................................................................17 Board for Correction.........................................................................................................................................................................................................17 Compensation Branch......................................................................................................................................................................................................18 Medical Affairs..................................................................................................................................................................................................................19 Customer Contact Centers ..............................................................................................................................................................................................21 HHS Hotline Department Information Line..................................................................................................................................................................21 PSC Contact Center ONE DHHS .................................................................................................................................................................................22 Employee Child Care Services.......................................................................................................................................................................................25 Financial Management Services ..................................................................................................................................................................................27 Accounting Services/Financial Reporting....................................................................................................................................................................27 Cost Allocation/Indirect Cost Negotiations..................................................................................................................................................................28 Customer Success Story: HHS' Centers for Medicare and Medicaid Services and Administration for Children and Families; U.S. Department of Agriculture, Food and Nutrition Service ...............................................................................................................................29 Customer Success Story: Food and Nutrition Service, U.S. Department of Agriculture................................................................................30 Debt Collection Center Services ....................................................................................................................................................................................31 Payment Management (Grant) Services ......................................................................................................................................................................32 Payroll Accounting Services...........................................................................................................................................................................................34 Unified Financial Management System Operations and Maintenance....................................................................................................................35 Freedom of Information Act Services...........................................................................................................................................................................37 Human Resource Services..............................................................................................................................................................................................39 Equal Employment Opportunity Complaint Investigations .........................................................................................................................................39 Equal Employment Opportunity Services......................................................................................................................................................................40 Human Resource Systems ..............................................................................................................................................................................................42 Payroll Services ................................................................................................................................................................................................................43 Information Technology Services..................................................................................................................................................................................45 Information Technology Operations ..............................................................................................................................................................................45 Information Technology Security Services ..................................................................................................................................................................50 Project Management Services.......................................................................................................................................................................................51 Logistic Services ..............................................................................................................................................................................................................53 General Storage................................................................................................................................................................................................................53 Labor and Moving Services ............................................................................................................................................................................................54 Product Distribution..........................................................................................................................................................................................................55 2009 PSC Service and Product Directory TABLE OF CONTENTS iii Table of Contents Occupational Health Services.......................................................................................................................................................................................57 Alternative Dispute Resolution Services ......................................................................................................................................................................57 Automated External Defibrillator Services...................................................................................................................................................................58 Clinical Services................................................................................................................................................................................................................59 Employee Assistance Program.......................................................................................................................................................................................60 Customer Success Story: The Foreign Agricultural Service ................................................................................................................................61 Environmental Health Services ......................................................................................................................................................................................62 Customer Success Story: Federal Officers Protected from Drug–Resistant Tuberculosis ...........................................................................64 Organizational Development Services..........................................................................................................................................................................65 Wellness/Fitness Programs ............................................................................................................................................................................................66 Work/Life Services ...........................................................................................................................................................................................................67 Pharmaceutical, Medical, and Dental Supplies and Services................................................................................................................................69 Supply Service Center......................................................................................................................................................................................................69 Customer Success Story: Guam Memorial Hospital ...............................................................................................................................................71 Property Management Services....................................................................................................................................................................................73 Asset Management ..........................................................................................................................................................................................................73 Building Management......................................................................................................................................................................................................74 Leased Space Management...........................................................................................................................................................................................75 Property Disposal..............................................................................................................................................................................................................76 Customer Success Story: Improved Security for Disposal ofGovernment Property ......................................................................................77 Real Property .....................................................................................................................................................................................................................78 Space Acquisition.............................................................................................................................................................................................................79 Space Alterations .............................................................................................................................................................................................................80 Shredding...........................................................................................................................................................................................................................81 Regional Support Services.............................................................................................................................................................................................83 Cooperative Administrative Support Units ...................................................................................................................................................................83 Regional Support...............................................................................................................................................................................................................84 Security Services .............................................................................................................................................................................................................87 Background Investigations .............................................................................................................................................................................................87 Digital Fingerprinting and Special Agency Checks.....................................................................................................................................................88 Personal Identity Card Issuance and Homeland Security Presidential Directive 12 Services ............................................................................89 Physical Security and Emergency Operations Services............................................................................................................................................90 Security Assessments and Consultation ......................................................................................................................................................................92 Technical Support Services ...........................................................................................................................................................................................95 Conference Services........................................................................................................................................................................................................95 Departmental Forms Management................................................................................................................................................................................96 Graphic Arts and Photography Services ......................................................................................................................................................................97 Customer Success Story: HHS' Office of Disease Prevention andHealth Promotion and the Office of Minority Health ......................98 Mail Operations.................................................................................................................................................................................................................99 Printing Procurement.....................................................................................................................................................................................................100 Telecommunications Management .............................................................................................................................................................................101 Telecommunications Services......................................................................................................................................................................................102 Transportation and Travel Services ............................................................................................................................................................................105 E Gov Travel Center of Excellence ..............................................................................................................................................................................105 Rental Vehicles................................................................................................................................................................................................................106 Subsidized Mass Transit Tickets (Transhare) ...........................................................................................................................................................107 Cost Center Codes ..........................................................................................................................................................................................................111 Index ................................................................................................................................................................................................................................. 113 2009 PSC Service and Product Directory TABLE OF CONTENTS iv Who We Are The Program Support Center (PSC) has a 12-year tradition of providing support services to all components of the U.S. Department of Health and Human Services (HHS) and other Federal Government Agencies worldwide. Our broad range of over 60 product and service offerings include: administrati ve operations, health resources, information technology suppor t, financial management, occupational health, human resources, and strategic acquisitions. PSC is a shared services organization dedicated to helping our customers achieve mission-critical results. Our business approach is to listen to, understand, and respond to your needs with high-quality solutions at the lowest possible cost. We are dedicated to achieving business results the right way, with a commitment to our customers, integrity, and service. What We Offer - Unmatched customer service - Simplifi ed and fast access to our products and services through Interagency Agreements, Memorandums of Understanding, and Service Level Agreements - Access to subject matter experts in key administrative support services - Reduction of administrative costs, freeing assets to be allocated to your core mission objectives - A broad range of offerings to meet your support needs We welcome the opportunity to talk to you about how PSC can play an integral role in the success of your Agency. Organizational Overview PSC has five service units: Administrative Operations Service (AOS), Federal Occupational Health Service (FOH), Financial Management Service (FMS), Information and Systems Management Service (ISMS), and Strategic Acquisition Service (SAS). Administrative Operations Service AOS provides a wide range of administrative services including: property management; security and emergency services; Equal Employment Opportunity services, policy, commemorative events, and complaint processing; and communication services as a liaison between the Defense Finance and Accounting Service and HHS employees. AOS also offers a variety of administrative services in the areas of compensation and medical affairs to active duty Commissioned Corps Officers of the U.S. Public Health Service serving in HHS and other Federal Agencies. Federal Occupational Health Service FOH provides comprehensive occupational health services, health and wellness programs, Employee Assistance Programs, work/life services, and environmental health and safety services. Financial Management Service FMS provides grant payment management services; accounting and fiscal services; debt management services; rate review, negotiation, and approvals for Departmental and other Federal grant and program activities; and fiscal advice, technical and policy guidance, and assistance in implementing new initiatives to ensure compliance with regulatory requirements. FMS also offers HHS' Center of Excellence for E-Gov Travel. Information and Systems Management Service ISMS provides an extensive array of information technology (IT) and technical support including: human resource systems; Freedom of Information Act implementation and records management; telecommunications services and management; Web content and publications management; IT infrastructure operations and consulting services; and maintenance of the Unified Financial Management System and the HHS Consolidated Acquisition System. Strategic Acquisition Service SAS provides fully integrated acquisition services to customers including: acquisition management, strategic sourcing, and the Supply Service Center. 2009 PSC Service and Product Directory PREFACE vii Customers PSC has a wide range of customers in HHS and many other Federal and local government agencies. - Agency for International Development - Department of Agriculture - Department of Commerce - Department of Defense - Department of Education - Department of Health and Human Services - Department of Homeland Security - Department of Housing and Urban Development - Department of the Interior - Department of Justice - Department of Labor - Department of State - Department of Transportation - Department of Treasury - Department of Veterans Affairs - Environmental Protection Agency - Consumer Product Safety Commission - District of Columbia - Federal Deposit Insurance Corporation - General Accounting Offi ce - General Services Administration - National Aeronautics and Space Administration - Office of Personnel Management - Peace Corps - Postal Service - Railroad Retirement Board - Securities and Exchange Commission - Social Security Administration PSC Service and Product Offerings Fully integrated solutions, contract negotiation, purchase card management, and simplifi ed acquisition services tailored to meet customer needs Acquisition Services HHS Consolidated Acquisition Solution Operations & Maintenance (HCAS O&M) Information and Systems Management Service As the designated Center of Excellence for HCAS O&M, the Information and Systems Management Service develops O&M policy and procedures, establishes services, monitors system performance, and ensures coordination and knowledge transfer. ISMS oversees the HCAS change control process and configuration management, as well as production operations, including instance management. In addition, ISMS also supports governance and reporting for HCAS O&M. HCAS O&M services provide support for daily operations of the HCAS application. Services offered include: - Tracking and resolution of issues - System monitoring and maintenance to ensure availability - Coordination with peer systems: the Unified Financial Management System and the Departmental Contracts Information System - Tracking, testing, and deployment of system changes - Coordination and communication with customers and vendors - Assurance of customer satisfaction Offered to: HHS Performance: System availability will be maintained at 99.8% of the time scheduled – no more than 0.2% unplanned downtime. 100% of issues that prevent users from accessing critical business functions will be resolved within 48 hours. 90% of Tier 3 Help Desk issues will receive a response within 60 minutes. Rate: Cost to OpDivs per agreement Contact: 301-443-6756; bharat.govindani@psc.hhs.gov 2009 PSC Service and Product Directory ACQUISITION SERVICES 11 Negotiated Contracts Strategic Acquisition Service Offering streamlined acquisition vehicles and customer cost savings through competition and effective negotiation strategies, the Strategic Acquisition Service (SAS) provides centralized negotiated contract services by trained and certified acquisition professionals. SAS provides comprehensive acquisition support, from start to fi nish. Specifically, staff oversee the entire acquisition lifecycle, including initial strategic planning; soliciting and assessing offers; and negotiating, awarding, administering, and monitoring Government contracts. SAS acquires equipment, supplies, and services for the Federal Government in the following areas: - Healthcare and support services - Evaluation design studies and analyses - Conference management - Technical assistance - Information technology - Professional services - Commodities Offered to: All Federal Agencies Performance: 95% of all acquisition requirements will be completed within the following acquisition lead times: 1. Negotiated Contracts (sole source) – Up to 105 days. 2. Negotiated Contracts (competitive, less complex) – Up to 140 days. 3. Negotiated Contracts (competitive, complex) – Up to 180 days. 95% success rate on all protests will be maintained. Rate: 1.5% of the obligation* *An additional 25% of the normal service fee will be charged to expedite negotiated contracts. A cancellation fee of $65.00 per hour or time consumed will be charged. Contact: 301-443-6557; pscacquisitions@psc.hhs.gov 2009 PSC Service and Product Directory ACQUISITION SERVICES 12 Purchase Card Management Strategic Acquisition Service There are times when customers need a service or product quickly and want to just pick up the telephone and place an order. The Strategic Acquisition Service (SAS) issues purchase cards to authorized employees under the Government-wide commercial purchase card program. SAS ensures its customers have the required training, establish certain single and monthly spending limits, and monitor spending in accordance with Federal Acquisition Regulations. Offered to: HHS Performance: 95% of requests for establishment of new purchase cards will be acted upon within 1 business day of receipt of complete information. 95% of all cardholders and approving officials will successfully complete the required training. Rate: $318.62 per card annually Contact: 301-443-6557; pscacquisitions@psc.hhs.gov 2009 PSC Service and Product Directory ACQUISITION SERVICES 13 Simplifi ed Acquisitions Strategic Acquisition Service The Strategic Acquisition Service (SAS) specializes in the negotiation and award of purchase orders, delivery orders, and Blanket Purchase Agreements for all types of commodities and services using Federal simplified acquisition procedures. To streamline the process, SAS establishes and manages consolidated contracts for information technology (IT) equipment and contract closeout services as well as strategically sourced, Department-wide contracts for temporary medical, professional, and administrative staffi ng, office equipment, supplies and furniture, and IT peripherals. A-76 acquisition support services are also available to meet the needs of customer Agencies and Federal initiatives. Offered to: All Federal Agencies Performance: 85% of all acquisition requirements will be completed within the following acquisition lead times: 1. Simplifi ed Acquisitions (less complex) – Up to 15 days. 2. Simplifi ed Acquisitions (complex) – Up to 45 days. 95% success rate on all protests will be maintained. Rate: 3.51% of obligation* *An additional 25% of the normal service fee will be charged to expedite simplifi ed acquisitions. A cancellation fee of $65.00 per hour or time consumed will be charged. Contact: 301-443-6557; pscacquisitions@psc.hhs.gov 2009 PSC Service and Product Directory ACQUISITION SERVICES 14 HHS' HSPD-12 Program Offi ce Customer Success Story HHS HSPD-12 Program turned to PSC s Strategic Acquisition Service (SAS) to ensure that it was able to transition to a new badge system on time. Th e HSPD-12 Program Offi ce contacted SAS to establish a mechanism for purchasing Personal Identity V erifi cation (PI V) badges to meet OMB deadlines and FIPS 201 standards. HSPD-12 mandates using c ommon identifi cation cards to regulate building access and PC and network access across Government. HHS has more than 68,000 employees and 32,000 contractors requiring transition to the new badge system. SAS developed a Request for Quotation to establish a Blanket Purchase Agreement (BPA) for the Purchase of PIV Badges. Soon, SAS awarded a BPA to O berthur f or the pur chase of c ompliant PI V cards for the Department. Th e badges are resilient to tampering and fraud, are easy to produce, and are secure. Under the contract, the badges can be purchased in large lots resulting in a cost savings of approximately $9 per card. Providing effi cient support services for people of the Commissioned Corps by managing medical affairs and compensation Commissioned Corps Support Services Board for Correction If U.S. Public Health Service Commissioned Corps Officers believe that there is an error or injustice in their personnel records, they should contact the Board for Correction. The Board manages and conducts the appeals process for those offi cers. Services offered include: - Establishment and maintenance of an active Board for Correction for review of submissions - Staff submissions through appropriate offices, such as the Office of the General Counsel and the Office of Commissioned Corps Operations, as necessary - Documentation of Board proceedings and preparation of correspondence to applicants about Board decisions - Provision of timely and accurate advice and assistance to Board members Offered to: HHS Performance: 95% of cases will be forwarded by the Board to the appropriate parties within 5 business days of receipt. Acknowledgement of receipt of application will be forwarded to applicants within 10 business days of receipt. 95% of Board meetings will be scheduled within 30 days of receipt of all preliminary comment source..
Content:
Running Head: COST ALLOCATIONS
Cost allocations
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Cost allocations are necessary so as to ascertain an equitable distribution of project costs to projects which are authorized. For this reason, the US army corps of engineers is so concerned with project costs. This will ensure that they will get an equitable share of the total costs of projects incurred. At the same time, it’s a requirement of the federal government for it to undertake cost allocations (Wolk et al 2004).
Despite the fact that they are a branch of the US federal government, cost allocation is mandatory from the federal government’s point of view. This is because the laws and requirements surrounding the reimbursement of funds require the recovery of costs that are incurred for that specific task or function. It’s therefore a matter of concern whether costs are allocated or not (Edward, 2006).
For project costs to be reimbursed, it must be clear whether costs were allocated. This ensures that the costs incurred are charged directly to their cost centers or factors, without overcharging or undercharging some cost centers (Charles, 2006).
The selected cost drivers are good for the purpose of cost allocation. The drivers are detailed and precise, thus ensuring that the costs are carried by the functions they were undertaken for. However, the cost drivers tend to have been selected. This could affect the existing cost allocations (as in the case of drawdown) (William, 1954). This undoubtedly would lead to inaccurate cost allocations. It’s always good to have precise cost drivers.
According to Cokins (2001) having all the costs and cost drivers identified is a good approach. By doing this, you ensure that you go into detail regarding costs, which in turn leads to all costs being allocated to. It really does make sense to have all the costs and cost drivers being listed.
Cost allocations are necessary in every organizational set up, not only in manufacturing companies. This is because even in a city government set up, there are specific areas that costs are incurred. They are incurred in different departments and for different functions.(David, 2001)
The costs that are incurred however need to be recovered. For this reason, it becomes necessary even for a city government to have cost allocations, even though it may seem like cost allocations are only for manufacturing companies.
The U.S department of human services has a special division just for cost allocation purposes. This because the department has ...
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