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Allocated expenses meaning9/17/2023 ![]() For larger jurisdictions, this may also include categories like city administrators, attorneys, human resources, and IT. What staff members or departments support multiple funds or programs? Common examples for smaller jurisdictions include finance directors, clerks/treasurers, payroll clerks, and facility maintenance staff.Identify within central services or internal service departments any specific services that support multiple funds or departments (such as payroll, accounts payable, utility billing, and facilities and grounds maintenance).įor the purposes of this cost allocation methodology, these costs are referred to as indirect costs or "overhead." Your jurisdiction should allocate costs for any services, staff, facilities, or equipment that benefit other funds or departments. Step 1: Identify Shared Facilities or Support Services Update and monitor the data and methodology to ensure the allocation remains fair and equitable over time.Determine the allocation factors/methodology to distribute the costs equitably.Identify shared facilities or support services.In particular, a cost allocation system should: The key to successful cost allocation is to establish an allocation system that is fair, equitable, and supported by current data. Federal monies require strict adherence to OMB’s Uniform Guidance (2 CFR 200). This usually requires a formal cost allocation plan with internal controls to assure accuracy. Get reimbursement for allowable overhead costs from federal and state grants, to the extent that this is allowed by the grant.RCW 43.09.210 requires that all service rendered by one department to another shall be paid for at its true and full value by the department receiving the service, and that no department shall benefit in any financial manner whatever by an appropriation or fund made for the support of another. Comply with state law and minimize audit issues.Relieve pressure on the general fund by allocating certain general fund costs to enterprise or other funds that receive a benefit from support services.Ensure accuracy of cost-based user fees for public services such as utilities, development review, parks, or any other service where the user pays a fee for service.Equitably share the costs of shared facilities and support services between departments, programs, and funds throughout the organization. ![]() Identify the actual cost of services being provided to the citizens.A formal cost allocation system can help a jurisdiction: There are a number of reasons that a local government should develop a cost allocation plan or system. Indirect costs, commonly referred to as "overhead costs" or central services, are for support services that are shared by multiple departments, programs and/or funds, such as accounting, payroll, administrative, or human resource salaries and benefits information technology (IT) services for the entire municipality or operating and maintenance costs for city hall or other buildings shared by multiple departments.įor example, the full cost of the Public Works Department includes its direct costs (wages, benefits, maintenance, and operations) plus the indirect costs/"overhead" of support services received from central services (such as accounting, payroll, and IT).Ī cost allocation plan distributes these indirect costs to ensure that the respective funds are fairly and accurately paying for the services they receive. Cost allocation refers to a process of accounting and recording the full costs of a government service by including its indirect costs or "overhead" in addition to its direct costs.ĭirect costs are those that clearly and directly benefit a specific fund or program, such as supplies, materials, staff salaries and benefits, or consultant fees that support a single department or project. ![]()
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