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DHHS Cost Allocation Fundamentals

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Title: DHHS Cost Allocation Fundamentals


1
DHHS Cost Allocation Fundamentals
  • DHHS Controllers Office
  • Cost Accounting Branch
  • 2010

2
Types of Cost Plans
  • Indirect Cost Rate - DPH, Schools for the Deaf
  • Cost Allocation Plan (Non PA) - DIRM,
    Controllers 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
Examples of Allocation Bases
  • Staff/Support Functions
  • Purchasing - POs processed
  • IT - workstations maintained
  • Personnel, clerical support - FTEs served
  • Non-Employee
  • Cost of space - square footage
  • Motor Pool - miles driven
  • Photocopying - copies made
  • Direct workers
  • Consistent, measurable output - applications
    processed, calls received, case/recipient/ client
    counts, etc.
  • Timesheets
  • Supervisors Positions supervised

6
Examples of Allocation Bases Currently Used in
DHHS
  • Division FTEs
  • 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

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
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 (Cont)
  • 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 Support Time Sheet Summary
12
Employee Percentages
  • Family Planning Admin. Support

Funding Source FRC Percentage Position Equivalent
MCH Block Grant AP 5.68 0.0568
Medicaid C3 36.36 0.3636
Family Planning FP 11.79 0.1179
WIC Admin GE 8.67 0.0866
Preventive Health Block Grant PH 37.50 0.3750
Total 100.00 1.0000
  • Family Planning Program

Funding Source FRC Percentage Position Equivalent
Family Planning FP 100.00 3.0000
13
Family Planning Coordinator (Step Up from
Employees)
Funding Source FRC 2312 FTE 2318 FTE Total FTEs Percentage 2308 FTEs
MCH Block Grant AP 0.0568 0.0568 1.42 0.0284
Medicaid C3 0.3636 0.3636 9.09 0.1818
Family Planning FP 0.1179 3.0000 3.1179 77.94 1.5588
WIC Admin GE 0.0867 0.0867 2.17 0.0434
Preventive Health Block Grant PH 0.3750 0.3750 9.38 0.1876
Total 1.0000 3.0000 4.0000 100.00 2.0000
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 isnt
    changed. Its very confusing to federal
    reviewers when the Description of Services and
    the Title dont 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 606s
  • 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 (cont)
  • Controllers 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 Controllers
    Office to develop allocation percentages for cost
    centers.

22
What happens (cont)
  • 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 (cont)
  • 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
Redistribution (cont)
26
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 Directors 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
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29
Budgeting (cont)
  • 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.

30
Questions?
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