1 Department of Finance Fiscal Systems and Consulting Unit Pro Rata/Statewide Cost Allocation Plan Overview 2011

2 Agenda Introduction/Overview State’s Full Cost Recovery Policy Define Central Service Agency Cost Central Service Cost Allocation Reports Budgeting for Pro Rata/SWCAP Recoveries

3 Full Cost Recovery Policy

4 The state policy is for departments to recover full costs whenever goods or services are provided for others. The full cost includes all cost attributable directly to the activity plus a fair share of indirect costs. Full Cost Recovery Policy

5 GC ~ When billing other entities, state agencies supported by the General Fund are required to include an administrative cost factor. SAM 8752 ~ Departments providing goods or services to others will recover full costs. This applies to all departments regardless of funding sources and in all cases unless a department is specifically exempted by law.

6 Elements of Full Cost Direct Costs - directly assignable to a program: – Salaries and wages – Equipment – Operating expenses (not included in use allowance calculations) – Travel expenses incurred to carry out the federal award

7 Elements of Full Cost Indirect Costs - not directly assignable to a program: a)Departmental (overhead) costs assigned to many programs: Executive staff Information technology Accounting staff Budget staff Other

8 Elements of Full Cost b) Statewide indirect costs: Fair share of costs incurred by central administrative service agencies. Pro Rata (special funds) SWCAP (federal funds)

9 Elements of Full Cost Indirect Costs Department’s Indirect Costs (Budgets, IT, Acctg, etc.) Pro Rata Costs (CSA cost allocation to special funds) SWCAP Costs (CSA cost allocation to federal funds) Only 60 departments have SWCAP

10 Elements of Full Cost Direct Costs (DC) $ XXXX Indirect Costs (IC) a) Departmental $ XX b) Statewide: Pro Rata XX or SWCAP XX XXXX Total Costs (TC) $XXXXX DC + IC = TC (full cost)

11 What is a Central Service Agency (CSA) Cost?

12 Central Service Agency Costs State Administrative Manual Section 8753 Central service costs are those amounts expended by central service departments and the Legislature for overall administration of state government and for providing centralized services to state departments.. These functions are necessary for state operations and are centralized to provide efficient and consistent statewide policy and services.

13 Central Services Function Code Central ServiceWorkload UnitSource Finance (DOF) 004 AuditsAudit HoursDOF/OSAE 005 BudgetsBudget HoursDOF/Admin 010 CALSTARSState Ops $DOF/Sch. 10 California Technology Agency 105 CA Technology AgencyState Ops $DOF/Sch. 10 Financial Information Systems for California 110 Financial Information System for California (SWCAP only) State Ops $DOF/Sch. 10 State Controller’s Office (SCO) 201 AccountingTransactionsSCO 202 Claim AuditsWarrantsSCO 203 PayrollWarrantsSCO 204 General DisbursementsWarrantsSCO

14 Central Services Function Code Central ServiceWorkload UnitSource State Controller’s Office (SCO) 205 Field AuditsAudit HoursSCO 211 PPSD/SDDPositionsSCO State Treasurer’s Office (STO) 301 Investment (Pro Rata Only)Interest EarnedSCO 302 Item ProcessingWarrantsSCO 303 Cash Mgmt/Public FinanceState Ops $DOF/Sch State Personnel Board (SPB)PositionsSCO 410 Dept. Personnel Admin (DPA)Positions SCO 510 Office of Admin Law (OAL)Review HoursOAL 520 CA State Library (CSL)State Ops $DOF/Sch.10

15 Central Services Function Code Central ServiceWorkload UnitSource 600 Health Benefits (HB) for Annuitants (Retired) HB Costs for Active Employees SCO/PERS/DPA 601 Dental Benefits (DB) for Annuitants' (Retired) DB Costs for Active Employees SCO/PERS/DPA Department of Justice (DOJ) 605 Legal (SWCAP Only)Attorney HoursDOJ 607 Tort Liability (SWCAP Only)Attorney HoursDOJ 700 & 705 Agency Secretaries Wtd Avg. of State Ops. for the Depts. they overseeState Ops/Sch Bureau of State Audits (BSA) Audit Hours DOF/FSCU

16 Central Services Function Code Central ServiceWorkload UnitSource 800 Legislature (Pro Rata Only)Sum of Past ActualDOF/FSCU 805 Legislative Counsel Bureau (Pro Rata Only) Sum of Past ActualDOF/FSCU 810 Governor’s Office (Pro Rata Only)Sum of Past ActualDOF/FSCU 815 Office of Planning & Research (Pro Rata Only) Sum of Past ActualDOF/FSCU

17 Central Service Cost Allocation

18 Central Service Cost Allocation Pro Rata Plan Recovery of central service costs from special and certain non-governmental cost funds Statewide Cost Allocation Plan (SWCAP) Recovery of central service costs from federal funds

19 Central Service Cost Allocation Pro Rata: Allocate costs to departments by function Distribute department’s total allocation to each fund based on the fund’s proportion of total funding Classify each fund’s cost as billable or nonbillable SWCAP: Allocate costs to departments by function Distribute department’s total allocation to federal fund based on its proportion of total funding Federal fund is only billable fund

20 Central Service Cost Allocation 1) Obtain workload and expenditure data from the CSAs: Past year actual workload data Past year actual expenditures (must tie to year-end financial statements) Budget year estimate expenditures 2) Calculate and distribute CSA costs to state departments based on workload

21 Central Service Cost Allocation 3) Distribute total departmental allocation Pro Rata – proportionately to all funds in the department based on each fund’s percentage of total departmental funding. SWCAP – proportionately to the federal fund based on its percentage of total departmental funding. SWCAP Method A Calculation: Department’s Total SWCAP Allocation Federal Funding State Operations X = Department’s Budgeted SWCAP

22 4) Determine the total allocated to each fund Calculate the total allocation using the departmental allocation for each fund (PY and BY) from Step 3 and the BY estimate from two years ago (PY estimate). Central Service Cost Allocation (Pro Rata Only) PY PY Roll - BY Total Actual Estimate Forward Estimate Allocation – = + =

23 Central Service Costs Allocation 5)Classify the allocation from Step 4 as billable or nonbillable funds (Pro Rata only) Billable funds: Funded by special revenue sources such as fees, licenses, penalties, assessments, interests, etc. Nonbillable funds: General Fund Federal Funds Special Deposit Fund (SWCAP only federal fund is billable)

24 Pro Rata/SWCAP Process CSA Reported Workload Data PY Actual and BY Estimate Pro Rata Reports CSA Cost Allocation CSA Reported Expenditure Data PY Actual and BY Estimate Budget Data (Schedule 10s) Miscellaneous Agencies Reported Data SWCAP Reports

25 Reports

26 Reports Pro Rata Detail by Functions Pro Rata allocation for each function Pro Rata Detail by Funds Pro Rata allocation for each fund SWCAP Detail by Agency SWCAP allocation for each function

27 Budgeting for Pro Rata

28 Budgeting for Pro Rata Pro Rata Assessment Sheet (green sheet) Does not include amounts less than $1,000 or negative amounts. Finance budget analysts complete the assessment sheets for billable funds only. Finance budget analysts forwards assessment sheet(s) to the departments for certification.

29 Pro Rata and SWCAP Departments and Finance budget analyst must verify that correct budgeted Pro Rata and SWCAP amounts are reflected on the Supplementary Schedule of Operating Expenses and Equipment (DF-300). Pro Rata object code SWCAP object code

30 Budgeting for SWCAP (Federal Recoveries)

31 Budgeting for SWCAP All departments receiving federal funds must budget and recover SWCAP. If the federal grant limits administrative costs to a certain percent of the total grant, the amount available for administrative costs must be shared between departmental indirect costs and statewide indirect costs. Finance budget analyst receives SWCAP apportionment sheet (pink).

32 Budgeting for SWCAP Department budget analyst, in collaboration with Finance budget analyst, determine if the Method A calculation results in an equitable budgeted amount, or if a Method B should be used. Department certification and Finance approval is required.

33 Recoveries

34 Pro Rata Recoveries Pro Rata Certification In June Finance certifies Pro Rata billable assessments to the SCO. SCO notifies state entities of their Pro Rata assessments. SCO will set-up the transfers to occur automatically on a quarterly basis.

35 SWCAP Recoveries SWCAP Plan submitted/approved to the federal government. Methods of SWCAP Cost Recovery: ICRP’s (Indirect Cost Rate Proposal) CAP (Cost Allocation Plan) PACAP (Public Assistance Cost Allocation Plan) Direct billing

36 SWCAP Recoveries As a general rule ICRP’s, CAP’s, and PACAP’s are to be filed with the department’s cognizant federal agency at least six months prior to the fiscal year that applies. ICRP’s, CAP’s, and PACAP’s must be submitted to the Department of Finance for approval before filing with the cognizant federal agency.

37 SWCAP Recoveries State departments must bill the federal government for direct and indirect costs. Departments are responsible for complying with federal and state requirements to ensure that SWCAP costs can be recovered from the federal government. Each federally funded state department must initiate the transfer process via a Transaction Request, TR form CA 504. Transfers are not done automatically. SAM section explains transfers of SWCAP recoveries to the General Fund.

38 Departments submit TR form CA 504, to SCO with a copy to FSCU and a copy to the department’s Finance Budget analyst. SWCAP transfer(s) are due within 30 days after the end of a quarter where a recovery occurs. SWCAP recoveries are tracked, reviewed, and reported by FSCU. State departments will be contacted for discrepancies. SWCAP Recoveries

39 SWCAP Recoveries If a department has not transferred federal funds to the General Fund on a timely basis, Finance has the authority to enforce recovery by instructing the SCO to transfer the amount that should have been transferred pursuant to GC Section Control Section 8.54 was added in the Budget Act which provides authority to reduce appropriation items when required transfers are past due.

40 SWCAP Recovery Process Bill Federal Fund for Direct Plus Indirect Costs Receipt in Federal Fund Transfer SWCAP to General Fund

41 References Pro Rata/SWCAP: – Variety of information: Federal information: – Federal Circular A-87: – Cost Principles and Procedures (ASMB C-10):

42 Contacts Phone: (916) Pro Rata Analyst – Andrew Erias (ext 2138) SWCAP Analyst – Natalie Villanueva (ext 2139) DOF Website:

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