Department of Finance Fiscal Systems and Consulting Unit

1. Department of FinanceFiscal 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. Full Cost Recovery Policy GC 11010 ~ 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: • Departmental (overhead) costs assigned to many programs: • Executive staff • Information technology • Accounting staff • Budget staff • Other

8. Elements of Full Cost • 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

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 foroverall 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

14. Central Services

15. Central Services

16. Central Services

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 • 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 • Calculate and distribute CSA costs to state departments based on workload

21. Central Service Cost Allocation • 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 Department’s Budgeted SWCAP = Federal Funding State Operations X

22. Central Service Cost Allocation (Pro Rata Only) 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). PY PY Roll - BY Total Actual Estimate Forward Estimate Allocation + = – =

23. Central Service Costs Allocation • 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. CSA Reported Expenditure Data PY Actual and BY Estimate CSA Reported Workload Data PY Actual and BY Estimate Miscellaneous Agencies Reported Data Budget Data (Schedule 10s) Pro Rata/SWCAP Process CSA Cost Allocation Pro Rata Reports 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 330438 • SWCAP object code 330439

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. SWCAPRecoveries • 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 8755.2 explains transfers of SWCAP recoveries to the General Fund.

38. SWCAP Recoveries • 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.

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 13332.02. • Control Section 8.54 was added in the 2010-11 Budget Act which provides authority to reduce appropriation items when required transfers are past due.

40. SWCAP Recovery Process BillFederal Fundfor Direct Plus Indirect Costs Receipt in Federal Fund TransferSWCAP toGeneral Fund

41. References • Pro Rata/SWCAP: • Variety of information: http://www.dof.ca.gov/FISA/PROSWCAP/PROSWCAP.htm • Federal information: • Federal Circular A-87: http://www.whitehouse.gov/omb/circulars/a087/a87_2004.html • Cost Principles and Procedures (ASMB C-10): http://www.hhs.gov/grantsnet/state

42. Contacts Phone: (916) 445-3434 Pro Rata Analyst – Andrew Erias (ext 2138) SWCAP Analyst – Natalie Villanueva (ext 2139) E-mail: FIPROSWP@dof.ca.gov DOF Website: http://www.dof.ca.gov