HomeMy WebLinkAboutReview of indirect cost plan 03-04
INDIRECT COST PLAN REVIEW
2003/2004
Presented to the
Deschutes County Audit Committee
by the
Internal Audit Program
David Givans, CPA – County Internal Auditor
Report# 03/04 - 3 Dated February 17, 2004
Deschutes Count y,
Oregon
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Report# 03/04 - 3 (Dated February 17, 2004)
To: Audit Co mmittee
CC: Mike Daly, Tom DeWolf
From: David Givans, Count y Internal Auditor
Subject: Internal Audit Report on the INDIRECT COST PLAN REVIEW 2003/2004
(Report #03/04-3)
Date: February 17, 2004
The enclosed audit reports provide informat ion concerning the review of the Indirect Cost Plan
for 2003/2004. Informat ion contained in this reports is fro m interviews, observat ions and
analyt ical work performed.
Audit results have been discussed with the management personnel o f the various internal service
funds as well as the County Administrator. Responses received fro m management have been
included at the end of this report as well as comments by so me of the indirect subco mmittee.
The assistance received fro m the indirect subco mmittee comprised Jeanine Faria – Finance, Tom
Anderson- CDD, Greg Canfield – Mental Healt h, and James Ross – Sheriff in evaluating the
observat ions and preparing this report was appreciated.
The cooperation extended by management and staff o f the internal service programs was
appreciated.
Based on direct ion fro m the Audit Committee, a follow-up on the recommendat ions and
management’s response will occur nine mo nths from the issuance of this report.
Deschutes Count y,
Oregon
Internal Audit Program
David Givans, CPA
County Internal Auditor
Deschutes County-Administration building
1130 NW Harriman
Bend, OR 97701
Phone: 541-330-4674
Fax: 541-388-4752
davidg@co.deschutes.or.us
Report# 03/04 - 3 (Dated February 17, 2004)
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Report# 03/04 - 3 (Dated February 17, 2004)
INDIRECT COST PLAN REVIEW
2003/2004
TABLE OF CONTENTS:
EXECUTIVE SUMMARY
1. INTRODUCTION
1.1. BACKGROUND ……………………………………………………………………... 1
1.2. OBJECTIVES & SCOPE ………………………………........................................... 1-2
1.3. METHODOLOGY …………………………………………………………................ 2
2. INTERNAL SERVICE FUNDS - BACKGROUND
2.1. Overview …..……………………………………………………………………….. 3-4
2.2. a. - Informat ion Technology ………………………………………………………..… 5
2.3. b. - IT Reserve ………………………………………………………………………... 5
2.4. Building Services …….……………………………………………………………….. 6
2.5. Finance ………………………………………………………………………………... 6
2.6. Personnel …………………………………………………………………………….... 7
2.7. Legal ………………………………………………………………………………... 7-8
2.8. Administrative Services …………………………………………………………….… 8
3. INDIRECT COST PLAN REVIEW
3.1. General issues…….……………………………………………………………...… 8-12
3.2. Informat ion technology / IT reserve ……………………………………………... 12-14
3.3. Building services ………………………………………………………………….… 14
3.4. Finance …………………………………………………………………………... 14-16
3.5. Personnel …………………………………………………………………………..… 16
3.6. Legal ……………………………………………………………………………... 16-17
3.7. Implications to grant applicat ions ……………………………………………….. 18-19
4. ISSUES REQUIREING ADDITIONAL STUDY …………………………………… 19
5. RESPONSES AND COMMENTS
5.1. From internal service fund departments ....…………………………………......... 20-22
5.2. From Assessor ……...……………………………………………………………….. 22
5.3. From indirect subco mmittee participants ……………….……………………….. 22-24
APPENDICES
Appendix I - Oregon county survey results
A. Methodology ……………………………………………………………………….… 25
B. Observations - Allo cation methodology ….……………………………………..... 25-29
Appendix II – Oregon county survey data ………………………………………………….. 30-41
Report# 03/04 - 3 (Dated February 17, 2004)
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Report# 03/04 - 3 (Dated February 17, 2004) i
INDIRECT COST PLAN REVIEW 2003/2004
Report# 03/04-3 (Dated February 17, 2004)
EXECUTIVE SUMMARY
The Deschutes County’s Audit Co mmittee approved a review o f the methodologies for allocating
County indirect charges. The purpose of the noted findings is to assist management and staff in
assessing whether improvements can be made to the current allocat ion system. The report
includes observations from surveying Oregon counties.
Internal service funds reviewed include:
· Informat ion Techno logy (IT)
· IT Reserve
· Building services
· Finance
· Personnel
· Legal
· Administrative Services
The fo llowing highlights some of the findings presented to management for consideration in a
summarized format. The findings and an excerpt of the associated recommendation include:
INFORMATION TECHNOLOGY (IT)
· The IT department does not have sufficient basis for adjustments to its
allocations
IT should remove these adjustments from its allocation computation.
· Internal and external billing rates used by Information Technology are
understated
Information technology should recalculate its direct hourly charge rates. Total
compensation should be divided by available charge hours (total hours available for work
less anticipated overhead hours). In addition, the department should consider including in
its billing rates the additional overhead incurred by the department including supervisory
overhead, training, supplies and other departmental overhead. For outside service contracts,
the department should consider using a fully costed hourly rate.
FINANCE
· Finance allocation base requires a review of each fund/department budget
The County Finance Department should consider utilizing transactional allocation bases or
use them as a tool to corroborate and adjust their current methodology and adjustments.
Report# 03/04 - 3 (Dated February 17, 2004) ii
· Finance does not allocate service fees to all funds/departments
Finance should calculate costs to all funds and departments and allocate costs to those that
can legally be charged. The general fund should probably incur the costs for those funds not
charged.
PERSONNEL
· Some costs incurred by departments are expended by Personnel and
allocated out as indirect costs
The County should consider recording direct costs as expenditures to the operating
department. These costs may be coordinated through the Personnel department.
LEGAL
· Legal costs allocated on out-dated time study
Legal should update its time study to support its allocation to all funds/departments. Legal
should consider allocating the overhead equitably among the users of their services based on
time charges.
· Legal has not been billing non-County entities for legal support
Legal should track and bill all time spent with non-County entities. A fully costed billing rate
should be used. The department should develop procedures for billing and collection so that
this function can be performed in a timely manner.
IMPLICATIONS TO GRANT APPLCIATIONS
· Some grant applications do not include internal service fund costs
Management should consider complying with the OMB Circular A-87 requirements for
indirect cost plan certification. By doing so, the County may be able to recover reasonable
indirect costs.
GENERAL ISSUES
· Board of County Commissioners exempt from all but one indirect cost
Indirect costs should be allocated to the BOCC.
Report# 03/04 - 3 (Dated February 17, 2004) iii
· Indirect charges are not allocated to internal service funds
Internal service departments should gather relevant statistics to calculate costs to other
internal service funds. Internal service funds should consider these imputed costs when
developing a fully costed hourly rate for third party contracts. Analysis indicates there is no
significant benefit to allocating between internal service funds.
· Allocation bases using budgeted amounts might not properly reflect
activity
Management should consider utilizing prior results of activity for allocation bases (i.e. from
prior calendar year) if this will achieve better equity in assessing charges for the projected
period. This might depend on the type of allocation base used. An even better approach is to
use actual activity results and actual cost to subsequently adjust charges to
funds/departments.
· Efficiency and effectiveness of internal service fund services are not
measured
Activities of County internal service funds should be separated into clearly identifiable
components. Internal service managers should clarify expectations and responsibilities with
users. The County should consider implementing appropriate performance measures so
quality and cost of services can be monitored.
· Survey of Oregon counties identified some other indirect costs
County management should consider allocating costs of the Board of County Commissioners
and building usage to funds/departments.
· User departments do not have input on internal service fund methods and
allocations
The County should consider forming a subcommittee of County Departments to review the
indirect cost plan including internal service fund budgets and allocation methodology prior
to allocation of charges to departments to gain a better understanding of internal service
fund charges and underlying allocation methodology.
· Some funds/departments do not receive allocations
Internal service funds should calculate charges to all funds/departments. Finance should
provide internal service fund managers with the anticipated fund/department descriptions to
be used in the County budget.
Report# 03/04 - 3 (Dated February 17, 2004) iv
RESPONSE FROM MANAGEMENT
Management generally concurred with the recommendat ions. Some management did not
comment on the recommendat ions since it is st ill too early to determine how the County might
respond and implement the recommendat ions.
Report# 03/04 - 3 (Dated February 17, 2004) Page 1
1. INTRODUCTION
1.1 BACKGROUND
Audit authorit y:
The Deschutes County Audit Committee authorized the audit by its approval o f the County’s
internal audit workplan for fiscal year 2003/2004.
Purpose of the audit:
The audit was prompted by continued concerns by County depart ments regarding the amount
spent on internal services, the methodology for allocation, and the services received for those
costs. This report also includes managements’ response to these recommendat ions.
Definit ion o f internal service funds
Internal service funds provide services to other departments within the same government, or to
other governments, on a cost reimbursable basis. They operate like “businesses” within the
government and must charge internal customers sufficient fees to recover the full cost of the
service they provide. These services are billed using a specific rat ionale proportionate to the
benefits received.
Internal services are typically established in order to standardize and conso lidate the use of
services in order to better account for and control the overall costs of government, Not only do
internal services represent a significant usage of public resource, but they also impact direct
services provided to cit izens.
Usually internal services are accounted for in separate funds and emplo y business like
accounting methods. Internal services often include activit ies such as finance, personnel,
facilit ies and data processing.
Brief history of Deschutes County’s internal service funds
The use of internal service funds was started in Deschutes County in 1997. The first funds
created were for informat ion techno logy (IT), building services and general support services
(which included finance, legal and personnel). In 1998, the general support service fund was
split into separate funds. The IT reserve (previously called the Citrix fund) was started in 2000.
The latest of the internal service funds, administrative services, was started in 2003. The
allocat ion methodology o f the various internal service funds has continued to evolve. The
original documentation used for the 1997 service fund allo cat ions has not been updated to
represent the current methodologies.
1.2 OBJECTIVES and SCOPE
Audit objectives:
The object ives of the audit were:
1) Review the internal service fund allocat ion methodologies to determine if they are fair and
reasonable.
a. Is the methodology sound and is it clearly documented and supported?
b. How does the methodology co mpare to other counties in Oregon?
2) To evaluate compliance wit h Federal, State or Count y regulat ions and requirements.
Report# 03/04 - 3 (Dated February 17, 2004) Page 2
Opportunities for increased efficiency and effect iveness were included in the recommendat ions
when applicable.
Scope:
The audit was limit ed to reviewing the specified internal service funds for the most recently
completed budget cycle (2003/2004). We limited our review to seven internal service funds –IT,
IT reserve, building services, legal, personnel, finance and administrative services. Risk
management and healt h insurance trust are beyond the scope of this review.
1.3 METHODOLOGY
The review invo lved meet ing wit h internal service fund managers and obtaining and reviewing
their charges and associated methodology. Relevant evidence was obtained through analysis,
interviews and testing. This evaluat ion is, by nature, subject ive.
Indirect cost plans should achieve the fo llowing object ives:
1. Propriet y of the methods used to allocate expenses,
2. Appropriateness of the bases used to allocate indirect costs
(bases should link an internal service with the associated costs for providing the service),
3. Consistency in applying po licies and procedures,
4. Mathemat ical accuracy o f the computed amount of indirect costs allocated,
5. Reasonableness of indirect costs allocated, and
6. Compliance with applicable laws and regulat ions.
Audit procedures included:
· Reviewing budgets and account ing informat ion for the appropriateness of the allocated
costs.
· Reviewing the methodology and the allocation of costs.
· Interviews with staff and management.
· Surveying other Oregon counties to assess co mmo n practices in preparing indirect cost
allocat ion plans and the allocat ion bases used.
· Reviewing governmental and cost accounting publicat ions for best practices wit h indirect
cost allocat ion plans.
· Modeling analyses to ascertain fairness of direct allocat ion method over reciprocal
allocat ion method.
· Preparing a model o f an alternate method for allocation of the Finance depart ment.
In addit ion, a subco mmittee was formed co mprising of three business managers from CDD,
Mental Health, and Sheriff’s Office and the County Account ing Manager. The subco mmittee
provided input and direct ion.
The audit was conducted in accordance with Government Auditing Standards issued by the
Comptroller General of the United States. A fo llo w-up review will be co mpleted in
approximately nine mo nths.
Report# 03/04 - 3 (Dated February 17, 2004) Page 3
2. INTERNAL SERVICE FUND BACKGROUND
2.1 Overview
The fo llowing Deschutes County internal service funds were identified for review:
· Informat ion Techno logy (IT)
· IT Reserve
· Building services
· Finance
· Personnel
· Legal
· Administrative Services
Budget and staffing summary
These internal service funds have a combined budget of $5.3 millio n for FY 2003/2004. Full
time equivalent (FTE) emplo yees budgeted for these internal service funds is 56.81 for 03/04.
Total internal service charges to departments have decreased 3.5% in the latest budget (03/04).
The Finance depart ment indicates the decrease is related to reduced personnel costs and the
removal o f utilit y costs from the internal service funds and directly charged.
IT and building services represent the largest
internal service fund charges to departments.
Finance, personnel, legal and administrative
services co mbined are less than the combined
charges of IT and building services.
Source: Deschutes County Budgets
Analysis of inte rnal servic e fund c harge s
-
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
2,000,000
IT / IT reserve Building services Finance Personnel Legal Administ rative
services
02/03
03/04
Source: Deschutes County Budgets
Composition of total internal service fund charges-
03/04
IT / IT reserve
33%
Building services
26%
Finance
15%
Personnel
10%
Legal
8%
Administrative
services
8%
Report# 03/04 - 3 (Dated February 17, 2004) Page 4
The fo llowing ten funds receive 88% of the internal service fund charges. The County has 58
funds that are charged indirects. The types of internal service charges to each of these vary
significant ly. The fo llowing chart indicates the charges incurred by these funds.
Applicable laws and regulations
Deschutes County has not created any laws regarding internal service funds. Oregon statute
(ORS 294.470) provides that charges for services (fro m internal service funds) shall be co mputed
to cover all costs for such services and the charges shall be periodically revised to eliminate any
element of profit or loss.
Federal regulat ions allow grant recipients to recover indirect costs from the federal grant funds
received. This is also true for many state grants. In order for indirect cost plans to recover these
costs they must fo llow certain standards. Most federal grants and so me state grants refer to
standards under OMB Circular A-87 (issued by the Office of Management and Budget).
Normally Deschutes County does not include indirect costs in its state and federal grant
applicat ions choosing instead to absorb those costs as part of the match the County will bear to
receive those grant monies.
Source: Deschutes County Budget
Top Te n Funds Re ce iving Inte rnal Se rvice Charge s (03/04)
$-
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
G
e n e r a l F u n d
D
e s c h C o S h e r i f f 's O
f f i c e
C o m m u n i t y D
e v e l o p m e n t
M e n t a l H
e a l t h
R o a d
C
o m m u n i t y J u s t i c e -J u v
H
e a l t h D
e p a r t m e n t
A
d u l t P a r o l e & P r o b a t i o n
I n s u r a n c e
S o l i d W a s t e
1 255 295 275 325 230 259 355 670 610
FUND# / De s cription
I n t e r n a l s e r v i c e f u n d c h a r g e s
Report# 03/04 - 3 (Dated February 17, 2004) Page 5
2.2 a. Information Technology
The Informat ion Techno logy (IT) Department provides techno logical support services to most
County depart ments.
Services include:
· Connectivit y to the Internet, County-wide e-mail, calendaring systems, and Microsoft
Office available through a Citrix environment;
· Network services and support - including securit y, backup and storage protocols and
virus protection; and
· Software and hardware integration for specific department applications. This includes
programming for internally developed programs.
IT develops charges based on three areas of
service as fo llows:
· Basic Internet access charged at a flat rate
for each depart ment computer,
· Actual t ime charges providing service to a
department in the prior year, and
· All other associated costs of the IT
department not included in the above
charges allocated by type and amount of
computer hardware.
2.2 b. IT - Reserve
The IT department also manages an IT reserve fund, which was init ially used to fund the
purchase of the Citrix system. This reserve now funds other significant hardware and/or
software purchases. Fund charges are based upon the number and type of computer hardware.
Inte rnal Se rvice Charge s Budge t (in thousands ) - IT
(* charges adj usted for inf lat ion, ** includes IT Reserv e)
FY FTE Charges *
99/00 11.75 1,209$
00/01 15.00 1,332$
01/02 **15.87 1,956$
02/03 **16.41 1,943$
03/04 **16.41 1,772$
% change 40%47%
Source: Deschutes County Budgets - by charges to specific funds
* Utilizing CPI - 12 m onth index
Source: IT Department internal service charge allocation
C om posi ti on of IT C harge s
Direct
p ersonnel
charges
38%
Flat rate
charge
11%
Indirects
51%
Report# 03/04 - 3 (Dated February 17, 2004) Page 6
2.3 Building Services
The Building Services Department is responsible for repairs, custodial services, grounds keeping,
HVAC, courier services, archiving, and telecommunicat ions. The methodology for allocating
costs was changed significant ly for the 03/04 budget.
Building services costs are divided into two pools - evening custodial and dayt ime maintenance.
Administrative overhead is allocated to these pools based on budgeted personnel do llars of each
pool. The costs of evening custodial pool are allo cated to departments based on square footage of
buildings receiving custodial services mult iplied by the numbers of day’s service received. The
costs of dayt ime maintenance are allocated on square footage of the buildings receiving dayt ime
maintenance. Some departments, primarily Sheriff, who do not use dayt ime service, are not
allocated a cost.
2.4 Finance
The Finance Depart ment services to the County include:
· Annual budget preparation
· Financial planning
· Accounts payable processing
· Payro ll processing
· Fixed asset data base management
· Debt issuance coordinat ion
· Transient room tax collect ion
· Internal and external reporting
Finance charges are allo cated based upon fund/department budgeted expenditures as modified.
Modificat ions to budgeted expenditures include eliminat ion of unappropriated ending fund
balance, transfers out, and other adjustments. Addit io nal adjust ments are made for debt service
funds, which cannot legally be assessed charges, funds wit h significant pass-through funds, and
reserve funds.
Inte rnal Se rvice Charge s Budge t (in thousands ) - Building Se rvice s
(* charges adjust ed for inflation)
FY FTE Charges *
99/00 16.50 1,264$
00/01 16.50 1,243$
01/02 17.50 1,367$
02/03 20.25 1,660$
03/04 20.25 1,361$
% change 23%8%
Source: Deschutes County Budgets - by charges to specific funds
* Utilizing CPI - 12 m onth index
Inte rnal Se rvice Charge s Budge t (in thous ands ) - Finance
(* charges adj ust ed f or inflation)
FY FTE Charges *
99/00 7.05 661$
00/01 7.05 730$
01/02 7.90 795$
02/03 6.90 866$
03/04 7.00 798$
% change -1%21%
Source: Deschutes County Budgets - by charges to specific funds
* Utilizing CPI - 12 m onth index
Report# 03/04 - 3 (Dated February 17, 2004) Page 7
2.5 Personnel
The Personnel Depart ment is responsible for administering the salaries and benefits for all
County emplo yees. Services include:
· Recruit ing,
· Processing and orienting new hires,
· Administering salary, co mpensation, leave programs,
· Administering health, life and disabilit y insurance programs,
· Administering PERS (Public Emplo yees Ret irement System),
· Administering 457 deferred compensation programs,
· Administering IRC Section 125 flexible spending programs,
· Administering unemplo yment benefit program,
· Negotiat ing, implement ing and maintaining four emplo yee unio n contracts
· Maintaining Count y-wide emplo yee records and centralized personnel files, and
· Providing training opportunit ies.
Personnel charges are allocated based upon Departments’ budgeted number of Full Time
Equivalent (FTE) emplo yees.
2.6 Legal
Legal Counsel provides legal advice on municipal and civil matters to the Board of Count y
Commissio ners (BOCC). They are also responsible for
· Drafting and reviewing ordinances, reso lutions and orders of the BOCC,
· Drafting and review of legal documents to which the Count y is a party,
· Coordinat ion with bond counsel and outside financial consultants regarding issuance of
bonds,
· Advising property management on legal matters relat ing to the transfer of real property,
· Overseeing any lit igation matters against the County or its emplo yees,
· Maintaining the Count y Code book, and
· Providing legal advice to the County Depart ments and Board of Count y Commissio ners.
Legal charges are based on an est imate of services to be provided departments.
Inte rnal Se rvice Charge s Budge t (in thous ands ) - Pe rs onne l
(* charges adj ust ed f or inf lat ion)
FY FTE Charges *
99/00 4 368$
00/01 5 466$
01/02 5 527$
02/03 5 625$
03/04 5 514$
% change 25%40%
Source: Deschutes County Budgets - by charges to specific funds
* Utilizing CPI - 12 m onth index
Report# 03/04 - 3 (Dated February 17, 2004) Page 8
2.7 Administrative Services
The Administrative Services Fund includes the Count y Administrator and staff that manage the
fo llo wing funct ions:
· Finance/tax
· Budget
· Internal audit program
· Risk management
· Building services
· Personnel
· Communicat ions and media
services
· Informat ion technology
· Property management
· Veterans services
· Law library
This internal service fund was established in 03/04. Administrative service charges are allocated
based upon budgeted expenditures as modified (same modificat ions as for Finance). The
department has 3.15 FTE budgeted.
3. INDIRECT COST PLAN REVIEW
The indirect cost plan (the Plan) review for Deschutes County was supported by the Finance
Department with the assistance of the other internal service fund departments. Internal service
fund personnel were open and professio nal during interviews and provided a full disclosure of
the business practices in place.
The results of the review indicate most of the Plan methodologies are reasonable. Some issues
should be reso lved for allocat ions to fairly reflect the relative benefits received by depart ments.
The fo llowing are recommendat ions for improvement which, addit ionally, will allow recovery of
indirect costs from Federal and State agencies.
The review, by its nature, was focused on evaluating the methodologies currently used in the
indirect cost plan.
Inte rnal Se rvice Charge s Budge t (in thous ands ) - LEGAL
(* charges adjusted f or inflation)
FY FTE Charges *
99/00 5.00 472$
00/01 5.00 462$
01/02 5.00 495$
02/03 5.00 494$
03/04 5.00 435$
% change 0%-8%
S o urce: Deschu tes Co u nty Bu d gets - by cha rg es to sp ecific fun d s
* Utilizin g CPI - 1 2 m on th in d ex
Report# 03/04 - 3 (Dated February 17, 2004) Page 9
3.1 General issues
Indirect charges are not allocated to internal service funds
Deschutes County internal service funds do not generally allocate costs to other internal service
funds even though they receive services. The IT reserve fund is the only internal service fund
allocat ing costs to other internal service funds. Many internal service funds provide (or receive)
more services than they receive (or give) to other internal service funds. For example - Building
services provides $62,000 more in services than it receives from other County internal service
funds. Legal fails to track internal service departments’ usage of their services since they do not
charge them.
In addit ion to providing Count y Departments with services, internal service funds charge third
party ent it ies for services. Excluding indirect costs may result s in less than full cost recovery by
internal service funds.
Best practices promulgated by the GFOA (Government Finance Officer’s Associat ion) indicate
departments should co mpute their actual cost of providing services. Most of Oregon counties
surveyed (60%) indicated they allocate indirect costs to internal service funds.
An analysis was performed to see what, if any, difference in departmental charges occurs if
internal service funds charge each other. Including these reciprocal charges between internal
service funds did not yield substant ially different charges to departments, than the direct method.
Internal service departments should gather relevant statistics to calculate costs to other
internal service funds. Internal service funds should consider these imputed costs when
developing a fully costed hourly rate for third party contracts. Analysis indicates there is no
significant benefit to allocating between internal service funds.
Board of County Commissioners exempt from all but one indirect cost
Indirect costs, other than IT Reserve, are not allocated to the Board of Count y Commissio ners
(BOCC). The indirect costs attributable to the BOCC are instead allocated to operating
departments.
Allocat ion of indirect costs to all funds/departments benefit ing from internal service fund efforts
is considered to be a more fair allocat ion plan.
Indirect charges of approximately $70,000 attributable to the BOCC have instead been allocated
direct ly to operating depart ments.
Indirect costs should be allocated to the BOCC.
Allocation bases using budgeted amounts might not properly reflect activity
The allocation bases used to allocate costs of County internal service funds are based on budget
Report# 03/04 - 3 (Dated February 17, 2004) Page 10
amounts. Actual expenditures can differ significantly from budget.
For allocat ion bases to be reasonable, they should:
· Represent actual cost or effort expended
· Be within management’s abilit y to control on a timely basis
· Provide minimal distortion
· Be consistent ly applied over time
· Be consistent with variat ions in funding
· Be not unduly co mplex - should be commensurate with materialit y o f charges
· Be efficient as possible in terms of cost to develop
Many o f Oregon counties surveyed had allo cat ion plans that utilized actual data fro m one or two
years prior. One of the guides for cost allocat ion plans indicated that budgeted amounts might
not be a reasonable base since it does not reflect actual act ivit y. Budgeted amounts differ fro m
actual and departments do not benefit fro m efforts to reduce usage of internal services. Grant
guidelines require the difference between actual cost and that projected to carryover and benefit
the next period.
When budgeted amounts used for allocat ion bases differs significant ly fro m actual, departments
actual indirect costs will vary fro m budgeted indirect costs. In some cases, these differences
might be immaterial and budgetary informat ion a fair representation for these allocat ions.
Management should consider utilizing prior results of activity for allocation bases (i.e. from
prior calendar year) if this will achieve better equity in assessing charges for the projected
period. This might depend on the type of allocation base used. An even better approach is to
use actual activity results and actual cost to subsequently adjust charges to funds/departments.
Efficiency and effectiveness of internal service fund services are not measured
Effect iveness or efficiency in providing services is not measured by the internal service funds.
Some operating departments perceive themselves as captive customers who have litt le impact on
decisio ns made by internal service funds. Departments may be able to ident ify services outside
the County but are unable to effect ively co mpare by cost and amount of service. County internal
service funds often focus on effect ive customer service rather than efficiency, often providing a
level of service far in excess of comparable services from an outside source.
Internal service depart ments should work with their customers to define and articulate their
services. Users are not always sure of the services they are paying for and service providers do
not always provide clear criteria as to what service are being provided. Typical outsourcing
questions can be reso lved only if costs of services are identifiable and comparable to those
provided outside the organizat ion.
Services need to be defined so that effect ive measurement and management can occur. GFOA
encourages all local governments to utilize performance measures as an integral part of the
Report# 03/04 - 3 (Dated February 17, 2004) Page 11
budget process.
Somet imes business decisio ns made for the County as a who le may not satisfy individual
departments. To achieve a balance between the departments’ needs and those of the County
internal service fund managers must promote good business practices.
Activities of County internal service funds should be separated into clearly identifiable
components. Internal service managers should clarify expectations and responsibilities with
users.
The County should consider implementing appropriate performance measures so quality and
cost of services can be monitored. Quality can also be measured by comparison to industry
standards and surveying department’s satisfaction with the quality of services. When costs
and performance are consistently calculated, decision makers and citizens can determine the
true cost of providing County services and achieving outcomes.
Survey of Oregon counties identified some other indirect costs
The Survey o f other Oregon counties indicated some addit ional indirect costs charges allocated
to departments.
Board of County Co mmissio ners - Most Oregon counties surveyed (73%) allocated out
the costs of the BOCC. Some count ies do not allo cate out all of the costs of the office.
The allocation base was most often on budgeted expenditures, FTE, board agenda items,
or a combinat ion thereof.
Building usage – Three of the five larger counties surveyed allocated out this cost. This
charge is generally described as building depreciatio n or usage allowance. Allocat ion
bases for building usage are generally on square footage and the associated charge based
on depreciat ion or use charge. Depreciat ion of buildings is usually over a 50-year life
and this is a reasonable method for purposes of federal grants under OMB Circular A-87.
Amounts in excess of this depreciable rate are not recoverable fro m federal grants or
those grants using similar rules.
Best practices promulgated by the GFOA (Government Finance Officer’s Associat ion)
indicate costs should include those costs that might be fully unfunded in the current
period including depreciat ion or use allowance. Of the five larger Oregon Counties
surveyed (60%) indicated they charged to departments some form of use or rent charge.
Departments who charge fees to third parties and or obtain grants may be able to recover these
indirect costs.
County management should consider allocating costs of the BOCC and building usage to
funds/departments.
Report# 03/04 - 3 (Dated February 17, 2004) Page 12
User departments do not have input on internal service fund methods and
allocations
Departments receiving indirect allocat ions do not have a formal mechanism to provide input on
the internal service fund budgets and methodology. Operating depart ments believe they have
little input on indirect costs and often are unaware of the services they are receiving.
The County should consider forming a subcommittee of County Departments to review the
indirect cost plan including internal service fund budgets and allocation methodology prior to
allocation of charges to departments to gain a better understanding of internal service fund
charges and the underlying allocation methodology.
Some funds/departments do not receive allocations
Each of the internal service funds allocates to a different set of funds and departments partly
because of the nature of their allocat ion bases. Some internal service funds allo cate to global
areas (i.e. County Fair) and end up charging one fund (i.e. Fund 618-Fair and Expo Center) and
don’t charge fund 619 (County Fair). This primarily occurs with allocat ions fro m IT and Legal.
All funds and departments should be considered for allocat ion. Having all internal service funds
calculate costs by specific fund and depart ment will provide for better allocat ion during budget
preparation.
The most complete set of departments/funds is used by Finance in its allocat ions. Wit hout a
commo n set of funds and depart ments to calculate by, the allocat ion bases might not allocate to
some funds/depart ments.
Internal service funds should calculate charges to all funds/departments. Finance should
provide internal service fund managers with the anticipated fund/department descriptions to
be used in the County budget.
3.2 Information Technology (Internal service fund - 660)
The IT department does not have sufficient basis for adjustments to its
allocations
The IT cost allocat ion model includes an adjust ment, that modifies the equipment units on which
the indirect portion of IT charges are allocated. The adjust ment has had a significant impact on
department charges.
Five departments have received a material reduct ion in charges due to the adjust ment and
include:
· Sheriff’s office (including Jail),
· Road,
· Mental healt h,
· Health, and
· 911.
Report# 03/04 - 3 (Dated February 17, 2004) Page 13
The allocation of IT charges is based on time and computer hardware and appears to be
acceptable. Judgmental adjust ments should be quant ifiable and supportable.
Analysis of the IT allocat ions indicates that after removing the adjustment, nearly $171,000 in
allocat ions are shifted.
Benefit (cost) to departments from indirect adjustment
Sheriff
Public Works
Mental Health
Health
Jail
911
Law Library
Property Management
GIS
Parole and Probation
Veterans
Children & Families
Solid Waste
Risk
Juvenile
Surveyor
TAX
County Fair
Clerk
Assessor
DA
CDD
Justice Court
(50,000)(40,000)(30,000)(20,000)(10,000)-10,000 20,000 30,000 40,000 50,000
Based on discussions with IT, the adjust ments were included to allow for departments who had
experienced staff handling their IT matters or for departments who had IT staff do miciled in their
departments. The extent of the adjust ments can not be object ively supported. IT recognized the
impact of the adjust ment and over the last four years has been phasing out the adjust ments for
some departments. IT believes these adjustments may distort the amount allocated to
departments.
IT should remove these adjustments from its allocation computation.
Internal and external billing rates used by Information Technology are
understated
Calculated emplo yee charge rates include only emplo yee co mpensation and benefits. The
average charge rate for IT staff t ime is $48 per hour.
Salaries and benefit s are a significant portion of providing personnel services but the non-
personnel service costs should not be ignored. The charge rate should recover all costs of the
emplo yee (direct and indirect). Indirect costs include supervisio n, training, and other overhead.
The calculat ion of charge rates should have a divisor representing the ant icipated chargeable
hours to be worked by the emplo yee.
An analysis was performed to re-calculate emplo yee charge rates. The re-calculation included
supervisory overhead for the IT Director and $112,000 of budgeted overhead costs. The analysis
took into account the chargeable hours available by staff member. The estimated average charge
Report# 03/04 - 3 (Dated February 17, 2004) Page 14
rate increased to $59 per hour. The average increase was 23%. This shifted charges from
indirect to direct time charges by $134,000.
Information technology should recalculate its direct hourly charge rates. Total compensation
should be divided by available charge hours (total hours available for work less anticipated
overhead hours). In addition, the department should consider including in its billing rates the
additional overhead incurred by the department including supervisory overhead, training,
supplies and other departmental overhead.
For outside service contracts, the department should consider using a fully costed hourly rate.
Costing a service is not the same thing as pricing it. The pricing decision needs to weigh issues
of equity and efficiency. (Costing Government Services: A guide for Decision Making).
3.3 Building services (Internal service fund - 620)
{No specific recommendations}
3.4 Finance and Administrative Services (Internal service fund-630/625)
Finance allocation base requires a review of each fund/department budget
Finance’s allocat ion base is modified budgeted expenditures. The extent of modificat ion
requires Finance to understand what the fund/department is do ing. Finance staff must review for
changes in the way a fund/department operates and consider an adjustment and the extent of that
adjustment.
The Finance Depart ment allocat ions
are based on budgeted expenditures
modified for
· transfers out,
· unappropriated ending fund
balance,
· expenditures fro m debt service
funds,
· inter-county transact ions, and
· other items.
The “other item” adjustments are
often judgmental and are applied to
operational funds, reserve funds,
construction funds, and internal
service funds. These “other”
adjustments amount to 33% of the
init ial budgeted expenditures. Some
of these adjust ments are to compensate for pass-through expenditures. Pass-through
expenditures are expenditures not made by the Count y but contracted for.
Source: Finance internal service charge allocations
Modifications to expenditures -
Finance allocation
T ransfers out ,
($19,977,070)
17%
Ending fund
balances,
($18,246,386)
16%
Debt service,
($8,788,557)
8%
Ot her it ems,
($67,899,243)
59%
Report# 03/04 - 3 (Dated February 17, 2004) Page 15
Costing Government Services: A guide for Decision Making (GFOA) indicates an appropriate
base for allocat ing an account ing funct ion is normally on transactions processed. For many of
the Oregon counties surveyed, allocat ions were based on number of transactions. The most
commo nly observed allocation bases included number of accounts payable transact ions, number
of revenue items, and number of payro ll checks.
Finance charges were re-figured to use more transactional type allocat ion bases. The draft model
considered there to be four equal areas to Finance ident ified by direct staffing and were
· accounts payable processing;
· payro ll processing;
· revenue co llect ion entry;
· and budget and financial
reporting.
The respect ive account ing bases used were
· number of accounts payable line items,
· number of FTE,
· number of revenue lines, and
· modified expenditures (only adjusted for debt service, transfers and ending fund
balance).
The draft analysis used readily available transactional measures. The draft analysis indicated one
particular department had been overcharged. Finance agreed this was a reasonable observat ion
and could be adjusted for manually as an “other adjust ment” in their current methodology. This
was a model calculat ion for purposes of discussio n. Addit ional discussio n on the bases, the
weight ing of the bases, co llect ion of informat ion, and cost pools could yield improvements to
this draft model.
The County Finance Department should consider utilizing transactional allocation bases or
use them as a tool to corroborate and adjust their current methodology and adjustments.
Finance does not allocate service fees to all funds/departments
A limited number of funds are exempt fro m Finance charges because it was believed this was in
accordance with Oregon Revised Statute (ORS). However, no specific ORS exemption exists
for the fo llowing funds
· Business loans (Fund 105)
· Communit y development block grant
(Fund 110)
· Grant projects (Fund 120)
· Special transportation (Fund 150)
· Taylor grazing (Fund 155)
All departments and funds should be calculated charges based on their usage of services.
Allocat ion of costs should be charged to those funds that can be legally assessed.
Excluding the above noted funds fro m finance charges resulted in $30,000 of costs allocated to
other funds/departments during fiscal year 2003/2004.
Finance should calculate costs to all funds and departments and allocate costs to those that
can legally be charged. The general fund should probably incur the costs for those funds not
Report# 03/04 - 3 (Dated February 17, 2004) Page 16
charged.
3.5 Personnel (Internal service fund - 650)
Some costs incurred by departments are expended by Personnel and allocated
out as indirect costs
During review of Personnel expenditures, it was determined that some of the expenditures are
direct ly traceable to another fund/department.
Expenditures ident ifiable by depart ment and therefore could be charged direct ly to those
departments include:
· Advert ising – Expended for all departments advertising open posit ions.
· Recruit ment - Significant expenses to recruit director level and management positions.
· Moving and relocation expenses for department personnel
· Pre-emplo yment exams - Many relate to specific departments. The Sheriff in particular
had Personnel incur above average costs testing performed for init ial applicants and
emplo yee transfer.
· Tuit ion reimbursement – Not many departments having Personnel fund these costs. Most
Departments direct ly fund these costs.
· Management consult ing - Included so me direct analysis o f job descript ion research for a
specific depart ment and surveys for specific departments.
· Legal - Legal costs for grievances for specific department. Some general unio n legal
support that is appropriate.
· Legal invest igat ions - Specific allegat ions in specific departments.
Indirect costs should be limit ed to costs that can not be efficiently traced to a specific
department.
County management has indicated that many of these expenses are coordinated through the
personnel depart ment as a way of making sure this funding is available countywide.
The County should consider recording direct costs as expenditures to the operating
department. These costs may be coordinated through the Personnel department.
3.6 Legal (Internal service fund - 640)
Legal costs allocated on out-dated time study
Legal’s allo cat ion is judgmentally based on 2000/2001 time study. The time study showed
approximate percentages of time spent on work for the various direct service departments.
Newer County funds subsequent ly established have not been allocated legal cost. Legal does not
track time expended on general government or internal service fund matters. Legal has addit io nal
overhead fro m non-work time (vacat ion, holidays, etc.). CDD, Road and Risk management
funds seem to have absorbed the largest share of the overhead cost.
Report# 03/04 - 3 (Dated February 17, 2004) Page 17
Charges based on est imated time should be supported by time record or estimates. Overhead
time should be equitably spread among user departments. Allocat ion methodologies should be
reasonable and calculate costs based on benefit s provided.
Legal should update its time study to support its allocation to all funds/departments. Legal
should consider allocating the overhead equitably among the users of their services based on
time charges.
Legal has not been billing non-County entities for legal support
Legal has not been charging certain outside service districts (such as 911 county service district)
for legal services provided.
All direct services provided to outside agencies should be recovered through timely billing and
collect ion. Failure to do so places an increased burden on County funds. A fully costed billing
rate should be developed that considers chargeable hours and include appropriate overhead,
supervisio n, and support staff costs as well as waived internal service fund charges.
Legal does not have to do this frequent ly enough to have a standard procedure to track and
perform this process.
Legal should track and bill all time spent with non-County entities. A fully costed billing rate
should be used. The department should develop procedures for billing and collection so this
function can be performed in a timely manner.
Legal incurs costs directly traceable to operating departments
Some expenditures from Legal are directly traceable to a specific department. Such costs
included outside attorney fees required due to an internal conflict of interest or due to a need for
specialized legal expertise.
Outside legal fees for the fiscal year 2002/2003included:
· Grievance work specific to a specific depart ment.
· Advice on personnel issues that could be charged to the Personnel Depart ment.
· Lawsuit work that should be paid by Risk Management
Indirect costs should be limit ed to costs that can not efficient ly be charged to the benefit ing
department. Direct expenses of depart ments should be charged to those departments, not to the
internal service fund.
Outside legal fees in 2002/2003 were $10k. Most outside legal services are coordinated through
legal counsel.
Outside legal fees should be paid by the benefiting department.
Report# 03/04 - 3 (Dated February 17, 2004) Page 18
3.7 Implications to grant applications
Some grant applications do not include internal service fund costs
The County currently prepares so me federal grant applicat ions, which do not include internal
service fund charges in ant icipated costs. Most federal and state grants allow certain indirect
costs. Federal grants generally require indirect costs be part of a certified indirect cost plan as
provided for under Circular A-87 prepared by the Office of Management and Budget (OMB).
The current County indirect cost plan does not meet the requirements of OMB Circular A-87.
The County’s current plan for 03/04 is not documented, does not identify and remove potential
unallowable costs, and is not certified by the Chief Financial Officer or higher position.
Major requirements of OMB Circular A-87 include:
· Documentation of allocat ion methodology
· Removal o f unallowable costs
· Certificat ion of the Plan by Count y Financial Officer
· Carryforward of differences between actual costs and those charged
Local governments of Deschutes County’s size are not generally required to submit their indirect
cost plan unless requested by the cognizant agency for the federal government.
County management overseeing these grant programs require a clear understanding o f the
underlying cost of providing these programs. Count y grant applicat ions strive to recover as
many costs as possible fro m these outside funding sources. However, as noted above, Deschutes
Count does not currently meet the requirements ne4cessary to include indirect costs in its
applicat ions. A majorit y of the Oregon counties surveyed prepared their indirect cost plans for
compliance wit h OMB Circular A-87 and were, therefore, eligible to include indirect costs as a
line item wit hin their federal grant applicat ions.
Recent grant awards totaling $579,000 to the Juvenile Co mmunit y Just ice, District Attorney,
Commissio n on Children and Families, and Sheriff’s Office did not include a share of indirects.
Assuming a conservative indirect percentage of 3.4% (the percentage of indirect charges to
County expenditures), the County may have recovered up to $20,000.
Excluding indirect costs in the grant program budget can result in one of the fo llowing situat ions:
1. A department develops and submits a budget for a proposed project or program that
accurately reflects the cost of each line item wit h the except ion of indirect costs. If a
grant is then awarded, the department must absorb the associated indirect costs allocated
within its exist ing budget, possibly creat ing shortages in other areas.
2. A department attempts to include generally accepted indirect costs, such as utilit ies or
administration, in the proposed budget by categorizing them as direct charges. If the
grantor agency determines that these charges are not valid the applicat ion could be
disqualified, the rating affected, or the budget reduced accordingly.
If a federal indirect cost rate is approved, a significant number of ongoing grants and programs
might be able to recover addit ional indirects as they are renewed in future periods. Additionally,
Report# 03/04 - 3 (Dated February 17, 2004) Page 19
new grants could include indirect costs as appropriate to ensure that the true program cost is
accurately reflected.
Management should consider complying with the OMB Circular A-87 requirements for
indirect cost plan certification. By doing so, the County may be able to recover reasonable
indirect costs. In addition, the County will have better management information as to the
underlying costs for its programs and be better able to make decisions about those programs.
4. ISSUES REQUIRING ADDITIONAL STUDY
The fo llowing item was outside the scope of this review but was encountered on review of rental
charges.
Rent and internal service fund charges might be double counted in grant
application
The application for the State of Oregon Assessment and Taxat ion grant included both rent and
internal service fund charges as expenditures for the grant. The grant limits “indirect costs” to
5% of direct expenditures. The rent expense incurred by the associated departments are internal
charges and do not reflect direct rent payments. The Count y receives a share of monies based on
the proportion of the County’s applicat ion to other counties in Oregon.
The instructions and discussio n with the Oregon Department of Revenue indicate that for rent to
be includable as a direct expenditure it needs to be paid to an outside party. In addit ion, there is
some confusio n over what “indirect costs” are and which ones should be included in direct
expenditures. The instructions indicate that you are not to include indirect costs. These “indirect
costs” are allowed for in a 5% addit ion at the end of the applicat ion. The applicat ion allows a
higher indirect cost rate if supported by an indirect cost plan prepared in accordance with OMB
Circular A-87.
The County receives approximately 29% of the expenditures shown in the grant applicat ion.
Expenditures could be overstated by as much as a couple hundred thousand dollars.
Discussions with the Assessor indicated there has been significant confusio n in the State over the
instructions for the grant and consistency wit h Oregon counties in preparing the applicat ion.
Ongo ing efforts by the Assessor are being made to clarify these issues with the Department of
Revenue but there are some grey areas that have not been resolved.
The County should research this area since it appears the A&T grant application as submitted
might be overstating expenses.
Report# 03/04 - 3 (Dated February 17, 2004) Page 20
5. REPONSES AND COMMENTS
5.1 From Internal service fund departments
Internal service fund management provided the fo llowing comments. The finance department
declined to comment at this time.
Information Technology Comments
3.1 General Issues
Page 9
Building Services is referenced as a department that provides $62,000 more services than
it receives fro m internal service departments. Might want to mention that I.T. provides in
excess o f $60,000 as well.
{Internal Audit Comment- IT does provide more net services than they receive. The
analysis indicated some $35,000}
pages 10 thru 11
Efficiency and effectiveness,– I agree with this would be nice to do, however, it will be
very t ime consuming. Especially for work activit ies that do not have nationally available
statist ics.
Page 12
User departments and their input into the process,– I.T. provides monthly reports to
department management indicat ion what work was done, who did the work, when the
work was performed, and how long it took. In addit io n, I.T. started an I.T. advisory
committee in September of 2003. These t ypes of issues have been or will be discussed at
these meet ings.
Page 12
Some funds/departments do not receive allocations,– I.T. allocates charges to the
funds and departments it is aware of. If there are further divisio ns, we need to know. In
addit ion, I.T. personnel who provide these services need to be aware of these divisio ns
and have an easy way o f dist inguishing them. For example, if they are doing work for
the County Fair, they will have difficult y ident ifying fund 618 or 619.
3.2 Information Technology - fund 660 (pages 12 thru 14)
· Add Juvenile to list of departments
· I agree the reductions should be eliminated. I.T. will do this as instructed.
· I am not in agreement with so me of the changes recommended to determine hourly rates.
o Allocat ing a portion of my costs to the others’ hourly rate.
o Allocat ing so me of the M&S to everyone’s hourly rate.
· I do agree with your suggest ion to change how the off-t ime portion of the hourly rate is
computed (i.e. subtract the hours instead of adding).
Report# 03/04 - 3 (Dated February 17, 2004) Page 21
Thanks for all your work,
Dave Peterson
Informat ion Techno logy Director
Personnel Comments
3.5 Personnel
I concur with your report.
The only concern I have, and you and I discussed this, is that it would be hard for departments to
budget for the "unknown". It is impossible to predict top management recruit ments, lawsuits,
grievances, discriminat ion/harassment complaints, posit ion/salary reviews, etc.
I do agree that the Sheriff's department should be paying for their own pre-emplo yment physicals
and psycho logical exams. Starting this fiscal year, they are paying for the psycho logical exams
but we are still paying for the physicals. No other department requires those types o f pre-
emplo yment exams. Personnel should continue to pay for County-wide pre-emplo yment drug
screening only.
Certain departments have many more recruitments than other smaller departments. If we choose
to charge those individual departments, it may impact their decision o f how often and where we
advert ise.
Last year was the first year $25,000 was budgeted for Tuit ion reimbursement. It is not commo n
knowledge to the departments that those funds are available, and so far this year we have not
spent anything in this line-item. It was the BOCC's decisio n to include this in the Personnel
budget. It is my understanding this money was to be used for the occasional "Leadership" series
for directors/managers and to assist those departments that have limited funds available for
training.
Thank you for the opportunit y to review your report.
Debbie Legg,
Personnel Services Manager
Legal Comments
3.6 Legal
Legal costs allocated on out-dated time study
Concur – Legal Department should update the time study by keeping daily t ime records for
attorneys. Allocat ion to departments on time charges might include so me adjust ments for other
factors such as ant icipated use. Overhead will be allocated equitably.
Legal has not been billing non-Count y ent it ies for legal support
Report# 03/04 - 3 (Dated February 17, 2004) Page 22
Concur – Fees for services should be billed to non-County ent ities such as Count y service
districts.
Legal incurs costs direct ly traceable to operating departments
Concur – Outside legal fees and other outside fees and costs should be paid by the benefit ing
department even if County legal counsel coordinates the outside services.
Mark Amberg
County Counsel
5.2 From Assessor
4. Issues requiring additional study
Grant application expenditures might be overstated
Due to the inconsistencies in how counties are filing, unclear direct ion fro m the Oregon
Department of Revenue (DOR), and lack of audit ing and oversight by the Depart ment of
Revenue I am not sure a problem/issue exists in how Deschutes County is applying for this
Grant. I would agree that the County should research this area and continue to ask the
Department of Revenue for clear guidance that they administer state wide so any inconsistencies
are addressed in ALL counties. As I went over with you, I have asked the DOR to clarify these
types of quest ions in their Grant instructions both verbally in Assessor/DOR committee meet ings
as well as through various written correspondence that I also shared with you.
The DOR has indicated that based on this type of feedback they received that they have added
language to the Grant application instructions for this upco ming year. These new applicat ions
and instructions should be arriving shortly. It is my hope that they answer a number of these
questions and when I receive them, I will be happy to forward you a copy and meet with you to
discuss.
Scot W. Langton
Deschutes County Assessor
5.3 From indirect subcommittee members
Board of County Commissioners and Internal Audit Committee
Tom Anderson, Operations Manager – Community Development Department
Comments-Indirect Cost Plan Review 2003/2004
Report# 03/04 - 3 (Dated February 17, 2004) Page 23
In general, Communit y Development supports both the undertaking of this report as well as its
findings. As you know, CDD is a fee supported operation with an invo lved customer base,
particularly the Central Oregon Builders Associat ion (COBA) and the Central Oregon
Associat ion of Realtors (COAR). Since we must incorporate indirect charges into our fees, and
since we work with our customers each year in the development of our budget from a cost and
service level perspect ive, indirect charges are a key item of discussio n. In the past, it has been
difficult for us to accurately co mmunicate the methodology behind the calculat ion of these costs.
This report will be an excellent tool in acco mplishing that task. Further, with the implementation
of the recommendat ions contained in the report, those costs will be considerably more fair and
logical in just ifying the level o f cost to our customers.
The fo llowing comments pertain to specific sections o f the report:
Methodology
We strongly support adherence to the object ives listed in the report as to what an Indirect Cost
Plan is meant to achieve, particularly wit h regard to appropriateness, reasonableness and
accuracy. We believe ourselves to be clients of internal service providing departments, and
would expect similar object ives if the service was being provided by outside vendors. In
addit ion, our expectation would be that we can influence the costs assigned to us by changes in
our service demand. For example, if we reduced the number of computers in our department,
called for building maintenance less frequent ly, or requested less service of the Legal
Department, then our costs would be reduced, if not in the current year then at least in the
fo llo wing year. We believe many of the specific recommendations on allocat ion methodology
will further that goal.
General Issues – Allocation bases using budgeted amounts might not properly reflect
activity
Related to the comments in the Methodology sect ion above, we believe that in order for cost
allocat ions to be as accurate as possible and also truly reflect ive of services requested and
delivered, that service output levels should be tracked and used as a means to allocate costs.
Changes are recommended wit hin the report which moves the County in that direction. Our
hope would be in future years that this objective could be furthered, including practices such as
the Legal Depart ment charging hours much as a private legal firm would, Building Services
charging time and materials for work orders, and the Finance Department implement ing an
automated formula which uses system generated data such as vouchers, deposits, and payro ll to
allocate charges based on client department usage.
General Issues – Efficiency and effectiveness of internal service fund services are not
measured
We strongly concur in this finding, and would recommend taking it a step further. We believe it
reasonable and appropriate that service providing departments should make a stronger effort in
customer/client outreach and co mmunicat ion. This might take the form of periodic
(quarterly/annual) meetings with service receiving departments to discuss qualit y o f service
provisio n, assurance that services are addressing the specific needs o f client departments, and
planning for future general needs and/or specific projects or events.
Communit y Development has appreciated the opportunit y to serve on the review co mmittee for
this study. We believe the work was extremely thorough and allowed for substant ial input from
Report# 03/04 - 3 (Dated February 17, 2004) Page 24
both service providing and service receiving departments. We believe in the recommendations
contained in the report and respectfully urge their full implementation. We will gladly provide
further testimo ny should it be requested.
--------------------------------------------------------------------------------------------------------------------------------------------
James F. Ross
Deschutes County Sheriff's Office
Business Manager
Here are my comments regarding the Indirect Cost Plan Review. These comments represent my
opinion only and not the views of the Sheriff or Undersheriff.
1. Indirect costs allo cat ions should be treated as contracts between the providing organizat ion
and the receiving organizat ion. The process needs to be formalized. The organizat ions
providing the indirect services need to provide documentation on what services will be provided
and how they developed the $ amounts. The receiving organizat ions should have the opportunit y
to decide what level of services they want fro m the indirect organizat ions.
2. Indirect should not be based on authorized FTE or budget $ amounts. I would reco mmend
adjustments be made during the fiscal year for differences between actual FTE and authorized
FTE's and $ actual and $ budgeted.
3. The Sheriff's Office would be opposed to eliminating the IT adjust ments. We have our own
IT person (Larry Vierra) while other County Departments do not.
4. I'm opposed to allocat ing building/equipment depreciat ion costs. This would raise the
operating expenses of the Sheriff's Office. We may want to consider "memo" accounts, which
provide depreciat ion informat ion only.
5. We should "benchmark" the cost of Deschutes County indirect organizat ions wit h other
Counties or private companies providing similar services. If Deschutes County indirect
organizat ions are not cost compet it ive, the using organizat ions should be allowed to pursue
outside vendors for these services.
Report# 03/04 - 3 (Dated February 17, 2004) Page 25
APPENDIX I – OREGON COUNTY SURVEY RESULTS
A. METHODOLOGY
The Deschutes County Internal Audit Program surveyed Oregon Counties to assess differences
and similarit ies in their indirect cost allocat ion plans. The survey focused on the internal service
costs allocated by Deschutes County. In addit ion, compliance wit h OMB Circular A-87 in the
development of indirect cost plans was noted. This Circular outlines requirements needed to
allocate costs to federal grant programs. Most of the informat ion received fro m other Oregon
Counties was for their 2003/2004 budgets, but some were for 2002/2003 budgets.
Informat ion was requested of all Counties with a populat ion between 40,000 and 450,000. Two
of the smaller counties did not respond to requests. The survey included five count ies larger than
Deschutes and nine counties smaller than Deschutes.
Oregon counties include:
· Washington County
· Clackamas Count y
· Lane Count y
· Marion Count y
· Jackson Count y
· Deschutes County
· Linn Count y
· Douglas County
· Yamhill Count y
· Benton County
· Josephine Count y
· Umat illa Count y
· Klamath Count y
· Coos County (no response)
· Polk County (no response)
· Lincoln Count y
· Columbia Count y
Informat ion provided by each of the Counties varied significant ly. A copy of the full cost
allocat ion plan and schedules was requested. Only a few count ies provided such detailed
informat ion. Some count ies provided only narrative informat ion on their plans.
Some counties provided copies o f their underlying spreadsheets. Some fo llow-up was performed
to clarify the data received.
The informat ion gathered included:
· Indirect cost pools and allo cat ion base(s)
· Type of allo cation methodology (direct, step or reciprocal),
· Use of proprietary so ftware to perform allo cat ion or use of Excel,
· Whether the Plan co mplies with OMB Circular A-87
Several assumpt ions were required to assemble the informat ion in a format suitable for
comparison. Not all count ies include the same services in each cost pool.
Some counties utilized more than one allo cation base for a given service. Each of the allo cation
bases was given equal weight in the survey results.
B. OBSERVATIONS
The survey o f Oregon Counties (the Survey) included input from 15 Oregon counties (includes
Deschutes County). Data for each county was not always available for comparison to Deschutes
County, therefore not all charts include all 15 counties. Charts are based upon detailed matrixes
of the observat ions located under Appendix II.
Report# 03/04 - 3 (Dated February 17, 2004) Page 26
INFORMATION TECHNOLOGY
A majorit y of the Oregon counties surveyed use one
or a number of allocation bases usually focused
around direct charges and number of personal
computers (PC’s).
Four of the five larger counties surveyed used direct
charges and/or PC’s to distribute IT charges.
Deschutes County’s allocation bases are consistent
with other Oregon counties in the survey.
BUILDING SERVICES
A majorit y of the Oregon counties surveyed use
an allocat ion base of square footage.
Deschutes County’s methodology is consistent
with other Oregon counties surveyed in using
square feet to charge out services. Deschutes
County goes one-step further than most to weight
service for nighttime custodial by number of days
service is provided, since not all departments
receive the same level of service. No other
Oregon counties surveyed weighted their
allocation by days of service.
FINANCE
A majorit y of the Oregon counties surveyed
use one or a number of allocat ion bases
usually focused on number of transact ional
type items handled through Finance.
A majorit y of the larger counties used number
of accounts payable (A/P) transactions,
number of paychecks and other factors.
Smaller counties used actual expenditures
more often. It is unclear fro m the informat ion
received whether these other counties
significant ly modify expenditures.
Deschutes County’s allocation base is based
on modified budgeted expenditures. One
small county allocated finance solely on 03/04
budgeted personnel expenditures.
Source: Survey of Oregon Counties (Appendix I)
IT - Al l ocati on base s
Dire ct
c harg e s
(us ua lly t ime )
4 8 %
F TE
8 %
C o nnec t io ns
8 %
Exp e nd it ure s
4 %
Lo g ins
4 %C P U t ime
4 %
# o f P C's
2 4 %
S o urce: S urvey o f Oreg o n Cou nties (Ap pen d ix I)
BUILDING S ERVICES -
Allocation bas es
Square
fo ot age
65 %
FT E
5 %
T ime
5 %
Exp end it ures
1 0%
Dire c t
C ha rge s
15 %
Source: Survey of Oregon Counties (Appendix I)
FINANCE - Allocation bas e s
# o f A/P
inv o ic e it e m s
19 %
Expe ndit ure s
15%
# o f re v e nue
tra ns .
11%
# o f pa yc he c ks
9%
Tim e
9%
F TE
7 %
P e rs o nne l
c o s ts
7%
G/L line s
7%
Oth e r fa c t o rs
(<5%)
16%
Report# 03/04 - 3 (Dated February 17, 2004) Page 27
PERSONNEL
A majorit y of the Oregon counties surveyed
allocated costs by FTE.
Two of the larger counties separately allocate the
costs for union and non-unio n emplo yees.
Deschutes County’s allocation base is consistent
with other Oregon counties surveyed. Union
employee costs are not handled separately.
LEGAL
A majorit y of the Oregon counties surveyed use
attorney time to allocate charges or they consider
legal a direct charge.
Three of the larger counties consider most legal costs
as direct costs. Three of the larger counties allocated
legal charges based on attorney t ime utilized.
Deschutes County’s allocation is based on estimated
usage of attorney time. This is consistent with other
Oregon counties surveyed. Legal uses estimated time
instead of actual time.
ADMINISTRATIVE SERIVCES
A majorit y of the Oregon counties surveyed use
expenditures or FTE to allocate these charges.
A majorit y of the larger counties used FTE and/or a
combinat ion of other factors. Expenditures were
used more often by smaller count ies.
Deschutes County’s allocation base is based on
modified budgeted expenditures. It is unclear from
the information received whether these other
counties use modified expenditures. Most of the
smaller counties allocate on actual expenditures.
Larger counties utilize other allocation bases such as
FTE, budgeted expenditures, and agenda items or
combination thereof.
S ou rce: Su rvey o f Orego n Cou nties (App en dix I)
PERS O NNEL -
Al l oca ti o n bas e s
# o f p ayro ll
checks
is s ued
7%
FTE
6 0 %
Exp end it ure
s
13 %
Pers o nnel
co s t s
7%
# o f
emp lo yees
13 %
S o u rce: S urvey o f Orego n Co un ties (App end ix I)
LEGAL -
Allocation bas es
T ime
55 %
Direct
ch arges
17 %
Exp end it ures
1 1 %
FT E
11 %
by files
o pen ed
6 %
S ou rce: Su rvey o f Orego n Co u nties (Ap p end ix I)
ADMINIS TRATIVE S ERVICES -
Al l ocation base s
FT E
32 %
Ot h er
fact o rs
(<6%)
2 6%
Exp e nd it u r e s
4 2 %
Report# 03/04 - 3 (Dated February 17, 2004) Page 28
OTHER INDIRECT COSTS
ALLOCATED
A number of Oregon counties
surveyed allocate other indirect costs
in their Plan.
Commissioners’ Office - A majorit y of
Oregon Counties surveyed allocate
some portion of the cost of the
Commissio ners’ Office based on a
combinat ion of factors including
expenditures, FTE and number of
agenda items.
Building usage - A number of Oregon
counties surveyed (three of the five
larger counties) assessed a building
rental charge. This was allocated by square footage.
Purchasing - Four of the five larger Oregon counties surveyed had a centralized purchasing
funct ion and allocated such costs based on purchase orders. Deschutes County does not have a
centralized purchasing funct ion so this is not relevant.
Archives – Five counties had the cost of archives allocated in their Plans. Archive costs were
allocated based on a number of factors including cubic feet stored or amount of time. Twenty-
five percent of Deschutes County’s archivist is allo cated through the Building Services charge.
Internal audit - Some of the larger Oregon counties have more internal audit staffing and,
therefore, just ify a separate indirect charge for these services. As Deschutes County accounts for
its internal auditor costs in its administrative services fund a separate allocation is not necessary.
Equipment usage - Three of the five larger Oregon counties surveyed assessed an equipment
charge. Usually this was to recover usage of internal service fund equipment based on a
depreciable rate. As Deschutes County includes the expenditure in its annual charge, a separate
charge is not necessary.
ALLOCATION METHODOLOGY
A majorit y of the Oregon counties surveyed use the step or
reciprocal method, which allocates costs between internal
service funds. The direct method does not allocate
charges between internal service funds.
Four of the five larger Oregon counties use a step or
reciprocal method.
Deschutes County uses the direct allocation method.
Source: Survey of Oregon Counties (Appendix I)
P e rc e nt a g e o f a llo c a tio n
m e t ho do lo g y o bs e rv e d
Direct
40%R e cip ro c al
60%
Source: Survey of Oregon Counties (Appendix I)
Other se le cte d i ndi rect costs
0 2 4 6 8 10 12
Equipment us age
County auditor
Ar chives
P ur chas ing
Building us age (r ent)
Commis sioner 's Of f ice
# of counties that allocated
Report# 03/04 - 3 (Dated February 17, 2004) Page 29
OMB CIRCULAR A-87
A majorit y of the Oregon counties surveyed (and four of
the five larger counties) indicate compliance with OMB
Circular A-87 requirements.
Local governments can recover indirect costs from federal
and many state grant funds received if they co mply with
OMB Circular A-87 requirements. The primary
requirements include:
· Documentation of allocat ion methodology
· Removal o f unallowable costs
· Certificat ion of the Plan by Count y Financial
Officer
· Carryforward of differences between actual costs
and those charged
Deschutes County does not currently meet all of the requirements of the Circular. The County
presently does not include indirect costs on grants coming under this Circular.
FUNDS/DEPARTMENTS RECEIVING INDIRECT COST ALLOCATIONS
A majorit y of the larger Oregon counties surveyed calculate indirect costs to all departments.
Those counties frequent ly do not allocate to some funds/depart ments. Funds not allocated to
included debt service and construction funds. The general fund usually receives the cost for
those funds not allocated to.
S o u rce: S urvey o f Orego n Co un ties (App end ix I)
P e rc e nt a g e o f c o untie s o bs e rv e d
who pre pa re a n OMB -A 8 7 indire c t
c o s t pla n
No
31%
Yes
69%
Report# 03/04 - 3 (Dated February 17, 2004) Page 30
APPENDIX II – OREGON COUNTY SURVEY DATA
The fo llowing data is the underlying data for the observat ions shown under Appendix I (B)
Information Technology Cost Pool Allocation factors
INFORMATION TECHNOLOGY
County
(by popln
size)Allocation factors D i r e c t
# o f P C 's
F T E
E x p e n d i t u r e s
# o f C o n n e c t i o n s
# o f L o g i n s
C P U t i m e
Washington
System maintenance - by assigned logins
Management - by assigned logins X
Clackamas
Projects - by time spent times internal rate
Other services - by # of computers X X
Lane Directly allocated X
Marion
Administration - by FTE
by staff direct billings X X
Jackson
by direct charges
by # of PC's X X
Deschutes
by time charges
by # of PC's & printers X X
Linn
by direct time (87%) and
by CPU time (17%)X X
Douglas by expenditures X
Yamhill by time spent times internal rate X
Benton
Programming-by planned time
PC's - by # of PC's
Network-by # of connections
Depreciation - by # of connections
Software maint - direct allocation X X X
Josephine
Direct charges - by 5 year avg. times fixed rate
Infrastructure - by fixed dollar value times # PC's
Base system - dollar value times # PC's X X
Umatilla by direct charges X
Klamath by time X
Lincoln
by % of personal and
by service expenditures X X
Columbia
by direct charges
by # of PC X X
Count 12 6 2 2 1 1 1
FTE = Full Time Equivalent employee
COMPARISON LIST
Report# 03/04 - 3 (Dated February 17, 2004) Page 31
Building Maintenance Cost Pool Allocation factors
BUILDING MAINTENANCE COMPARISON LIST
County
(by popln
size)Allocation factors S q u a r e f o o t a g e
D i r e c t c h a r g e s
E x p e n d i t u r e s
T i m e
F T E
Washington
Bldg maintenance - by square footage served
Janitorial - by square footage served
Grounds maintenance - by square footage served
Utilities - by square footage served X
Clackamas
Maintenance and Utilities - by square footage
Projects - direct by time spent
Repairs & maintenance - by time
Administration-by budgeted utilities and other
costs
95% to full service facilities X X X
Lane by square footage X
Marion
Janitorial-by square footage
Facility-by square footage X
Jackson
Direct charges
by square footage X X
Deschutes
Day Maintenance - by square footage
Night maintenance - by square footage
Utilities - direct charges X X
Linn by square footage X
Douglas by expenditures X
Yamhill by square footage X
Benton Included with rent charge - by square footage X1
Josephine by square footage X
Umatilla
by square footage
Mail under printing-% of total alloc. postal X
Klamath by square footage X
Lincoln by % of personal service expenditures X
Columbia
Gen Service - by FTE
Maintenance & utilities - by square footage X X
Count 13 3 2 1 1
FTE = Full Time Equivalent employee
1 - Most are charged as a direct cost and not included in indirect cost plan.
Report# 03/04 - 3 (Dated February 17, 2004) Page 32
Finance Cost Pool Allocation factors
FINANCE
County
(by popln
size)Allocation factors # o f A /P i n v o i c e i t e m s
E x p e n d i t u r e s
# o f r e v e n u e t r a n s .
# o f p a y c h e c k s
T i m e
F T E
G /L l i n e s
P e r s o n n e l c o s t s
# o f p a y r o l l t r a n s a c t i o n s
# o f b i l l i n g s
# o f b u d g e t l i n e s
# o f j o u r n a l e n t r i e s
# o f F o r m 1 0 9 9 's
# o f e m p l o y e e s
Washington
Accounts Payable - by invoice line items
Payroll - by # of paychecks
General - 80% by G/L lines and 20% by budget X X X X
Clackamas
Accounts Payable & Receivable - by # of transactions
Payroll - by # of paychecks issued
Grant accounting - by hours spent
Budget - by # of budget lines
Other accounting - by hours spent
General government - not allocated X X X X X
Lane
Accounts Payable - by # of transactions (39%)
Payroll-by # of checks (32%)
Cash receipts - by # of transactions (13%)
Investment- by estimated time (10%)
Benefits- by FTE (6%)X X X X X
Marion
General - by FTE (w/temps) (10%)
Accounts payable - by # of transactions (35%)
Accounts receivable- by # of billings (20%)
(35%) by material & services budget {no capital
items}X X X X
Jackson
General - by # of A/P and payroll transactions
Payroll - by # of payroll transactions X X
Deschutes by modified budget expenditures X
Linn
Treasurer-by # of receipts
Accounting-by # of employees X X
Douglas by expenditures X
Yamhill
General - by modified expenditures
Payroll-by # of payroll checks X X
Benton
Accounting- by # of A/P, journal entries, and Revenue
transactions
Payroll-by personnel costs X X X X
Josephine by # of A/P and Payroll transactions X X
Umatilla
Accounts payable - by # of A/P transactions
Receipts-by # of receipts
Tax-by expenditures
Bank reconciliations-by expenditures
1099's-by # of 1099's
Government obligation bond-by direct time
General ledger-by # of financial transactions
tax notes-by expenditures X X X X X X
Klamath
by G/L, accounts payable, payroll, time and
expenditures X X X X X
Lincoln by personal service expenditures X
Columbia by FTE X
Count 9 7 5 4 4 3 3 3 2 1 1 1 1 1
FTE = Full Time Equivalent employee
COMPARISON LIST
Report# 03/04 - 3 (Dated February 17, 2004) Page 33
Personnel Cost Pool Allocation factors
PERSONNEL
County
(by popln
size)Allocation factors F T E
# o f e m p l o y e e s
P e r s o n n e l c o s t s
E x p e n d i t u r e s
# o f p a y r o l l c h e c k s i s s u e d
Washington
by FTE
Unions - by FTE for union ee's X
Clackamas by FTE X
Lane
by FTE
Union - by FTE X
Marion by FTE (adjusted for temps)X
Jackson HR - by number of employee's X
Deschutes by FTE X
Linn by number of employee's X
Douglas by expenditures X
Yamhill by # of payroll checks issued X
Benton by personnel costs X
Josephine by FTE X
Umatilla HR-by FTE X
Klamath by FTE and expected new hires X
Lincoln by personal service expenditures X
Columbia by FTE X
Count 9 2 2 1 1
FTE = Full Time Equivalent employee
COMPARISON LIST
Report# 03/04 - 3 (Dated February 17, 2004) Page 34
Legal Cost Pool Allocation factors
LEGAL
County
(by popln
size)Allocation factors T i m e
D i r e c t c h a r g e s
E x p e n d i t u r e s
F T E
b y f i l e s o p e n e d
Washington
by direct charges on time
General funds balance - by time X X
Clackamas Not allocated out - by direct charges X
Lane
by FTE (33%)
by actual time (67%)X X
Marion Not allocated out - by direct charges X
Jackson by actual time X
Deschutes by estimated time X
Linn by estimated time X
Douglas by expenditures X
Yamhill by estimated time X
Benton by actual time (p/y)X
Josephine by files opened and FTE X X
Umatilla by estimated time (in BOCC)X
Klamath by time X
Lincoln by personal service expenditures X
Columbia by estimated time X
Count 10 3 2 2 1
FTE = Full Time Equivalent employee
COMPARISON LIST
Report# 03/04 - 3 (Dated February 17, 2004) Page 35
Administrative Services Cost Pool Allocation factors
ADMINISTRATIVE SERVICES
County
(by popln
size)Allocation factors E x p e n d i t u r e s
F T E
s p e c i f i c d e p t .
G r a n t d o l l a r s
# o f a g e n d a i t e m s
# o f A /P t r a n s a c t i o n s
# o f e m p l o y e e s
Washington
Administration - by FTE
Employee Relations - by FTE
Budget analysis - by modified budget X X
Clackamas
Administration - 2/3 by FTE
BOCC support-1/3 not allocated X
Lane
by Agenda items (45%)
by Expenditures (29.5%) {10% lobbying}
by Grant dollars administered (10%)
by FTE (12.5%)
to Economic development (3%)X X X X X
Marion by FTE (w/temps)X
Jackson by budgeted expenditures X
Deschutes by modified budget expenditures X
Linn
by average # of employees
by accounts payable transactions X X
Yamhill by modified expenditures X
Benton Departmental overhead-by internal service FTE X
Josephine by modified budget expenditures (p/y)X
Umatilla by FTE and expenditures X X
Klamath by budget, resolutions, and transfers
Lincoln by personal service expenditures X
Count 8 6 1 1 1 1 1
FTE = Full Time Equivalent employee
COMPARISON LIST
Report# 03/04 - 3 (Dated February 17, 2004) Page 36
Other Indirect Cost Pools
County
(by popln
size)C o m m i s s i o n e r s o f f i c e
B u i l d i n g u s a g e (r e n t )
P u r c h a s i n g
B u d g e t & p l a n n i n g
C o u r i e r s e r v i c e s
C o u n t y a u d i t o r
C o m m u n i c a t i o n s
A r c h i v e s
E q u i p m e n t u s a g e
C o p i e r &/o r
p r i n t i n g s e r v i c e s
P C r e p l a c e m e n t
F i n a n c i a l s y s t e m
R e a d y s t o r e s
M o t o r p o o l
R e t i r e m e n t r e s e r v e
Washington X X X X X X X X
Clackamas X X X X X X
Lane X X X X X X X X X X X
Marion X X X X
Jackson X X X X X X
Deschutes (iii)(v)(iv)(i)(ii)
Linn X X
Douglas X
Yamhill X X X X
Benton X (i)X
Josephine X X
Umatilla X X X X X X X X
Klamath X X (i)
Lincoln X X
Columbia X X X
Count 11 6 6 6 5 4 5 5 4 4 3 3 2 2 1
Note:This matrix was used to identify other areas of indirect costs allocation.
Other indirect cost pools are broadly defined for purposes of comparison.
Notes:
i Included in administrative service fund
ii System acquisition costs spread between personnel and finance
iii No consistent payment of rents by departments/funds
iv Included in building services fund. Mail costs directly charged on usage.
v Included in finance
Other indirect cost pools
Report# 03/04 - 3 (Dated February 17, 2004) Page 37
BOCC Cost Pool Allocation factors
BOCC (other indirect cost pool)
County
(by popln
size)Allocation factors E x p e n d i t u r e s
F T E
# o f a g e n d a i t e m s
S p e c i f i c d e p t
T i m e
P o r t i o n -
N o t c h a r g e d
Washington
by FTE (35%)
by agenda items (35%)
by budget appropriations (30%)X X X
Clackamas
Lane
by FTE (15%)
by agenda items (30%)
by expenditures (40%)
to Road dept (10%)
to Planning (5%)X X X X
Marion
by FTE (w/temps)(50%)
by Expenditures (50%)X X
Jackson by budgeted expenditures X
Deschutes
Linn
Douglas by staffing expenditures only X
Yamhill by modified expenditures X
Benton
Josephine by modified p/y budget X
Umatilla
Klamath
by time
not charged (33%)X X X
Lincoln by personal service expend.X
Columbia by FTE (35%)X
Count 9 4 2 1 1 1
FTE = Full Time Equivalent employee
COMPARISON LIST
Report# 03/04 - 3 (Dated February 17, 2004) Page 38
Building Usage Cost Pool Allocation factors
BUILDING USAGE (Rent)(Other indirect cost pool)
(by popln
size)Allocation factors Square footage
Washington by square footage (2% of bldg cost)X
Clackamas
Lane by square footage (depreciation of 3.3% of total X
Marion by square footage (debt service)X
Jackson
Deschutes No consistent charge for usage of facilities.
Linn
Douglas
Yamhill by square footage X
Benton by square footage (uniform rental rate plan)X
Josephine
Umatilla by square footage X
Klamath
Lincoln
Columbia
Count 6
COMPARISON LIST
Report# 03/04 - 3 (Dated February 17, 2004) Page 39
Archives Cost Pool Allocation factors
ARCHIVES (Other indirect cost pool)
County
(by popln
size)Allocation factors # o f c u b i c f e e t s t o r e d
S h a r e o f l a b o r
# o f l b s . d e s t r o y e d
# o f r e c o r d s
P e r s o n a l s e r v i c e
e x p e n d i t u r e s
Washington
Clackamas
Admin cost - by share of labor
Microfilm - by staff hours required
Records storage-by cubic feet stored
Destruction-by lbs destroyed
Inform. Mgmt. -by share of clerical ee's X X X
Lane by # of records X
Marion
Jackson by # of cubic feet of storage X
Deschutes
Linn
Douglas
Yamhill
Benton
Josephine
Umatilla by % of estimated support X
Klamath
Lincoln by personal service expenditures X
Columbia
Count 2 2 1 1 1
COMPARISON LIST
Report# 03/04 - 3 (Dated February 17, 2004) Page 40
Allocation Methodologies
Type of allocation method from review of indirect plan materials*
County
(by popln size)D i r e c t
S t e p
R e c i p r o c a l
Washington X1
Clackamas X
Lane X1
Marion X
Jackson X
Deschutes X
Linn X
Douglas X
Yamhill X
Benton X
Josephine X
Umatilla X1
Klamath X
Lincoln X
Columbia X
1 - Proprietary software used for allocation (Maximus). Most other counties utilize a
spreadsheet program.
*Allocation methodologies - brief descriptions
Direct - direct allocation to program depts.
Step - sequence of inter-allocation between internal service depts.
Reciprocal - explicit allocation in-between internal service depts.
Allocation Methodology
Report# 03/04 - 3 (Dated February 17, 2004) Page 41
Prepare indirect cost plan to comply with OMB A-87 ?
County
(by popln size)Y e s
N o
Washington X
Clackamas X
Lane X
Marion X
Jackson X
Deschutes X
Linn X
Douglas
Yamhill
Benton X
Josephine X
Umatilla X
Klamath X
Lincoln X
Columbia X
Note:OMB-A87 indirect cost plans allow for indirect costs to be charged to federal grants
OMB A-87 Plan?
Report# 03/04 - 3 (Dated February 17, 2004)
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