August 13 2015 900 AM 300 PM Welcome Jill Kanemasu Assistant ChiefLocal Operations Division of Accounting and Reporting 2 Introductions Naomi Tamashiro Branch Chief State amp Local Governments ID: 805702
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Slide1
County Cost Plan Overview
August 13, 20159:00 AM – 3:00 PM
Slide2Welcome
Jill Kanemasu
Assistant Chief-Local Operations
Division of Accounting and Reporting
2
Slide3Introductions
Naomi Tamashiro
Branch Chief
State & Local Governments
Cost Allocation Services
Janet Turner
National Specialist of Cost Plans
State & Local Governments
Cost Allocation Services
3
Slide4Introductions
4
Racquel
Flanagan
Manager
Fiscal Systems Bureau
Liane
Winter
Manager
Fiscal Policy Bureau
Greg
Tayros
Accounting Officer
Fiscal Systems Bureau
Slide5County Cost Plan Contacts
Hitomi Sekine, Chief
Anita Dagan, ManagerPhillip Pangilinan, LeadDarlene Justice Darryl MarEric PerezSandeep Singhhsekine@sco.ca.govadagan@sco.ca.govppangilinan@sco.ca.gov
djustice@sco.ca.gov
dmar@sco.ca.gov
eperez@sco.ca.gov
sxsingh@sco.ca.gov
5
Slide6Training Agenda
09:00 – SCO Welcome 09:05 – Introduction, Housekeeping, and DHHS & CDSS Welcome 09:10 – Cost Plan Authority/History 09:30
–
Feds Overview and 2 CFR Part 200 Changes
10:30
– Morning Break 10:45 – Cost Plan Allocation Framework 11:15 –
Carry Forward 12:00
– Lunch Break 6
Slide7Training Agenda
7 01:00 – Cost Plan Review Process 01:30 –
Common Findings
02:00
–
Afternoon Break 02:15 – California Department of Social Services 02:45
– Resources and Closing
03:00 – End
Slide8State Controller’s Office (SCO) Authority Over Cost Plans
Federal Office of Management and Budget (OMB) has designated the
Federal Department of Health and Human Services (DHHS) as the agency assigned cognizance for the State of California’s Statewide Cost Allocation Plan; it has also assigned cognizance to DHHS for the countywide cost allocation plans of all 58 California counties.In December 1971, DHHS delegated cognizance authority for California counties to the Director of the California Department of Social Services (DSS).In January 1974, DSS re-delegated this authority to the SCO, where it has remained. This authority does not include the responsibility for approving indirect cost rate proposals of county departments.
2
Slide93
Slide10Cost Allocation Services
Update – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Published December 19, 2014)
August 13, 2015
Slide11Division of Cost Allocation (DCA)
is nowCost Allocation Services (CAS)11
Slide1212
COST ALLOCATION SERVICES: Director
: Arif “Mak” Karim 214-767-3600 (Dallas, Texas) Arif.Karim@psc.hhs.gov Deputy Director: Darryl Mayes 301-492-4852 (Bethesda, Maryland) Darryl.Mayes@psc.hhs.gov
Slide13Additional Contact Information - https://rates.psc.gov/fms/dca/map1.html
San FranciscoNew York
CAS Offices BethesdaDallas13
Slide1414CAS BRANCH CHIEFS:
STATE AND LOCAL COLLEGE/UNIVERSITY/NON PROFITS/HOSPITALSNew York / Dallas Dallas San FranciscoMichael Stack Matthew Dito Patrick Smith
212-264-0944 214-767-3764 415-437-7834Michael.Stack@ Matthew.Dito@ Patrick.Smith@psc.hhs.gov psc.hhs.gov psc.hhs.govSan Francisco/Bethesda New York Bethesda / DallasNaomi Tamashiro Louis Martillotti Steven Zuraf415-437-7822 212-264-0918 301-492-4858Naomi.Tamashiro Louis Martillotti Steven.Zuraf@psc.hhs.gov @psc.hhs.gov @
psc.hhs.gov
Slide1515CAS Services:
State and Local Cost Allocation Plans (SWCAPs, LOCAPs)Public Assistance Cost Allocation PlansIndirect Cost Rate Agreements: State and Local Government Departments Colleges and Universities
Nonprofit Organizations
Hospitals
Slide1616
Federal Awarding Agency Regulatory Implementation of Office of Management and Budget’s Uniform Administrative Requirements, Cost Principles
, and Audit Requirements for Federal AwardsEffective date: This interim finalrule is effective on December 26, 2014.Federal Register -- December 19, 2014
NEW
Slide17172 CFR Part 200 Supersedes and Streamlines
Requirements From:OMB Circular A-21, Cost Principles for Educational Institutions
OMB Circular A-50, Audit FollowupOMB Circular A-87, Cost Principles for State, Local. And Indian Tribal GovernmentsOMB Circular A-89, Catalog of Federal Domestic AssistanceOMB Circular A-102, Grants and Cooperative Agreements With State and Local Governments
Slide18182 CFR Part 200 Supersedes and
Streamlines Requirements From:(continued)OMB Circular A-110, Uniform Administrative Requirements for Grants and Other Agreements with Institutions of Higher Education, Hospitals and Other Non-Profit Organizations
OMB Circular A-122, Cost Principles for Non-Profit OrganizationsOMB Circular A-133, Audits of States, Local Governments and Non-Profit Organizations
Slide19Useful Websites & OMB Contact Information
http://www.ecfr.gov Current version of Title 2 CFR Part 200 and Title 45 CFR Part 75http://www.cfo.gov/cofar
Links include:2 CFR 200 (link to ecfr.gov)Joint Interim Final Rule Implementing the Uniform Guidance (79 FR 75871)Preamble and original Federal Register Notice for Uniform Guidance (78 FR 78589)
Frequently Asked Questions- updated as of November
2014 (
10
pages, 282 kb)
Uniform Guidance Cost Principles Text Comparison (174 pages, 1.62 mb
)
OMB Contact: Gilbert Tran (202) 395-3993 Hai_M._Tran@omb.eop.gov19
Slide202 CFR Part 200 Changes
Cost Principles
changes:No More Use AllowanceAllowability of Audit CostsSoftware
Unallowable Costs
Slide212 CFR Part 200 Changes
Cost Principles changes –
No More Use Allowance!: Effective DatesConverting from Use Allowance to Depreciation ExpenseCombination of methods cannot exceed acquisition cost
Useful life exceeds original depreciable life – considered fully depreciated
Slide222 CFR Part 200 Changes
Cost Principles changes –
No More Use Allowance!: Effective 12/26/2014, use allowance is no longer available as a substitution for depreciation
F
or non-Federal entities, the effective date should be the fiscal year starting after December 26, 2014 (July 1, 2015 – June 30, 2016) as switching to a new methodology mid-year can be burdensome
Slide232 CFR Part 200 Changes
Cost Principles changes –
No More Use Allowance!: Effective Dates: (1) FR Notice. “This interim final rule is effective on December 26, 2014.”
(2) OMB/COFAR FAQ’s. FAQ. 110.1: “…for indirect cost rates and cost allocation plans, Federal awarding and indirect cost rate negotiating agencies will use the Uniform Guidance both in generating proposals for and negotiating a new rate (when the rate is due to be re-negotiated)
for non-Federal entity fiscal years starting on or after December 26, 2014.”
Slide242 CFR Part 200 Changes
Cost Principles changes –
No More Use Allowance!: Effective Dates (continued): Can convert from use allowance to depreciation at the beginning of any fiscal year, BUT NO LATER THAN 7/1/2015 (Fiscal Year 2015-2016;For Cost Allocation Plans FY 2017-2018).
Slide252 CFR Part 200 Changes
Cost Principles changes –
No More Use Allowance!: Straight Line (SL) depreciation is the only acceptable method.In general, accelerated depreciation is not an acceptable method
Slide262 CFR Part 200 Changes
Cost Principles changes –
No More Use Allowance!: Subpart E §200.436 Depreciation(a) Depreciation is the method for allocating the cost of fixed assets to periods benefitting from asset use. The non-Federal entity may be compensated for the use of its buildings, capital improvements, equipment, and software projects capitalized in accordance with GAAP, provided that they are used, needed n the non-Federal entity’s activities, and properly allocated to Federal awards. Such compensation must be made by computed depreciation. (Underlining added for emphasis).
Slide272 CFR Part 200 Changes
Cost Principles changes –
No More Use Allowance!: Subpart E §200.436 Depreciation (continued)(d)(5) Where the depreciation method is introduced to replace the use allowance method, depreciation must be computed as if the asset had been depreciated over its entire life (i.e., from the date the asset was acquired and ready for use to the date of disposal or withdrawal from service). The total amount of use allowance and depreciation for an asset (including imputed depreciation applicable to periods prior to the conversion from the use allowance method as well as depreciation after the conversion) may not exceed the total acquisition cost of the asset.
Slide282 CFR Part 200 Changes
Example: Effective date and depreciation calculated
A County, with a fiscal year ending 6/30/2016, purchased a new building/structure on January 1, 2016 for $1,000,000 and placed that building/structure in service on January 1, 2016. The building has a useful life of 40 years. For simplicity, assume no salvage value.What method of depreciation should the County use and how much depreciation should be taken in year 1?
Slide292 CFR Part 200 Changes
Example:
Effective date and depreciation calculatedAnswer: SL Depreciation is required to be used – Asset purchased and placed in service on January 1, 2016 which is during the FY 2015-16.Amount of depreciation to be taken in FYE 6/30/2016 is $12,500Computed as follows: $1,000,000/40yrs = $25,000 full year depreciation
$25,000*6/12 = $12,500 for the 6 months of FYE 6/30/2016
the asset was in service
Slide302 CFR Part 200 Changes
Support for Conversion:
At time of conversion, prepare a comparison of the two methods (use allowance vs. straight line depreciation) to determine if:Cost of asset has been fully recoveredAsset outlived its useful lifeIf either is true, the asset is considered fully depreciated, and no further costs are allowed.
Slide312 CFR Part 200 Changes
Support for Conversion:
Use Allowance Schedule should include the following:Asset descriptionCostDate placed in serviceUseful lifeUse allowance taken each year
YTD accumulated use allowance taken
N
et book value
Slide322 CFR Part 200 Changes
Support for Conversion:
Depreciation schedule should include the following:Asset descriptionCostDate placed in serviceUseful life
Annual straight line depreciation
YTD accumulated depreciation
Net book value
Slide332 CFR Part 200 Changes
Example: Converting from Use Allowance to Depreciation Expense
1 piece of equipment with a useful life of 10 years. Grantee opted to claim use allowance for first 5 years in accordance with OMB Circular A-87, then converted to depreciation in accordance with the Uniform Guidance (2 CFR Part 200) for the last 5 years. No Federal funds were used to purchase the equipment. Capitalized asset cost = $5,000.
Slide342 CFR Part 200 Changes
Example:
Converting from Use Allowance to Depreciation Expense
Slide352 CFR Part 200 Changes
Example: Converting to Depreciation-Asset Outlived its depreciable life
1 piece of equipment has a capitalized cost of $5,000 and a useful/depreciable life of 7 years. Grantee opted to claim use allowance in accordance with OMB Circular A-87. In year 8, Grantee must convert to depreciation in accordance with the Uniform Guidance (2 CFR Part 200). No Federal funds were used to purchase the equipment.
Slide362 CFR Part 200 Changes
Example: Converting to Depreciation-Asset Outlived its depreciable life
Slide372 CFR Part 200
Changes
Cost Principles changes – Audit Costs: The costs of the Single Audit were and continue to be allowableAgreed upon procedures for sub-recipient monitoring of sub-recipients not subject to the Single Audit Act was and continues to be allowable
Slide382 CFR Part 200
Changes
Cost Principles changes – Audit Costs: A-87 Appendix B 4.b said “Other audit costs are allowable if included in a cost allocation plan or indirect cost proposal, or if specifically approved by the awarding agency as a direct cost to an award.”This language was intentionally removed from the Uniform Guidance as it violates the Single Audit Act.
Slide392 CFR Part 200
Changes
Cost Principles changes – Software: Capitalize in accordance with GAAPEffective fiscal years beginning on or after January 1, 2016
Intangible assets include patents and computer software
Software development projects-allowable interest
Slide402 CFR Part 200
Changes
Cost Principles changes:$5,000 Capitalization Threshold for Equipment and Software:2 CFR 200, Subpart A, §200.33 Equipment:Equipment means tangible personal property (including information technology systems) having a useful life of more than one year and a per unit acquisition cost which equals or exceeds the lesser of the capitalization level established by the non-Federal entity for financial statement purposes, or $5,000. See also §§200.12 Capital Assets, 200.20 Computing Devices, 200.48 General Purpose Equipment, 200.58 Information Technology Systems, 200.89 Special Purpose Equipment, and 200.94 Supplies.
Slide412 CFR Part 200
Changes
Cost Principles changes: $5,000 Capitalization Threshold for Equipment and Software (continued):2 CFR 200, Subpart A, §200.58 Information Technology Systems:Information Technology Systems means computing devices, ancillary equipment, software, firmware, and similar procedures, services (including support services), and related resources. See also §§200.20 Computing Devices and 200.33 Equipment.
Slide422 CFR Part 200
Changes
Software development projects-allowable interest:2 CFR 200 Subpart E, §200.449:General. Costs incurred for interest on borrowed capital, temporary use of endowment funds, or the use of the non-Federal entity’s own funds, however represented, are unallowable. Financing costs (including interest) to acquire, construct, or replace capital assets are allowable, subject to the conditions in this section.(1) Capital assets is defined as noted in §200.12 Capital Assets. An asset cost includes (as applicable) acquisition costs, construction costs, and other costs capitalized in accordance with GAAP.
(2)
For non-Federal entity fiscal years beginning on or after January 1, 2016, intangible assets include patents and computer software. For software development projects, only interest attributable to the portion of the project costs capitalized in accordance with GAAP is allowable.
Slide432 CFR Part 200
Changes
Software development projects-allowable interest:2 CFR 200 Subpart a, §200..12 Capital Assets:Capital assets means tangible or intangible assets used in operations having a useful life of more than one year which are capitalized in accordance with GAAP. Capital assets include:land, buildings (facilities), equipment, and intellectual property (including software
) whether acquired by purchase, construction, manufacture, lease-purchase, exchange, or through capital leases: and
Additions, improvements, modifications, replacements, rearrangements, reinstallations, renovations or alterations to capital assets that materially increase their value or useful life (not ordinary repairs and maintenance).
Slide442 CFR Part 200 Changes
Unallowable Costs:
Use allowanceEntertainment and employee morale Alcoholic beverages Uncollectible debts Contingency reserves Contributions
Fund raising
Goods or services for the personal use
Under recovery on other federal grants
Slide45The Basics of Cost Allocation
What does Cost Allocation mean?
The process of assigning to two or more departments the costs of an item shared by the departments.Cost allocation ensures that each program bears its fair share of the total costs.
Slide46The Basics of Cost Allocation
What programs should use cost allocation method?
Cost allocation is required only in situations in which resources are shared with another program and when a program receives services from two different Central service departments.
Slide47The Basics of Cost Allocation
Two types of departments are included in the Cost Plan:
Central Service Departments: Departments that provide services to other departments throughout the county. Receiving Departments: Departments that receive services from Central Service Departments.
Slide48The Basics of Cost Allocation
Two types of
costs are included in the Cost Plan: Type I – AllocatedType II – Direct Billed
Slide49The Basics of Cost Allocation
Requirements for Type I (Allocated) Costs:
Allowable CostsAppropriate Allocation BaseAppropriate Support/Documentation
Slide50The Basics of Cost Allocation
Requirements for Type II (Direct Billed) Costs:
Appropriate Billing MethodologyAppropriate Support/DocumentationIncluded Within Appropriate FunctionReceiving Departments Accorded Consistent Treatment
Slide51Cost Allocation Plan Framework
Building/Equipment Depreciation
Function/ActivityCentral Service DepartmentCarry Forward Schedule
Summary Schedule
Slide52Cost Allocation Plan Framework
Building/Equipment Depreciation
Function/ActivityCentral Service DepartmentCarry Forward Schedule
Summary Schedule
Slide53Cost Allocation Plan Framework
What is included in the Building Depreciation/Equipment Depreciation Schedule:
NarrativeList of building or assets Depreciation ScheduleOccupancy Schedule
Slide54Cost Allocation Plan Framework
What information goes into a narrative?
Detailed information on the types of service provided by the DepartmentProvide a description of the method(s)used to determine the allocations to the various receiving departmentsExplain the rationale for applying the appropriate methodology to the cost categorySignificant changes
Slide55Cost Allocation Plan Framework
Building/Equipment Depreciation
Function/ActivityCentral Service DepartmentCarry Forward Schedule
Summary Schedule
Slide56Cost Allocation Plan Framework
What is included in the Function/Activity: Detailed allocation of costs to receiving departments
Direct BillingAllocation Basis
Slide57Cost Allocation Plan Framework
Building/Equipment Depreciation
Function/ActivityCentral Service DepartmentCarry Forward Schedule
Summary Schedule
Slide58Cost Allocation Plan Framework
What is included in the Central Service Department: Narrative
List of functions/activities provided by the Central Service DepartmentSalaries & Benefits, Other Expense & cost, total expenditures for each function/activity Costs allocated to receiving departments based on service provided via allocation basis
Slide59Cost Allocation Plan Framework
Building/Equipment Depreciation
Function/ActivityCentral Service DepartmentCarry Forward Schedule
Summary Schedule
Slide60Cost Allocation Plan Framework
What is included in the Summary Schedule: Summary of total allocated costs broken down by receiving departments
Totals provided for each central service department
Slide61Cost Allocation Plan Framework
Building/Equipment Depreciation
Function/ActivityCentral Service DepartmentCarry Forward Schedule
Summary Schedule
Slide62Cost Allocation Plan Framework
What is included in the Carry Forward Schedule: Actual Costs/Final Costs
Fixed Costs/Estimated Costs from 2 Years ago Carry Forward – The difference between Actual Costs and Fixed CostsActual Costs with Carry Forward AdjustmentsProposed Costs
Slide63Carry
Forward Schedule
What is Carry Forward?A Carry Forward calculation is the difference between the actual costs from the current period and the fixed costs from prior period.
Slide64Carry Forward
Schedule
In other words Carry Forward means: A 2 year cycle true-up from your fixed (estimated) costs to your actual costs. FY 14-15
FY 15-16
FY 16-17
FY 17-18
FY 13-14
Slide65Carry
Forward Schedule
What is Actual Cost? Actual cost is the cost that the cost plan is based on. Actual Costs are costs that the departments receiving services from the central services department experience on a fiscal year period (July 1st – June 30th
).
For example:
FY 15-16 Cost Plan is based on FY 13-14 actual cost.
(July 1, 2013 – June 30, 2014)
Slide66Carry
Forward Schedule
Actual Cost Terminology:Actual cost is also known as: Current AllocationFinal CostCurrent Cost
Let’s look at a few examples in the next few slides.
Slide67Carry Forward
Schedule
Slide68Carry Forward Schedule
Slide69Carry Forward Schedule
Slide70Carry
Forward Schedule
What is Fixed Cost? Fixed cost is the cost that is based on actuals reported in the cost plan 2 years ago. For example:
FY 15-16 Cost
Plan’s fixed costs are based on FY 13-14 Cost Plan actuals.
Slide71Carry Forward
Schedule
FY 14-15Actual Cost– FY 12-13Fixed Cost – Actuals reported in FY 12-13 Cost Plan
FY 15-16
Actual Cost–
FY 13-14
Fixed Cost –
Actuals reported in FY 13-14
Cost Plan
FY 16-17Actual Cost– FY 14-15
Fixed Cost –
Actuals reported in FY
14-15
Cost Plan
FY 17-18Actual Cost– FY 15-16Fixed Cost – Actuals reported in FY
15-16 Cost Plan
FY 13-14
Actual Cost–
FY 11-12
Fixed Cost –
Actuals reported in FY 11-12 Cost Plan
Slide72Carry
Forward Schedule
Fixed Cost Terminology:Fixed cost is also known as: Prior Year AllocationFixed CostEstimated Cost
Lets look at a few examples in the next few slides.
Slide73Carry Forward
Schedule
Slide74Carry Forward Schedule
Slide75Carry Forward Schedule
Slide76Carry
Forward Schedule
Carry Forward Calculation: Actual Costs – Fixed Costs = Carry ForwardCarry Forward is also referred to as a Roll Forward
Slide77Carry Forward Schedule
Example:
Receiving DepartmentActual CostFixed cost Carry ForwardDepartment A100,00080,000100,000 – 80,000 = 20,000
Department
B
100,000
150,000
100,000 – 150,000 = -50000
Slide78Carry Forward
Schedule
Slide79Carry Forward Schedule
Slide80Carry Forward Schedule
Slide81Carry Forward Schedule
What is an Adjustment?
An adjustment is made to capture an event that is not reflected in your actual cost.
Slide82Carry Forward Schedule
Types of events that may require an adjustment:
New DepartmentSignificant expansion to a departmentSignificant reduction to a departmentSpecial project/assignment (only affects one year)Dissolution of department
Slide83Carry Forward
Schedule
Slide84Carry Forward Schedule
Slide85Carry Forward Schedule
Slide86Carry Forward Schedule
What are proposed costs?
Actual Cost + Carry Forward ± Any Adjustments = Proposed CostsProposed Costs are what county departments use to claim their cost for services rendered
Slide87Carry Forward
Schedule
Slide88Carry Forward Schedule
Slide89Carry Forward Schedule
Slide90Key Points
When
you include adjustments in the cost plan you must include a narrative explaining the adjustment in detail.- Multiple adjustments must be labeled individually as A, B, C etc. in supporting documents.
The Cost Plan Unit will include a note in the special remarks section of the negotiation agreement stating if the adjustment
should/should
not be included when calculating carry-forward in subsequent cost plans
.
Slide91Negotiation Agreement
Special Remarks
Slide92Cost Plan Review Process
Date
EventNovember 30thExtension requests must be submitted to SCODecember 31stCost Plans are due to SCO
January 31
st
Cost Plans with extensions
are due to SCO
June 30th
Deadline for SCO to approve Cost
Plans submitted timelySeptember 30thDeadline for SCO to approve all Cost Plans
Slide93Cost Plan Review Process
Desk Review
Is thererisk?
Field Review
Desk Review Finding?
Field Review Finding?
Revision Required
Revision ok?
Negotiation Agreement Issued
Y
Y
Y
Y
N
N
N
N
Slide94SCO Desk Review
Components of the process:
Review the cost plan, supplemental checklist, and other documentation submitted for materiality, completeness, and reliability of supporting data Review
all required certifications in the supplemental checklist for appropriate authorized
signatures
Slide95SCO Desk Review
Components of the
process: (continued)Reconcile the plan to the county’s budget or other financial documents used to support the plan
Review prior negotiation agreements for any conditions or adjustments
Slide96SCO Desk Review
Components of the process: (continued)
Review other financial reports (actuarial reports, CAFR, depreciation schedules, etc.)Review for any findings/recommendations contained in the most recent Field Review report that should be considered in the current
review
Slide97SCO Desk Review
Components of the process: (continued)
Variance analysis of cost poolsReview allocation basesRead any memos, narratives, and justifications provided by the county for any significant changes
Slide98Cost Plan Review Process
Desk Review
Is there
risk?
Field Review
Desk Review Finding?
Field Review Finding?
Revision Required
Revision ok?
Negotiation Agreement Issued
Y
Y
Y
Y
N
N
N
N
Slide99SCO Field Review
What triggers a cost plan field review?
Follow up on the Findings/Recommendations of a prior Field Review ReportThe appearance of
functional problems in the plan
High reserve balances with minimal support
T
he
reoccurrence of problems/issues
Slide100SCO Field Review
What do we look at when we are in the field?
Review the county’s direct billing system (any departments that direct bill)We request supporting information on the bases used to allocate cost
Slide101SCO Field Review
What do we look at when we are in the field?
ISF and Risk Management departments to review reserve balances if necessaryAny other department that has issues that affect the cost plan and/or charge federally funded departments
Slide102Cost Plan Review Process
Desk Review
Is thererisk?
Field Review
Desk Review Finding?
Field Review Finding?
Revision Required
Revision ok?
Negotiation Agreement Issued
Y
Y
Y
Y
N
N
N
N
Slide103Cost Plan Revisions
What happens if our county needs to submit a revised cost plan to the SCO?
The desk review process starts all over again. The Cost Plan revision submission date replaces the original submission date.
Slide104Cost Plan Revisions
What kind of items typically require a revision?
Material keying errors Carry Forward calculation errors Desk/Field review findings
Slide105Cost Plan Revisions
Are there any special requirements for a cost plan revision?
Please resubmit a new completed Certificate of Cost Allocation Plan along with a memo signed by the Auditor-Controller or a high ranking official, explaining the changes in the revision and their impact on the cost allocation plan.
Slide106Common Findings
Improper tracking of program hours
Inappropriate allocation basis
Overbilling
Adjustments to carry forward are used incorrectly.
High reserve balances for ISFs and Self-Insurance Funds unsubstantiated
Slide107Internal Service Fund
Some examples of Internal Service Funds (ISFs):
Fleet Services/Motor Pool Information Technology/Information Services
Printing department
Purchasing department
Slide108Internal Service Fund
Question: Why do you look at the ISFs, they are not part of the cost plan?
ISFs bill Federal departmentsWithin the scope of SCO’s review ISFs rates
Billing Methodology
ISFs reserves
Reserves for departments that are not identified as ISFs in the CAFR are unallowable
Slide109Internal Service Fund
What type of documentation should be provided to the SCO for ISFs?
The items of expense making up the billed activity The data used to develop the
billing rate(s
) and how often they are
updated
Justification
as to why the method used is the most appropriate for the activity
Methodology for tracking department owned assets
Slide110Internal Service Fund
What type of documentation should be provided to the SCO for ISFs? (continued)
How often billings are compared to actual costs and usageHow variances
will be
adjusted
Any
other information the cognizant
agency requires to evaluate the reasonableness of the billing system
Slide111Internal Service Fund
Working Capital Reserves:
ISFs are dependent upon a reasonable level of working capital reserves to operate from one billing cycle to the next. Charges by the internal service activity to provide for the establishment and maintenance of a reasonable level of working capital reserve, in addition to the full recovery of costs, are allowable.
Slide112Internal Service Fund
What is a reasonable level for the working capital reserves?
A working capital reserve as part of retained earnings of up to 60 days cash expenses for normal operating
purposes is
considered reasonable
A working capital reserve exceeding 60 days may be approved by the cognizant agency for indirect costs in exceptional cases
Slide113Internal Service Fund
How do you calculate the 60 days working capital?
(Operating Expense – Depreciation expense)/6 = 60 days working capital We compare that to the cash balance of the Unreserved Retained Earnings (fund balance) to determine if the reserve amount is reasonable.
Slide114Internal Service Fund
Example: Fleet ISF
Operating Expense: $23,000,000 Depreciation Expense: $5,000,000 Unreserved Retained Earnings (cash): $12,000,000 (23,000,000 – 5,000,000)/6 = $3,000,000 reasonable 60 days working capital. 12,000,000 – 3,000,000 = $9,000,000 over
Slide115Insurance
Some areas we look at during our desk and field review:
Types of insurance coverage and whether the county purchases insurance from a third party, belongs to a insurance pool, or self-insuresActuarial reports completed by a third partyInsurance programs grant funded departments participate in
Slide116Insurance
Some areas we look at during our desk and field review:
If the county has changed from third party purchased insurance to self-insurance, we request a narrative explaining the rationale for conversion and a comparison of before and after ratesIf the rates have increased significantly, we also ask for an explanation for the causes behind the rate increases
Slide117Insurance
If the Self-Insurance fund reserves are reviewed by an actuarial study then SCO will:
Review the actuarial study for a given self-insurance programObtain the rate building methodology and reserve levels recommended by the actuarial study adopted by the County Board of Supervisors
Slide118Insurance
If the Self-Insurance fund reserves are reviewed by an actuarial study then SCO
will: Continued.. Determine the County’s plan concerning increasing or decreasing the fund balance in the futureIf the fund balance is above the adopted reserve levels of the Board of Supervisor resolution, then recommend a rate holiday or immediate rebate
Slide119Insurance
If the Self-Insurance fund reserves are reviewed by an actuarial study then SCO
will: Continued.. Have the county identify all transfers during the year for the Self-Insurance programEnsure that all rates are charged consistently and adjusted no less than annually
Slide120Cost Plan Review Process
Desk Review
Is thererisk?
Field Review
Desk Review Finding?
Field Review Finding?
Revision Required
Revision ok?
Negotiation Agreement Issued
Y
Y
Y
Y
N
N
N
N
Slide121Concluding Steps
After the Desk/Field Review, the cost plan
is formalized with an Approved Negotiation Agreement Approved Negotiation Agreements are mailed to Department of Social Services, Department of Transportation, Department of Child Support Services, Department of Health Care Services, Judicial Council, and Department of Corrections and Rehabilitation
Slide122THE COUNTYWIDE COST ALLOCATION PLAN (CCAP)
AND THE COUNTY EXPENSE CLAIM (CEC)By: California Department of Social Services (CDSS)Fiscal Systems Bureau (FSB)County Systems Section
Slide123In this part of the training we will discuss the function of the CEC and how it relates to the CCAP
123Background Information
Slide124Two Types of Claims:
The Original Quarter ClaimThe Adjustment Quarter Claim
Slide125The original CEC is due to CDSS on the first business day, 30
days after the end of the quarter. CEC Due Dates for FY 2015-16
Original Quarter Claim (aka Current Quarter)Original CEC Final Filing Date September 2015 November 2, 2015 December 2015
February 2, 2016
March 2016
May 2, 2016
June 2016
August 1, 2016
Slide126Adjustment CECs
must be received at CDSS by the first business day nine months after the end of the original claiming quarter. Adjustment CEC Due Dates for FY 2015-16
Adjustment Quarter ClaimAdjustment CEC Final Filing Date September 2014
July 1,
2015
December 2014
October 1,
2015 March 2015 January 4, 2016 June 2015
April 1, 2016
Slide127CASH CLAIMING
The CEC operates on a cash claiming basis.Costs must be claimed in accordance with cash claiming requirements set forth in the CFL No. 06/07-06, dated
July 13, 2006. In accordance with 45 Code of Federal Regulations (CFR) Part 95.13, the CEC is a cash claim and costs should be claimed according to the date the payment is made.
Slide1281. Expenditures are reported in the quarter they are paid.2. The CEC Certification certifies under penalty of perjury that warrants have been issued.
3. The CEC cannot be processed without the CEC Certification and verification of signature attached. COUNTIES ENSURE:
Slide129Tracking CCAP Costs
Slide130CCAP Internal Tracking Sheet Example
Slide131On the Expenditure Schedule (DFA 325.1)1. Line L. Space-Countywide Cost Allocation Plan2. Line N. Public & Pub/Private Agency– Direct Bill:
N1. Pub/Prv Agy Dir Bill—CCAP N2. Pub/
Prv Agy County Counsel N3. Public/Private Agency Allocated—CCAP On the EDP-Cost Detail Schedule (DFA 325.1A)3. Public Agency/Purchase of Services-AllocatedWhere CCAP Costs Are Claimed
Slide132If the county claimed CCAP costs under the “Direct Billed” line, the CDSS will check that the county is approved under their CCAP A-87 Plan.
This is checked by reviewing the cover letter of the county’s CCAP A-87 plan and verifying that the list of categories are approved in their CCAP Allocation under Section II for “Direct Billing”. How CDSS Reviews CCAP Costs
Slide133Employee Fringe BenefitsCounty CounselUtilities
ClearingInternal Service Funds Self-InsuranceWorkers Compensation Unemployment Insurance Medical Liability Miscellaneous Insurance Categories under Section II: Direct Billing
Slide134Example of the
DFA 325.1
Slide135Example of the DFA 325.1A
Slide136Costs claimed without an approved CCAP from SCO are not allowed.FSB reduces the total claim by the amount of the CCAP costs disallowed.
Please check SCO’s guidelines on CCAP submission timeline.COSTS WITHOUT APPROVED CCAP
Slide137Welfare and Institution (W&I) Code 10604.5 & 10604.6
Payment of county claims for federal or state reimbursements; there is a time limit for filing claims.
Slide138Four on-site visits to County Welfare Departments’ (CWDs) Fiscal Operation offices per yearFour areas of review, one includes Support Operating Costs claimed to the CECCDSS monitoring staff obtain list of County-Owned buildings related to
CCAP spaceCDSS monitoring staff verify that these buildings are used by the CWDCDSS monitoring staff cross check list of buildings to validate CCAP costs with buildings appearing in the sample for Line K – Space to ensure there is no overlap.CDSS Fiscal Monitoring Reviews
Slide139Resources
OMB Uniform Guidance http
://www.whitehouse.gov/omb/grants_docs Uniform Guidance Crosswalk from Existing Guidance to Final GuidanceUniform Guidance Crosswalk from Final Guidance to Existing Guidance.
Slide140Resources
2 CFR Chapter I, Chapter II, Part 200
http://www.gpo.gov/fdsys/pkg/FR-2013-12-26/pdf/2013-30465.pdfSCO Website: http://www.sco.ca.gov/ard_county_cost_allocation.html
Slide141Cost Plan Assignments
ERIC PEREZ
DARRYL MARDARLENE JUSTICESANDEEP SINGH916-445-2989916-327-9496916-323-2369916-445-2987eperez@sco.ca.gov
dmar@sco.ca.gov
djustice@sco.ca.gov
sxsingh@sco.ca.gov
AMADOR
ALAMEDA
COLUSA
INYOCALAVERASALPINE
CONTRA COSTA
LOS ANGELES
DEL NORTE
BUTTE
EL DORADOMARINHUMBOLDTFRESNOMADERA
MONTEREYIMPERIAL
GLENN
MARIPOSA
ORANGE
LAKE
KERN
MERCED
RIVERSIDE
MENDOCINO
KINGS
MONO
SACRAMENTO
NEVADA
LASSEN
NAPA
SAN FRANCISCO
PLACER
MODOC
SAN DIEGO
SAN JOAQUIN
SAN BENITO
PLUMAS
SANTA BARBARA
SAN MATEO
SAN BERNARDINO
SAN LUIS OBISPO
SANTA CRUZ
STANISLAUS
SHASTA
SIERRA
SISKIYOU
SANTA CLARA
TRINITY
SOLANO
SONOMA
TEHAMA
YOLO
VENTURA
SUTTER
TULARE
YUBA
TUOLUMNE