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Home My WebLink AboutFS 2012-04-03 Item 2C - Update - 2011 Indirect Cost AllocationCity of Tukwila Jim Haggerton, Mayor INFORMATIONAL MEMORANDUM TO: Mayor Haggerton Additional Finance and Safety Committee FROM: Peggy McCarthy, Finance Director DATE: March 28, 2012 SUBJECT: 2011 Indirect cost allocation ISSUE Provide notification of an increase to the 2011 indirect cost allocation charged to the utility funds and certain other funds managed by the Public Works department. The increase brings the allocation in compliance with the indirect cost allocation model and policy. BACKGROUND The FCS Group created an indirect cost allocation model for the City in February 2010 based on 2008 costs and activity. The resulting allocation amounts were used as the basis for the 2011 indirect cost allocations. Recently, in the process of updating the model with 2010 amounts and data, it was discovered that a portion of the model had not been applied in 2011. Specifically, the Public Works overhead allocation amounts (e.g. allocation of salary and benefits of the Public Works Director, Operations Manager, etc.) were not incorporated into the 2011 indirect cost allocation charges. The affected funds and amounts follow. Fund Fund Description Additional Allocation 104 I Arterial Street 1 16,627 303 General Government Improvements I 16,627 1 401 1 Water I $124,701 402 Sewer I 58,194 412 I Surface Water I $149,641 501 Equipment Rental I 83,134 TOTAL I $448,924 In the original allocation, and following policy, the indirect cost allocations from the model were inflated by 3% to account for the time lag between the fiscal year the indirect costs were incurred (2008) and the fiscal year the indirect costs were allocated (2011). If the Public Works Administration overhead costs had been allocated to the funds managed by the Public Works administration, an additional $462,392 would have been charged and the same amount would have been transferred to the general fund through this allocation, as follows: 31 INFORMATIONAL MEMO Page 2 A comparison of the indirect cost allocations historically charged to these funds follows: Historical Indirect Cost Allocation Compared with 2011 Restated and Oriqinal 104 303 401 402 412 501 Restated 2011 137,449 59,046 487,108 329,131 361,571 294,607 Original 2011 120,324 41,921 358,665 269,191 207,441 208,979 2010 639,936 65,000 608,400 499,335 375,815 199,734 2009 Additional 65,000 585,000 480,150 2011 2011 Fund Fund Description Allocation Model Inflator 2011 Original Allocation PW Overhead Inflator Additional Allocation 309,338 164,403 2006 451,077 481,464 395,208 297,684 158,160 Allocation 428,792 462,996 379,992 Allocation Restated 104 (Arterial Street 116,819 3% •I 120,324 16,627 3% 17,126 137,449 303 General Govt 40,700 3% 41,921 16,627 3% 17,126 59,046 397,914 Improvements 252,072 123,996 1999 340,992 331,992 282,000 186,996 118,992 1998 324,996 315,996 401 (Water 348,219 3% 358,665 124,701 3% 128,442 487,108 402 ISewer 261,350 3% 269,191 58,194 3% I 59,940 I 329,131 412 (Surface Water 201,399 3% 207,441 149,641 3% I 154,130 361,571 501 (Equipment Rental 202,892 3% 1 208,979 83,134 3% 85,628 I 294,607 I, ITOTA ^•1171,3 i 79 �3 /o :1206 $2D 448 924 3 /o a I -462,392 1,6685912 .I A comparison of the indirect cost allocations historically charged to these funds follows: Historical Indirect Cost Allocation Compared with 2011 Restated and Oriqinal 104 303 401 402 412 501 Restated 2011 137,449 59,046 487,108 329,131 361,571 294,607 Original 2011 120,324 41,921 358,665 269,191 207,441 208,979 2010 639,936 65,000 608,400 499,335 375,815 199,734 2009 615,350 65,000 585,000 480,150 361,400 192,100 2008 591,657 562,500 461,663 347,462 184,665 2007 526,739 500,781 411,008 309,338 164,403 2006 451,077 481,464 395,208 297,684 158,160 2005 428,792 462,996 379,992 285,996 151,992 2004 395,346 429,204 373,992 274,992 145,992 2003 411,879 414,995 360,000 276,770 139,992 2002 365,602 404,450 361,513 255,000 136,992 2001 391,243 408,000 348,000 254,000 130,992 2000 380,027 397,914 341,748 252,072 123,996 1999 340,992 331,992 282,000 186,996 118,992 1998 324,996 315,996 268,992 183,988 112,992 1997 317,024 315,000 267,000 177,992 113,000 DISCUSSION Charging the Public Works administration allocation of $462,392 to these funds brings the allocation total more closely in -line with the historical amounts, adds revenue to the general fund and follows City policy which prescribes use of the model as the basis for these allocations. All affected funds have sufficient budget and fund balance to cover these charges. For these reasons, the additional charge will be made for 2011. Under current policy, the additional allocation will also be applied in 2012 and beyond. If the allocation overly burdens a fund, such as the sewer fund, transfers into the fund from the general fund may be necessary at some point in the future. RECOMMENDATION Information Only. 32 W.12012 Info Memos- Councilllndirect Cost Allocations- FS4- 3- 12.doc