Pro Rata/SWCAP Plan Overview

2013

Department of FinanceFiscal Systems and Consulting Unit

• Full Cost Recovery Policy• Central Service Costs Allocation• SWCAP Budgeting & Recoveries• Pro Rata Budgeting & Recoveries• Reports• Timeline

AGENDA

Full Cost Recovery Policy

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The state policy is for departments to recover full costs whenever goods or services are provided for others.

The full cost includes all costs attributable directly to the activity plus a fair share of indirect costs.

Direct Costs

Indirect Costs

Full Cost Recovery Policy

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Full Cost Recovery Policy

GC 11010 ~ When billing other entities, state agencies supported by the General Fund are required to include an administrative cost factor.

SAM 8752 ~ Departments providing goods or services to others will recover full costs. This applies to all departments regardless of funding sources and in all cases unless a department is specifically exempted by law.

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Elements of Full Cost

Direct Costs $ XXXX

Indirect Costs a) Departmental $ XXb) Statewide:

Pro Rata XX or

SWCAP XX XXXX

Total Costs $XXXXX

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Direct Costs

– are directly assignable to a program:

• Salaries and wages

• Equipment

• Operating expenses (not included in use allowance calculations)

• Travel expenses

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Indirect Costs– are not directly assignable to a program:

a) Departmental (overhead) costs assigned to many programs:

Executive staff

Information technology

Accounting staff

Budget staff

Other

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Indirect Costs

b) Statewide:

Fair share of costs incurred by Central Service Agencies (CSAs).

• Pro Rata

• Recovery of CSA costs from special funds and some nongovernmental cost funds

• SWCAP

• Recovery of CSA costs from federal funds

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Indirect Costs

Indirect Costs

Department’s Indirect Costs

(Budgets, IT, Acctg, etc.)

Pro Rata Costs(CSA cost allocation

to special funds)

SWCAP Costs(CSA cost allocation

to federal funds)Only 60 departments

have SWCAP

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What is a Central Service Agency (CSA) Cost?

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

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Central Services

Function Code

Central Service Workload Unit Source

Finance (DOF)

004 Audits Audit Hours DOF/OSAE

005 Budgets Budget Hours DOF/Admin

010 CALSTARS State Ops $ DOF/Sch. 10

Department of Technology

105 Department of Technology State Ops $ DOF/Sch. 10

Financial Information Systems for California

110Financial Information System for California (SWCAP only) State Ops $ DOF/Sch. 10

State Controller’s Office (SCO)

201 Accounting Transactions SCO

202 Claim Audits Warrants SCO

203 Payroll Warrants SCO

204 General Disbursements Warrants SCO

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Central Services

Function Code

Central Service Workload Unit Source

600Health Benefits (HB) for Annuitants (Retired)

HB Costs for Active Employees

SCO/PERS/CalHR

601Dental Benefits (DB) for Annuitants' (Retired)

DB Costs for Active Employees

SCO/PERS/CalHR

Department of Justice (DOJ)

605 Legal (SWCAP Only) Attorney Hours DOJ

607 Tort Liability (SWCAP Only) Attorney Hours DOJ

800 Legislature (Pro Rata Only) Sum of Past Actual DOF/FSCU

805 Legislative Counsel Bureau (Pro Rata Only)

Sum of Past Actual DOF/FSCU

Central Service Costs Allocation

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Cost Allocation Process

1) Obtain workload and expenditure data from the CSAs: Past year (PY) actual workload data

PY actual expenditures (must tie to year-end financial statements)

Budget year (BY) estimate expenditures

2) Calculate and distribute CSA costs to state departments based on workload

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3) Distribute total departmental allocation Pro Rata – proportionately to all funds in

the department based on each fund’s percentage of total departmental funding.

SWCAP – proportionately to the federal fund based on its percentage of total departmental funding.

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4) Determine the total allocated to each fund (Pro Rata Only)

Calculate the total allocation using the departmental allocation for each fund (PY and BY) from Step 3 and the BY estimate from two years ago (PY estimate).

PY PY Roll - BY Total Actual Estimate Forward Estimate Allocation

– = + =

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5) Classify the allocation by billable or non-billable funds (Pro Rata only)

• Billable funds:

Funded by special revenue sources such as fees, licenses, penalties, assessments, interests, etc.

• Non-billable funds: General FundFederal FundsSpecial Deposit Fund

(SWCAP only federal fund is billable)

Budgeting for SWCAP(Federal Recoveries)

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Budgeting for SWCAP

All departments receiving federal funds must budget and recover SWCAP.

If there are caps/restrictions in the grant language for recovering administrative costs, departments should try to work with their federal cognizant agency to see if it can be eliminated. If this cannot be done, the SWCAP budget may need to be modified by using Method B.

Federal Funding State Operations X

Department’s Total SWCAP

Allocation=

Department’s Budgeted SWCAP

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Budgeting for SWCAP Finance budget analyst receives SWCAP

apportionment sheet (pink).Department budget analyst, in collaboration

with Finance budget analyst, determine if the Method A calculation results in an equitable budgeted amount, or if a Method B should be used.

Department certification and Finance approval is required.

SWCAP Recoveries

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SWCAP Recoveries

SWCAP Plan submitted/approved to the federal government.

Methods of SWCAP Cost Recovery:

ICRP’s (Indirect Cost Rate Proposal) CAP (Cost Allocation Plan) PACAP (Public Assistance Cost Allocation Plan) Direct billing

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SWCAP Recoveries

As a general rule ICRP’s and CAP’s are to be filed with the department’s cognizant federal agency at least six months prior to the fiscal year that applies.

ICRP’s and CAP’s must be submitted to the Department of Finance for approval before filing with the cognizant federal agency.

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SWCAP Recoveries

State departments must bill the federal government for direct and indirect costs. Departments are responsible for complying with federal and state requirements to ensure that SWCAP costs can be recovered from the federal government.

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SWCAP Recovery Process(Department’s Responsibility)

BillFederal Fundfor Direct Plus

IndirectCosts Receipt of

FederalFunds

TransferSWCAP portion

toGeneral Fund

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SWCAP Transfer

• Each federally funded state department must initiate the transfer process using the Transaction Request, TR form CA 504. (Transfers do not occur automatically.)

• SAM section 8755.2 states “Government Code Sections 13332.01–13332.02, require departments to recover SWCAP costs from the federal government and to transfer the SWCAP recoveries to the General Fund within 30 days after the end of each quarter.”

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Transaction Request

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SWCAP Transfer

• Departments submit Transaction Request to SCO and send copies to:

• FSCU • Department’s Finance Budget analyst

• SWCAP transfer(s) are due within 30 days after the end of a quarter where a recovery occurs.

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SWCAP Journal Entry

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Control Section 8.54As of the 2010-11 Budget Act, Control Section

8.54 was added to provide Finance the authority to reduce a department’s support appropriation when required transfers are past due or not sufficient.

Control section is cited on the pink sheet certification.

FSCU monitors and reports SWCAP recoveries. State departments will be contacted for discrepancies.

Budgeting for Pro Rata

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Budgeting

Pro Rata

Similar to SWCAP’s calculation

Department’s Total ProRata

Allocation

Billable Fund State Operations X = Fund’s

ProRata Assessment

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Budgeting Pro Rata Assessment Sheet

(green sheet)

Does not include amounts less than $1,000 or negative amounts.

Finance budget analysts forward assessment sheet(s) to the departments for certification.

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Pro Rata Recoveries

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Pro Rata Recoveries

Pro Rata Certification• In June Finance certifies Pro Rata

billable assessments to the SCO.

• SCO notifies state entities of their Pro Rata assessments.

• SCO will set-up the transfers to occur automatically on a quarterly basis.

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Pro Rata Journal Entry

Reports

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Reports

• Pro Rata Detail by Functions

• Pro Rata Detail by Funds

• SWCAP Detail by Agency

• SWCAP Recoveries

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TimelineJune – August

• FSCU provides training for Central Service Agency (CSA) staff• CSAs receive Workload, Expenditure and Misc spreadsheets from FSCU• FSCU reviews and processes central services data • Departments to complete final prior year SWCAP recoveries

September

• FSCU runs Pro Rata and SWCAP cost allocation (pink and green sheets prepared)• Finance Budget Letter release to departments• Finance budget analysts distribute the pinks and greens to departments’ budget office

October

• Departments turn in signed/certified pinks and greens to Finance budget analysts• FSCU finalizes Pro Rata and SWCAP amounts for the January 10 Governor’s Budget

October – December

• SWCAP departments turn in their ICRP/CAP to FSCU for review before submitting to the feds by December 31

February – April

• FSCU notifies departments of the final negotiated SWCAP amounts (DHHS Rerun)

June• SCO notifies departments on the new fiscal year Pro Rata assessments

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References

Pro Rata/SWCAP:Variety of information:http://www.dof.ca.gov/accounting/fscu/pro_rata-swcap/

Federal information:

Federal Circular A-87:http://www.whitehouse.gov/omb/circulars/a087/a87_2004.html

Cost Principles and Procedures (ASMB C-

10):http://www.hhs.gov/grantsnet/state

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Contacts

Phone: (916) 445-3434

Lead Analyst – Jerome Tribble (ext 2140)

Pro Rata Analyst – Monica Medina (ext 2145)

SWCAP Analyst – Corrine Lim (ext 2166)

E-mail: FIPROSWP@dof.ca.gov

DOF Website: http://www.dof.ca.gov