Pro Rata/SWCAP Plan Overview 2013 Department of Finance Fiscal Systems and Consulting Unit

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

Full Cost Recovery Policy

4 The state policy is for departments to recover full costs whenever goods or services are provided for others. The full cost includes all costs attributable directly to the activity plus a fair share of indirect costs. Direct Costs Direct Costs Indirect Costs Indirect Costs Full Cost Recovery Policy

5 Full Cost Recovery Policy Full Cost Recovery Policy GC ~ When billing other entities, state agencies supported by the General Fund are required to include an administrative cost factor. SAM 8752 ~ Departments providing goods or services to others will recover full costs. This applies to all departments regardless of funding sources and in all cases unless a department is specifically exempted by law.

6 Elements of Full Cost Direct Costs $ XXXX Indirect Costs a) Departmental $ XX b) Statewide: Pro Rata XX Pro Rata XX or or SWCAP XX XXXX SWCAP XX XXXX Total Costs $XXXXX

7 Direct Costs – are directly assignable to a program: Salaries and wages Salaries and wages Equipment Equipment Operating expenses (not included in use allowance calculations) Operating expenses (not included in use allowance calculations) Travel expenses Travel expenses

8 Indirect Costs – are not directly assignable to a program: a)Departmental (overhead) costs assigned to many programs: Executive staff Executive staff Information technology Information technology Accounting staff Accounting staff Budget staff Budget staff Other Other

9 Indirect Costs b) Statewide: Fair share of costs incurred by Central Service Agencies (CSAs). Pro Rata Pro Rata Recovery of CSA costs from special funds and some nongovernmental cost funds Recovery of CSA costs from special funds and some nongovernmental cost funds SWCAP SWCAP Recovery of CSA costs from federal funds Recovery of CSA costs from federal funds

10 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

11 What is a Central Service Agency (CSA) Cost?

12 Central Service Agency Costs State Administrative Manual Section 8753 Central service costs are those amounts expended by central service departments and the Legislature 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.

13 Central Services Function Code Central ServiceWorkload UnitSource Finance (DOF) 004 AuditsAudit HoursDOF/OSAE 005 BudgetsBudget HoursDOF/Admin 010 CALSTARSState Ops $DOF/Sch. 10 Department of Technology 105 Department of TechnologyState Ops $DOF/Sch. 10 Financial Information Systems for California 110 Financial Information System for California (SWCAP only) State Ops $DOF/Sch. 10 State Controller’s Office (SCO) 201 AccountingTransactionsSCO 202 Claim AuditsWarrantsSCO 203 PayrollWarrantsSCO 204 General DisbursementsWarrantsSCO

14 Central Services Function Code Central ServiceWorkload UnitSource 600 Health Benefits (HB) for Annuitants (Retired) HB Costs for Active Employees SCO/PERS/ CalHR 601 Dental Benefits (DB) for Annuitants' (Retired) DB Costs for Active Employees SCO/PERS/ CalHR Department of Justice (DOJ) 605 Legal (SWCAP Only)Attorney HoursDOJ 607 Tort Liability (SWCAP Only)Attorney HoursDOJ 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

16 Cost Allocation Process 1) Obtain workload and expenditure data from the CSAs: Past year (PY) actual workload data Past year (PY) actual workload data PY actual expenditures (must tie to year-end financial statements) PY actual expenditures (must tie to year-end financial statements) Budget year (BY) estimate expenditures Budget year (BY) estimate expenditures 2) Calculate and distribute CSA costs to state departments based on workload

17 3) Distribute total departmental allocation Pro Rata – proportionately to all funds in the department based on each fund’s percentage of total departmental funding. Pro Rata – proportionately to all funds in the department based on each fund’s percentage of total departmental funding. SWCAP – proportionately to the federal fund based on its percentage of total departmental funding. SWCAP – proportionately to the federal fund based on its percentage of total departmental funding.

18 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 – = + =

19 5)Classify the allocation by billable or non-billable funds (Pro Rata only) Billable funds: Billable funds: Funded by special revenue sources such as fees, licenses, penalties, assessments, interests, etc. Non-billable funds: Non-billable funds: General Fund Federal Funds Special Deposit Fund (SWCAP only federal fund is billable)

Budgeting for SWCAP (Federal Recoveries)

21 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

22

23 Budgeting for SWCAP Finance budget analyst receives SWCAP apportionment sheet (pink). 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

25 SWCAP Recoveries  SWCAP Plan submitted/approved to the federal government.  Methods of SWCAP Cost Recovery: ICRP’s (Indirect Cost Rate Proposal) ICRP’s (Indirect Cost Rate Proposal) CAP (Cost Allocation Plan) CAP (Cost Allocation Plan) PACAP (Public Assistance Cost Allocation Plan) PACAP (Public Assistance Cost Allocation Plan) Direct billing Direct billing

26 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.

27 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.

28 SWCAP Recovery Process (Department’s Responsibility) Bill Federal Fund for Direct Plus Indirect Costs Receipt of Federal Funds Transfer SWCAP portion to General Fund

29 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.) 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 states “Government Code Sections – , 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.” SAM section states “Government Code Sections – , 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.”

30 Transaction Request

31 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.

32 SWCAP Journal Entry

33 Control Section 8.54  As of the 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

35 Budgeting Pro Rata Similar to SWCAP’s calculation Department’s Total ProRata Allocation Billable Fund State Operations X = Fund’s ProRata Assessment

36 Budgeting Pro Rata Assessment Sheet (green sheet) 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.

37

38 Pro Rata Recoveries

39 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.

40 Pro Rata Journal Entry

Reports

42 Reports Pro Rata Detail by Functions Pro Rata Detail by Funds SWCAP Detail by Agency SWCAP Recoveries

43 Timeline June – August FSCU provides training for Central Service Agency (CSA) staff FSCU provides training for Central Service Agency (CSA) staff CSAs receive Workload, Expenditure and Misc spreadsheets from FSCU CSAs receive Workload, Expenditure and Misc spreadsheets from FSCU FSCU reviews and processes central services data FSCU reviews and processes central services data Departments to complete final prior year SWCAP recoveries Departments to complete final prior year SWCAP recoveriesSeptember FSCU runs Pro Rata and SWCAP cost allocation (pink and green sheets prepared) FSCU runs Pro Rata and SWCAP cost allocation (pink and green sheets prepared) Finance Budget Letter release to departments Finance Budget Letter release to departments Finance budget analysts distribute the pinks and greens to departments’ budget office Finance budget analysts distribute the pinks and greens to departments’ budget officeOctober Departments turn in signed/certified pinks and greens to Finance budget analysts 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 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 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) FSCU notifies departments of the final negotiated SWCAP amounts (DHHS Rerun)June SCO notifies departments on the new fiscal year Pro Rata assessments SCO notifies departments on the new fiscal year Pro Rata assessments

44 References  Pro Rata/SWCAP: Variety of information: Variety of information: Federal information: Federal Circular A-87: Federal Circular A-87: Cost Principles and Procedures (ASMB C-10): Cost Principles and Procedures (ASMB C-10):

45 Contacts Phone: (916) Lead Analyst – Jerome Tribble (ext 2140) Pro Rata Analyst – Monica Medina (ext 2145) SWCAP Analyst – Corrine Lim (ext 2166) DOF Website: