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FIN-2.08 - Cost Allocation

COST ALLOCATION

Binding City Policy

BCP-FIN-2.08


 

Policy

 

The City will establish and maintain a consistent methodology for allocating the costs of the City's central service functions and activities that benefit or are used by several City organizations.  The goal is to provide stable, predictable and equitable costs and rates to organizations that pay for these services.

 

The two primary methods used to allocate central services costs to City organizations are the General Fund Overhead (GFOH) model and interagency agreements.  Business service activities that recover costs through rates and interagency agreements will periodically compare the cost of their fees and rates with other comparable agencies and/or businesses, and report these findings to their customers.

 

General Fund Overhead (GFOH)

 

Costs will be allocated for general central support services or activities budgeted in the General Fund.  See list of services and activities.

 

Bureaus and operations that are budgeted in the General Fund do not pay General Fund Overhead.  The amount to be recovered through the GFOH model shall include all costs of the bureau or activity less all internal and external revenue.  See cost allocation criteria and metrics.

 

The Financial Planning Division of the OMF Bureau of Financial Services will provide each paying agency with its projected GFOH costs in a timely manner so the costs can be included in each agency's budget request.

 

The Financial Planning Division will establish and staff a General Fund Overhead Advisory Committee to assist Financial Planning in the management of the GFOH system.  See list of bureau committee members.  Financial Planning will annually review the updated GFOH model with the Committee to ensure that it meets the goal of providing a stable, predictable and equitable allocation of GFOH costs.

 

Every five years, Financial Planning will conduct a comprehensive review of the GFOH model to identify any needed changes.  The results of this review and any recommendations will be provided to the Council.

 

The budget will include a table showing the City's GFOH metrics and the share each fund is paying.

 

Interagency Agreements (IAs)

 

Costs for services or activities provided to customers that can be defined on a per unit basis based on actual consumption will be allocated through rates.  Designated business service activities will recover their costs by charging rates.

 

Those bureaus recovering costs through the use of rates shall do so through the use of interagency agreements between the providing bureau and the receiving bureau. The amount to be recovered by those bureaus through rates shall include all direct and indirect costs of the bureau less any external revenue.  See interagency agreements.

 

Responsibility

 

The Chief Administrative Officer is authorized to develop and issue procedures with input from Council, bureaus and other appropriate stakeholders in order to implement the cost allocation policies.

 


HISTORY

 

Resolution No. 35089, adopted by City Council December 16, 1992.

Replaced by Ordinance No. 181829, passed by City Council May 14, 2008 and effective July 1, 2008.