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Allocated expenses meaning full#

What factors need to be addressed if a cost allocation is to be performed by the government’s own staff? If in indirect cost allocation is to be performed by the government’s own staff, a team approach normally is preferable. A change in the government’s administration orĤ.A significant change in economic factors affecting cost basis (e.g.Implementation of a new enterprise resource planning (ERP) system.Purpose for which the allocation is to be used.The basis and methodology for the cost allocation should be reviewed regularly to ensure the allocation is fair, consistent, reasonable and rational, based on the following: changes to cost centers, involvement of new funds). How often should a cost allocation be performed?An indirect cost allocation should be evaluated annually to ensure that factors that can have a significant effect on the allocation (e.g.

The government is responsible for having a system in place that ensures that data are appropriately classified in the accounting system.ģ.

For cost allocations that will be used for claiming indirect costs for grants, the contract for services with the preparer should state whether the preparer will assist in negotiating with a grant provider, if necessary, and which party (the government or the preparer) would be responsible for any indirect costs that are ultimately disallowed and.

The government’s staff should obtain at least a basic understanding of the process used to prepare the cost allocation.

The government should obtain ownership of the final work product.

The selected preparer should have knowledge and experience that is specifically relevant to the purpose for which the cost allocation will be used.

The need for independence may prevent the financial statement auditor from serving in this role.

What factors need to be addressed if an external party is selected to perform the allocation?If an external party is engaged to perform a cost allocation, the government should address the following:

Regardless of who prepares the cost allocation, management needs to be involved in the process and knowledgeable about the methodology used.Ģ.

The optimal choice may depend on the purpose of the cost allocation (for example, departmental chargebacks vs.

In certain political environments, a government’s constituents may be more accepting of an externally prepared cost allocation.

Specific factors that should be addressed in choosing between the two include:

Who should perform the allocation? An indirect cost allocation can be performed either by the government’s own staff or by an external party. Regardless of the purpose of an indirect cost allocation, a systematic and rational methodology should be used.ġ. Certain important management objectives (measuring the cost of government services, establishing fees and charges, charging back the cost of internal services to departments/agencies, fully utilizing restricted funds, and requesting reimbursements under federal and state grants, when allowed) can be served by allocating indirect costs.

Allocated expenses meaning full#

Indirect cost allocation is an accounting function by which estimates are made to distribute indirect costs to programs or functions, in order to approximate their full cost.

The cost to governments to track every expense and directly attribute each cost to each function would exceed the benefits. Such indirect costs include shared administrative expenses where a department or agency incurs costs for support that it provides to other departments/agencies (e.g., legal, finance, human resources, facilities, maintenance, technology). In addition to the direct cost of providing services, governments also incur indirect costs. Employment Resources for Finance Officers.Economic Development & Capital Planning.Accounting, Auditing, & Financial Reporting.Alliance for Excellence in School Budgeting.