Cost Allocation Techniques

Cost Allocation Cost Allocation TechniquesTechniques

presented bypresented byRichard Garrity, Senior AssociateRichard Garrity, Senior Associate

RLS & Associates, Inc.RLS & Associates, Inc.Presented at:Presented at:

1717thth National Rural Public and Intercity Bus National Rural Public and Intercity Bus Transportation ConferenceTransportation Conference

October 22 - 25, 2006October 22 - 25, 2006Stevenson, WA Stevenson, WA

Cost Allocation Techniques – Rich Garrity, RLS & Associates, Inc. of 72

Session ObjectivesSession Objectives1. Identify Range of “Cost Allocation” Issues in Transit

2. Understand Concept of Full Cost Identification

3. Define Methods for Computing Fully Allocated Costs

4. Review Methods to Convert FAC to “Price”


Target AudienceTarget Audience This Workshop is Designed for:This Workshop is Designed for:

Transit Organizations that Provide Transit Organizations that Provide Service Under a Purchase of Service Service Under a Purchase of Service Arrangement to Other Users/GroupsArrangement to Other Users/Groups

Multi-Purpose Human Service Multi-Purpose Human Service Agencies Supported by Multiple Agencies Supported by Multiple Federal GrantsFederal Grants


What is Cost Allocation?What is Cost Allocation? In Transit, “Cost Allocation” Can In Transit, “Cost Allocation” Can

Refer to a Series of Distinct Refer to a Series of Distinct Management/Accounting Management/Accounting PracticesPractices

Each Requires a Separate Each Requires a Separate Methodology, Yet all are Methodology, Yet all are Technically Cost AllocationTechnically Cost Allocation


Types of Cost AllocationTypes of Cost Allocation Financial Based Cost Financial Based Cost

AllocationAllocation Service Based Cost Allocation Service Based Cost Allocation

PlansPlans


Types of Cost AllocationTypes of Cost Allocation Financial Based Cost Financial Based Cost

AllocationAllocation Central Service Cost Allocation Central Service Cost Allocation

PlansPlans Indirect Cost Allocation PlansIndirect Cost Allocation Plans


Types of Cost AllocationTypes of Cost Allocation Central Services Cost Allocation PlanCentral Services Cost Allocation Plan

A Publicly Sponsored Transit Program A Publicly Sponsored Transit Program Benefits from the Services of Other Benefits from the Services of Other Governmental Units and Desires to Governmental Units and Desires to Claim Costs Incurred by these Units Claim Costs Incurred by these Units Under its Various Federal AwardsUnder its Various Federal Awards

The Public Entity or Governmental Unit The Public Entity or Governmental Unit Must Prepare a “Central Services Cost Must Prepare a “Central Services Cost Allocation Plan”Allocation Plan”


Types of Cost AllocationTypes of Cost Allocation Indirect Cost Allocation PlanIndirect Cost Allocation Plan

An Entity (Public or Private Nonprofit) An Entity (Public or Private Nonprofit) Provides Multiple Program ServicesProvides Multiple Program Services

Certain Overheard and Administrative Certain Overheard and Administrative Costs Incurred by the Entity Benefit All Costs Incurred by the Entity Benefit All Programs and Services, Including Programs and Services, Including TransitTransit

The Agency Seeks to Recoup These The Agency Seeks to Recoup These Costs in Their Billings to Various Federal Costs in Their Billings to Various Federal AgenciesAgencies

The Entity Requires an Approved The Entity Requires an Approved “Indirect Cost Allocation Rate” in Order “Indirect Cost Allocation Rate” in Order for Such Costs to be Reimbursable by for Such Costs to be Reimbursable by the Federal Governmentthe Federal Government


Types of Cost AllocationTypes of Cost Allocation Service Based Cost AllocationService Based Cost Allocation

Allocate Costs to Various Allocate Costs to Various Types/Modes/Services Types/Modes/Services

Urban/Rural Cost AllocationUrban/Rural Cost Allocation Required by FTARequired by FTA

Charter Cost AllocationCharter Cost Allocation Local Match Allocation PlanLocal Match Allocation Plan



A Public Transit Agency Coordinates A Public Transit Agency Coordinates Service With Various Human Service Service With Various Human Service Agencies In The AreaAgencies In The Area

The Transit Provider Has A Policy That The Transit Provider Has A Policy That Public Transit Funds Cannot Be Used Public Transit Funds Cannot Be Used To Subsidize Human Service Agency To Subsidize Human Service Agency Client TransportationClient Transportation

The Transit Agency Needs A “Fully The Transit Agency Needs A “Fully Allocated Cost Analysis” To Allocated Cost Analysis” To Determine How To Price Contract Determine How To Price Contract ServicesServices



A Transit Agency Receives Funding Under A Transit Agency Receives Funding Under Both FTA Section 5307 And Section 5111Both FTA Section 5307 And Section 5111

FTA Expects the Grantee to Develop a FTA Expects the Grantee to Develop a Reasonable Basis for Allocating Reasonable Basis for Allocating Operating Costs Between the Two Operating Costs Between the Two Funding Sources that is Related to the Funding Sources that is Related to the Service ProvidedService Provided

FTA Requires a “Grant Allocation Plan” to FTA Requires a “Grant Allocation Plan” to Distribute Costs to the Two Different, But Distribute Costs to the Two Different, But Related ProgramsRelated Programs



A Transit Agency Provides Charter A Transit Agency Provides Charter Service in Accordance with 49 CFR Service in Accordance with 49 CFR part 604part 604

The Transit Agency Must The Transit Agency Must Demonstrate That it Fully Recovers Demonstrate That it Fully Recovers the Cost of Charter Service the Cost of Charter Service

The Agency Requires a “Charter The Agency Requires a “Charter Service Allocation Plan”Service Allocation Plan”



A Regional Transit Authority Provides A Regional Transit Authority Provides Service Over a Multi-Jurisdictional Service Over a Multi-Jurisdictional Service AreaService Area

Each Participating Local Entity Must Each Participating Local Entity Must Share Responsibility for Funding a Share Responsibility for Funding a Portion of the Local Share Portion of the Local Share

The Authority Must Allocate Local The Authority Must Allocate Local Funding Needs In An Equitable Manner Funding Needs In An Equitable Manner To All Participating JurisdictionsTo All Participating Jurisdictions


Multiple Cost Multiple Cost Allocation NeedsAllocation Needs

Some Public Transportation Some Public Transportation Projects May Require Multiple Projects May Require Multiple Types of Cost AllocationTypes of Cost Allocation


Example of Public Agency With Example of Public Agency With Need for Multiple Allocation Need for Multiple Allocation

StrategiesStrategiesMunicipal or County Government

Central Service Departments

Central Service Departments Operating Departments

Individual Operating Departments

Public Works & Transit

Central Service Cost Allocation Plan

Allocable Portion of Central Service Costs

Departmental AdministrationApproved Indriect Cost Rate Approved Indriect Cost Rate

Allocable Portion of Departmental Indirect Costs

Allocable Portion of Departmental Indirect CostsTransit Public Works

Management

Transit Direct Costs:Shared Functions

Dispatch

Allocated on Basis of Service Units

Allocable Portion of

Transit Direct Costs:Direct Functions

Operations Maintenance

Fixed Route JARC Demand Response

Modes

Transit Management Costs (Fixed Costs)


Example of Nonprofit Agency With Example of Nonprofit Agency With Need for Multiple Allocation Need for Multiple Allocation

StrategiesStrategiesNonprofit Organization

Direct Expenses

Home Care TransportationCongregate Meals

Indirect Expenses

Approved Indirect Cost Rate

Allocable Portion of Indirect Costs

Management

Transit Direct Costs:Shared Functions

Dispatch

Allocated on Basis ofService Units

Allocable Portion of

Transit Direct Costs:Direct Functions

Operations Maintenance

Medicaid Contract Transit

Rural Public Transit

Title III Client Transit

Services

Transit Management Costs (Fixed Costs)


Identifying Transportation Identifying Transportation CostsCosts

Our Goal - To Answer the Our Goal - To Answer the Questions:Questions:

How Much Does the Transportation How Much Does the Transportation Service Cost?Service Cost?

When We Sell Transportation Services, When We Sell Transportation Services, What Should We Charge?What Should We Charge?

In Order to Achieve These Goals, In Order to Achieve These Goals, Agency and Program Managers Agency and Program Managers Must Use Financial PlanningMust Use Financial Planning


Financial Planning:Financial Planning:Why is This Important?Why is This Important?

Transportation Systems Need Transportation Systems Need Complete and Accurate Financial Complete and Accurate Financial Data in Order to: Data in Order to: Manage the System So That its Manage the System So That its

Goals and Objectives are Met Goals and Objectives are Met EfficientlyEfficiently

To Accurately Evaluate Alternative To Accurately Evaluate Alternative Service Delivery ProposalsService Delivery Proposals



Know the True Cost of Operating Know the True Cost of Operating the System so that Costs May be the System so that Costs May be Billed or Allocated Appropriately Billed or Allocated Appropriately to the System's Users to the System's Users

Report to the Funding Sources or Report to the Funding Sources or Purchasing Agencies How Money Purchasing Agencies How Money was Spent, What Revenues were was Spent, What Revenues were Realized, and the Financial Realized, and the Financial Status of the OrganizationStatus of the Organization



Planning for Planning for ChangeChange Changes We Changes We InstituteInstitute

Changes Changes Forced Upon Forced Upon UsUs

Political Climate


Framework for Framework for Financial PlanningFinancial Planning

Financial Planning Begins by Financial Planning Begins by Establishing (or Reaffirming) Establishing (or Reaffirming) Overall Strategies and GoalsOverall Strategies and Goals Mission StatementMission Statement

WHAT Will the Transit Service Do?WHAT Will the Transit Service Do? HOW Will the System Operate?HOW Will the System Operate?

This Starts the Financial This Starts the Financial Planning ProcessPlanning Process



Four (4) Fundamental Financial Four (4) Fundamental Financial Management ProcessesManagement Processes Performance Evaluation ProcessPerformance Evaluation Process Budget ProcessBudget Process Accounting SystemAccounting System Financial ReportingFinancial Reporting

All are Inter-RelatedAll are Inter-Related



Cost Analysis is a Key Element Cost Analysis is a Key Element of Financial Planningof Financial Planning

Knowing the Costs of Knowing the Costs of Individual Routes or Services Individual Routes or Services is Useful for Your Management is Useful for Your Management Purposes and for Billing Your Purposes and for Billing Your Client AgenciesClient Agencies



The Basic Approach The Basic Approach Recommended and Used by Recommended and Used by Successful Business Successful Business Operations and Transportation Operations and Transportation Systems is Called “Full Cost Systems is Called “Full Cost Accounting”Accounting”



To Use this Approach Requires an To Use this Approach Requires an Understanding of Basic Cost Understanding of Basic Cost Concepts and the Use of a Concepts and the Use of a Consistent Costing Method (Model)Consistent Costing Method (Model)


Full Cost AccountingFull Cost Accounting Using “Full Cost Accounting” Means Using “Full Cost Accounting” Means

that the Total Costs of Providing that the Total Costs of Providing Transportation Services are Transportation Services are ConsideredConsidered

Total Costs Include Any Commitment Total Costs Include Any Commitment or Use of Time, Money, Physical or Use of Time, Money, Physical Resources, and Other Assets of the Resources, and Other Assets of the Agency in the Delivery of Agency in the Delivery of Transportation ServicesTransportation Services


Full Cost AccountingFull Cost Accounting In Full Cost Accounting, a Value is In Full Cost Accounting, a Value is

Given to These Commitments Given to These Commitments Whether or Not They Result in Whether or Not They Result in Immediate Out-of-Pocket Immediate Out-of-Pocket ExpendituresExpenditures


Tools to Assist in Tools to Assist in Full Cost AccountingFull Cost Accounting

The Agency’s Chart of The Agency’s Chart of Accounts is the Basic Tool Accounts is the Basic Tool Used to Ensure that All Used to Ensure that All Transportation Costs are Transportation Costs are Reflected in the Agency’s Reflected in the Agency’s Accounting SystemAccounting System


Special Issues in Special Issues in Full Cost AccountingFull Cost Accounting

Operating and Capital CostsOperating and Capital Costs

Fixed and Variable CostsFixed and Variable Costs

Direct and Shared CostsDirect and Shared Costs


Special Issues in Special Issues in Full Cost AccountingFull Cost Accounting

Cost PrinciplesCost Principles State and Local GovernmentsState and Local Governments

OMB Circular A-87OMB Circular A-87 http://www.whitehouse.gov/OMB/http://www.whitehouse.gov/OMB/

circulars/a087/a087-all.htmlcirculars/a087/a087-all.html NonprofitsNonprofits

OMB Circular A-122OMB Circular A-122 http://www.whitehouse.gov/OMB/http://www.whitehouse.gov/OMB/

circulars/122/a122.htmlcirculars/122/a122.html


Operating and Capital Operating and Capital CostCost

Operating Costs are Consumed in Less Operating Costs are Consumed in Less Than One Year (Than One Year (e.ge.g., Wages, Fuel) and ., Wages, Fuel) and Generally Have a Unit Acquisition Cost Generally Have a Unit Acquisition Cost of Less Than $300.00of Less Than $300.00

Capital Costs are Expenses for Long-Capital Costs are Expenses for Long-Term Assets (Term Assets (e.ge.g., Vehicles, Garages)., Vehicles, Garages)

Definitions May be Set by the Grantor Definitions May be Set by the Grantor AgencyAgency



Under FTA Programs, Capital Under FTA Programs, Capital Expenses are Defined in FTA Expenses are Defined in FTA Circulars Circulars

These Documents Can Be Obtained These Documents Can Be Obtained at:at:

http://www.fta.dot.gov/legal/guidance/circulars/9000http://www.fta.dot.gov/legal/guidance/circulars/9000//



Defining Capital Costs is Important, Defining Capital Costs is Important, as OMB Circular A-87 States that as OMB Circular A-87 States that Depreciation Will Exclude:Depreciation Will Exclude: Any Portion of the Cost of Buildings and Any Portion of the Cost of Buildings and

Equipment Borne by or Donated by the Equipment Borne by or Donated by the Federal Government Irrespective of Federal Government Irrespective of Where Title was Originally Vested or Where Title was Originally Vested or Where it Presently ResidesWhere it Presently Resides



What Does this Mean?What Does this Mean? If the Cost of the Vehicle (Asset) Was If the Cost of the Vehicle (Asset) Was

Paid for by a Federal Program, You May Paid for by a Federal Program, You May NOT Include Depreciation of that Asset in NOT Include Depreciation of that Asset in Your Charges to Other Federal Programs Your Charges to Other Federal Programs in the Cost of Service Provision in the Cost of Service Provision

*Source: OMB Circular A-87, Attachment B, *Source: OMB Circular A-87, Attachment B, Paragraph 15c(2); and OMB Circular A-122, Paragraph 15c(2); and OMB Circular A-122, Attachment B, Paragraph 11c(2).Attachment B, Paragraph 11c(2).


Variable and Fixed Variable and Fixed ExpensesExpenses

Variable Costs Change Variable Costs Change Relative to the Amount Relative to the Amount of Service Provided of Service Provided ((e.ge.g., Drivers' Wages)., Drivers' Wages)

Fixed Costs Do Not Fixed Costs Do Not Vary with the Amount Vary with the Amount of Service Provided of Service Provided ((e.ge.g., Administrative ., Administrative Salaries)Salaries)

Fixed

Variable

Total

OutputC

ost


Direct and Indirect Direct and Indirect CostsCosts

Direct Costs are Those Direct Costs are Those Expenses Incurred by the Expenses Incurred by the Transit System that are Transit System that are Directly Related and Strictly Directly Related and Strictly Benefit Only the Benefit Only the Transportation ProgramTransportation Program



Indirect Costs are Those Costs Indirect Costs are Those Costs That Have Been Incurred for That Have Been Incurred for Common or Joint PurposesCommon or Joint Purposes

These Costs Benefit More than These Costs Benefit More than One Cost Objective/Program and One Cost Objective/Program and Cannot be Readily Identified with Cannot be Readily Identified with a Particular Final Cost Objective a Particular Final Cost Objective Without Effort Disproportionate to Without Effort Disproportionate to the Results Achievedthe Results Achieved



The Essential Difference is the The Essential Difference is the Degree of Ease with Which a Degree of Ease with Which a Cost Can be Readily Assigned Cost Can be Readily Assigned to a Particular Cost Objective to a Particular Cost Objective with a High Degree of with a High Degree of Accuracy Accuracy



There are No Universal Rules There are No Universal Rules for Classifying Costs as Direct for Classifying Costs as Direct or Indirect Under Every or Indirect Under Every Accounting SystemAccounting System

But You Must be ConsistentBut You Must be Consistent


Recommendations for Recommendations for Preparing Indirect Cost Preparing Indirect Cost

PlansPlans


HHS Guide Can be Downloaded HHS Guide Can be Downloaded at:at:

http://www.hhs.gov/grantsnet/statehttp://www.hhs.gov/grantsnet/state//

Recommendations for Recommendations for Preparing Indirect Cost PlansPreparing Indirect Cost Plans


Cost AllocationCost Allocation Fad or Management Necessity?Fad or Management Necessity?

An Understanding of Fully Allocated An Understanding of Fully Allocated Costs Provides Management with:Costs Provides Management with:

The Ability to Accurately Price Services The Ability to Accurately Price Services Provided Under ContractProvided Under Contract

An Assessment Tool to Evaluate An Assessment Tool to Evaluate Changes in ServiceChanges in Service

For Example, the Cost of Adding or For Example, the Cost of Adding or Losing a Contract Service Could Be Losing a Contract Service Could Be EstimatedEstimated


Why Cost Allocation?Why Cost Allocation?

TransitRidership

More TransitFunds From FTA???


Why Cost Allocation?Why Cost Allocation? To Determine How Much It To Determine How Much It

Costs to Provide A Specific Costs to Provide A Specific Transit ServiceTransit Service

$6.80Per

Trip


The Cost Allocation The Cost Allocation ProcessProcess

Why Do We Need a Model to Why Do We Need a Model to Determine Cost?Determine Cost? Why Can’t We Simply Divide Total Why Can’t We Simply Divide Total

System Cost by Total System System Cost by Total System Miles?Miles?

Or Total System Cost by Total Or Total System Cost by Total System Hours?System Hours?

Consider the Following:Consider the Following:



Do These Trips Cost the Same?Do These Trips Cost the Same?5

Miles

5 M

iles

10

Minutes

5 Miles

5 M

iles

20 Minutes



Do These Trips Cost the Same?Do These Trips Cost the Same?

8 Miles

5 M

iles

20

Minutes

5 Miles

5 M

iles20 Minutes



Transportation Costs are Transportation Costs are Driven by Two Critical Factors:Driven by Two Critical Factors: Time AND DistanceTime AND Distance

Our Model Must Take Both Our Model Must Take Both Factors Into Account When Factors Into Account When Costing Transportation Costing Transportation ServicesServices


Developing a Cost Developing a Cost Allocation ModelAllocation Model

How Do We Allocate Costs? How Do We Allocate Costs? Don’t Worry, This Process is Not Don’t Worry, This Process is Not Complicated! This is Complicated! This is NotNot a a Mandate, But a Useful Mandate, But a Useful Management ToolManagement ToolAnother Program

Mandate???? Aaaaaagh!!!



Cost Allocation Assumes:Cost Allocation Assumes: Total System Costs Can be Total System Costs Can be

Allocated to Service Based on the Allocated to Service Based on the Level of Service ProvidedLevel of Service Provided

System Average Unit Costs Can Be System Average Unit Costs Can Be Used to Estimate Service CostsUsed to Estimate Service Costs


Overview of the Overview of the Cost Allocation ProcessCost Allocation Process

Assemble Data

Assign Expense Line Items

Calculate Unit Costs


Issues in Assembling Issues in Assembling DataData

Where Do We Get Cost Data?Where Do We Get Cost Data?

What Time Period Should be What Time Period Should be Used?Used?

Projected vs. Actual?Projected vs. Actual?


Data RequiredData Required Twelve (12) Months Actual or Twelve (12) Months Actual or

Projected Transit Expense DataProjected Transit Expense Data Expense Data Will be Classified as Either:Expense Data Will be Classified as Either:

Fixed ExpenseFixed Expense Variable ExpenseVariable Expense

Service DataService Data Vehicle-MilesVehicle-Miles Vehicle-HoursVehicle-Hours Passenger TripsPassenger Trips


Assigning Expenses Assigning Expenses to Categoriesto Categories

Cost Allocation Involves Taking Cost Allocation Involves Taking Each Expense Line Item and Each Expense Line Item and Assigning It to Either the Fixed or Assigning It to Either the Fixed or Variable CategoryVariable Category

Variable Expenses are Further Variable Expenses are Further Broken Down as Varying Either byBroken Down as Varying Either by:: HourHour MileMile


What Are the Rules for What Are the Rules for Assigning Costs?Assigning Costs?

Fixed Costs are Those Costs Fixed Costs are Those Costs that Will Not Change As a that Will Not Change As a Result of an Increase or Result of an Increase or Decrease in Service LevelsDecrease in Service Levels

Variable Expenses are Those Variable Expenses are Those Costs that Will Change if There Costs that Will Change if There is a Change in Service Levelsis a Change in Service Levels


Tips for Assigning CostsTips for Assigning Costs There are No Hard and Fast There are No Hard and Fast

Rules…..But:Rules…..But: Project Administration Costs are Project Administration Costs are

Almost Always FixedAlmost Always Fixed Understand the Basis of Each Understand the Basis of Each

Cost Item and Assign AccordinglyCost Item and Assign Accordingly Be LogicalBe Logical BE CONSISTENTBE CONSISTENT


Calculate Unit CostsCalculate Unit Costs We Now Have a Total of Fixed We Now Have a Total of Fixed

and Variable Costsand Variable Costs We Need to Calculate Our Unit We Need to Calculate Our Unit

Costs. There are Three (3) Costs. There are Three (3) Calculations:Calculations: Allocated Hours CostAllocated Hours Cost Allocated Miles CostAllocated Miles Cost Allocated Fixed Expense RatioAllocated Fixed Expense Ratio


Computation - Computation - Allocated Hours CostAllocated Hours Cost

Allocated Hours Cost:Allocated Hours Cost:

Total Allocated Hours Cost Total Allocated Hours Cost Annual Projected Vehicle HoursAnnual Projected Vehicle Hours


Computation - Computation - Allocated Miles CostAllocated Miles Cost

Allocated Miles Cost:Allocated Miles Cost:

Total Allocated Miles Cost Total Allocated Miles Cost Annual Projected Vehicle MilesAnnual Projected Vehicle Miles


ComputationsComputations What Do We Do With Fixed What Do We Do With Fixed

Expenses?Expenses? There Are Different Approaches - For There Are Different Approaches - For

Most Demand Response Systems in Most Demand Response Systems in Rural Areas, Fixed Expenses are Rural Areas, Fixed Expenses are Expressed as a Percentage or Ratio Expressed as a Percentage or Ratio of Allocated Variable Expenses of Allocated Variable Expenses (Hours Cost + Miles Cost)(Hours Cost + Miles Cost)


Computation of Fixed Computation of Fixed ExpensesExpenses

In Rural Systems, Fixed Expenses In Rural Systems, Fixed Expenses are Expressed as a Percent of are Expressed as a Percent of Variable Expenses:Variable Expenses:

Fixed Cost Factor = Fixed Cost Factor =

Total Fixed ExpensesTotal Fixed ExpensesTotal Allocated Hours Expenses + Total Allocated Miles Total Allocated Hours Expenses + Total Allocated Miles

ExpensesExpenses


Computation of Fixed Computation of Fixed ExpensesExpenses

Fixed Expenses are Expressed as Fixed Expenses are Expressed as Follows:Follows:

Total Fixed ExpensesTotal Fixed Expenses Total Peak Period VehiclesTotal Peak Period Vehicles


Completing Our Completing Our CalculationsCalculations

The Fully Allocated Cost of Service The Fully Allocated Cost of Service is Equal to:is Equal to:{(Total Annual/Projected Hours x Allocated {(Total Annual/Projected Hours x Allocated

Hours Cost)+(Total Annual/Projected Hours Cost)+(Total Annual/Projected Miles x Allocated Miles Cost)} Miles x Allocated Miles Cost)}

++ {Fixed Cost Factor *[(Total {Fixed Cost Factor *[(Total

Annual/Projected Hours x Total Allocated Annual/Projected Hours x Total Allocated Hours Cost)+(Total Annual Projected Hours Cost)+(Total Annual Projected Miles x Allocated Miles Cost)]}Miles x Allocated Miles Cost)]}


Putting It All TogetherPutting It All Together Congratulations … You Have Congratulations … You Have

Just Developed a Cost Just Developed a Cost Allocation Model!Allocation Model!


Putting Our Model to Putting Our Model to WorkWork

Now that We Have Our Model, Now that We Have Our Model, We Will Put it to WorkWe Will Put it to Work

We'll Sort Through The X's and O's By Looking At Allocating the Costs

of Various System Users


Developing Unit RatesDeveloping Unit Rates Our Objectives in the Process:Our Objectives in the Process:

SimpleSimple EquitableEquitable Reflect Actual Cost of Service Reflect Actual Cost of Service

ProvisionProvision Appropriate Use of Public Appropriate Use of Public

SubsidiesSubsidies


Alternative Rate Alternative Rate StructuresStructures

Price Per Passenger TripPrice Per Passenger Trip Price Per MilePrice Per Mile Price Per HourPrice Per Hour Price Per ZonePrice Per Zone


Issues with Cost Issues with Cost AllocationAllocation

This Procedure Has Not Been Reviewed This Procedure Has Not Been Reviewed or Certified by Federal Grantor Agenciesor Certified by Federal Grantor Agencies

Complexities Arise When a Complexities Arise When a Transportation Provider Uses Transportation Provider Uses Ridesharing (Mixing Clients of Two or Ridesharing (Mixing Clients of Two or More Programs) When Using a Mileage More Programs) When Using a Mileage or Time Based Unit Rate of Serviceor Time Based Unit Rate of Service

Treatment of Capital Paid for, in Whole Treatment of Capital Paid for, in Whole or In Part, By the Federal Governmentor In Part, By the Federal Government


Automating the Cost Automating the Cost Allocation and Rate Setting Allocation and Rate Setting

ProcessProcess The Procedures Employed in The Procedures Employed in

Cost Allocation Can be Cost Allocation Can be Replicated Each Fiscal YearReplicated Each Fiscal Year

Process Lends Itself to the Process Lends Itself to the Development of a Spreadsheet-Development of a Spreadsheet-Based Cost Allocation ModelBased Cost Allocation Model


Automating the Cost Automating the Cost Allocation and Rate Setting Allocation and Rate Setting

ProcessProcess Several States Have Developed Several States Have Developed

Such Models for Their Section Such Models for Their Section 5311 Grantees5311 Grantees


PresenterPresenterRichard Garrity, Senior AssociateRichard Garrity, Senior Associate

RLS & Associates, Inc.RLS & Associates, Inc.3131 S. Dixie Highway, Suite 5453131 S. Dixie Highway, Suite 545

Dayton, OH 45439Dayton, OH 45439(937) 299-5007(937) 299-5007

Direct Line: (910) 328-5770Direct Line: (910) [email protected]@cris.com

Cost Allocation Techniques

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