County Cost Plan Overview August 13, 2015 9:00

County Cost Plan Overview August 13, 2015 9:00

County Cost Plan Overview August 13, 2015 9:00 AM 3:00 PM Welcome Jill Kanemasu Assistant Chief-Local Operations Division of Accounting and Reporting 2 Introductions Naomi Tamashiro

Janet Turner Branch Chief National Specialist of Cost Plans State & Local Governments Cost Allocation Services State & Local Governments Cost Allocation Services 3 Introductions

Racquel Flanagan Liane Winter Greg Tayros Manager Manager Accounting Officer Fiscal Systems Bureau

Fiscal Policy Bureau Fiscal Systems Bureau 4 County Cost Plan Contacts

Hitomi Sekine, Chief Anita Dagan, Manager Phillip Pangilinan, Lead Darlene Justice Darryl Mar Eric Perez Sandeep Singh [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected]

5 Training Agenda 09:00 SCO Welcome 09:05 Introduction, Housekeeping, and DHHS & CDSS Welcome 09:10 Cost Plan Authority/History 09:30 Feds Overview and 2 CFR Part 200 Changes 10:30 Morning Break 10:45 Cost Plan Allocation Framework 11:15 Carry Forward 12:00 Lunch Break 6 Training Agenda

01:00 Cost Plan Review Process 01:30 Common Findings 02:00 Afternoon Break 02:15 California Department of Social Services 02:45 Resources and Closing 03:00 End 7 State Controllers Office (SCO) Authority Over Cost Plans Federal Office of Management and Budget (OMB) has designated the Federal Department of Health and Human Services (DHHS) as the agency assigned

cognizance for the State of Californias Statewide Cost Allocation Plan; it has also assigned cognizance to DHHS for the countywide cost allocation plans of all 58 California counties. In December 1971, DHHS delegated cognizance authority for California counties to the Director of the California Department of Social Services (DSS). In January 1974, DSS re-delegated this authority to the SCO, where it has remained. This authority does not include the responsibility for approving indirect cost rate proposals of county departments.

2 3 Cost Allocation Services Update Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Published December 19, 2014) August 13, 2015 Division of Cost Allocation (DCA) is now Cost

Allocation Services 11 COST ALLOCATION SERVICES: Director: Arif Mak Karim 214-767-3600 (Dallas, Texas) [email protected] Deputy Director: Darryl Mayes 301-492-4852 (Bethesda, Maryland) [email protected]

12 CAS Offices New York San Francisco Bethesda Dallas Additional Contact Information https://rates.psc.gov/fms/dca/map1.html 13 CAS BRANCH CHIEFS: STATE AND LOCAL

COLLEGE/UNIVERSITY/NON PROFITS/HOSPITALS New York / Dallas Dallas San Francisco Michael Stack Matthew Dito Patrick Smith 212-264-0944 214-767-3764 415-437-7834 [email protected] [email protected] [email protected] psc.hhs.gov

psc.hhs.gov psc.hhs.gov San Francisco/Bethesda New York Bethesda / Dallas Naomi Tamashiro Louis Martillotti Steven Zuraf 415-437-7822 212-264-0918 301-492-4858 Naomi.Tamashiro Louis Martillotti Steven.Zuraf @psc.hhs.gov @psc.hhs.gov

@psc.hhs.gov 14 CAS Services: State and Local Cost Allocation Plans (SWCAPs, LOCAPs) Public Assistance Cost Allocation Plans Indirect Cost Rate Agreements: State and Local Government Departments Colleges and Universities Nonprofit Organizations Hospitals 15

NEW Federal Awarding Agency Regulatory Implementation of Office of Management and Budgets Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards Effective date: This interim final rule is effective on December 26, 2014. Federal Register -- December 19, 2014 16 2 CFR Part 200 Supersedes and Streamlines Requirements From: OMB Circular A-21, Cost Principles for Educational Institutions

OMB Circular A-50, Audit Followup OMB Circular A-87, Cost Principles for State, Local. And Indian Tribal Governments OMB Circular A-89, Catalog of Federal Domestic Assistance OMB Circular A-102, Grants and Cooperative Agreements With State and Local Governments 17 2 CFR Part 200 Supersedes and Streamlines Requirements From: (continued) OMB Circular A-110, Uniform Administrative Requirements for Grants and Other Agreements with Institutions of Higher Education, Hospitals and Other Non-Profit Organizations OMB Circular A-122, Cost Principles for Non-Profit

Organizations OMB Circular A-133, Audits of States, Local Governments and Non-Profit Organizations 18 Useful Websites & OMB Contact Information http://www.ecfr.gov Current version of Title 2 CFR Part 200 and Title 45 CFR Part 75 http://www.cfo.gov/cofar Links include: 2 CFR 200 (link to ecfr.gov) Joint Interim Final Rule Implementing the Uniform Guidance (79 FR 75871) Preamble and original Federal Register Notice for Uniform Guidance (

78 FR 78589) Frequently Asked Questions- updated as of November 2014 (10 pages, 282 kb) Uniform Guidance Cost Principles Text Comparison (174 pages, 1.62 mb) OMB Contact: Gilbert Tran (202) 395-3993 [email protected] 19 2 CFR Part 200 Changes Cost Principles changes: No More Use Allowance

Allowability of Audit Costs Software Unallowable Costs 2 CFR Part 200 Changes Cost Principles changes No More Use Allowance!:

Effective Dates Converting from Use Allowance to Depreciation Expense Combination of methods cannot exceed acquisition cost Useful life exceeds original depreciable life considered fully depreciated

2 CFR Part 200 Changes Cost Principles changes No More Use Allowance!: Effective 12/26/2014, use allowance is no longer available as a substitution for depreciation For non-Federal entities, the effective date should be the fiscal year starting after December 26, 2014 (July 1, 2015 June 30, 2016) as switching to a new methodology mid-year can be burdensome 2 CFR Part 200 Changes Cost Principles changes No More Use Allowance!: Effective Dates: (1) FR Notice. This interim final rule is effective on December 26, 2014. (2) OMB/COFAR FAQs. FAQ. 110.1: for indirect cost rates and cost

allocation plans, Federal awarding and indirect cost rate negotiating agencies will use the Uniform Guidance both in generating proposals for and negotiating a new rate (when the rate is due to be re-negotiated) for non-Federal entity fiscal years starting on or after December 26, 2014. 2 CFR Part 200 Changes Cost Principles changes No More Use Allowance!: Effective Dates (continued): Can convert from use allowance to depreciation at the beginning of any fiscal year, BUT NO LATER THAN 7/1/2015 (Fiscal Year 2015-2016; For Cost Allocation Plans FY 2017-2018). 2 CFR Part 200 Changes Cost Principles changes No More Use Allowance!: Straight Line (SL) depreciation is the only acceptable method.

In general, accelerated depreciation is not an acceptable method 2 CFR Part 200 Changes Cost Principles changes No More Use Allowance!: Subpart E 200.436 Depreciation (a) Depreciation is the method for allocating the cost of fixed assets to periods benefitting from asset use. The non-Federal entity may be compensated for the use of its buildings, capital improvements, equipment, and software projects capitalized in accordance with GAAP, provided that they are used, needed n the non-Federal entitys activities, and properly allocated to Federal awards. Such compensation must be made by computed depreciation. (Underlining added for emphasis). 2 CFR Part 200 Changes Cost Principles changes No More Use Allowance!:

Subpart E 200.436 Depreciation (continued) (d)(5) Where the depreciation method is introduced to replace the use allowance method, depreciation must be computed as if the asset had been depreciated over its entire life (i.e., from the date the asset was acquired and ready for use to the date of disposal or withdrawal from service). The total amount of use allowance and depreciation for an asset (including imputed depreciation applicable to periods prior to the conversion from the use allowance method as well as depreciation after the conversion) may not exceed the total acquisition cost of the asset. 2 CFR Part 200 Changes Example: Effective date and depreciation calculated A County, with a fiscal year ending 6/30/2016, purchased a new building/structure on January 1, 2016 for $1,000,000 and placed that building/structure in service on January 1, 2016. The building has a useful

life of 40 years. For simplicity, assume no salvage value. What method of depreciation should the County use and how much depreciation should be taken in year 1? 2 CFR Part 200 Changes Example: Effective date and depreciation calculated Answer: SL Depreciation is required to be used Asset purchased and placed in service on January 1, 2016 which is during the FY 2015-16. Amount of depreciation to be taken in FYE 6/30/2016 is $12,500 Computed as follows: $1,000,000/40yrs = $25,000 full year depreciation $25,000*6/12 = $12,500 for the 6 months of FYE 6/30/2016 the asset was in service 2 CFR Part 200 Changes

Support for Conversion: At time of conversion, prepare a comparison of the two methods (use allowance vs. straight line depreciation) to determine if: Cost of asset has been fully recovered Asset outlived its useful life If either is true, the asset is considered fully depreciated, and no further costs are allowed. 2 CFR Part 200 Changes Support for Conversion: Use Allowance Schedule should include the following:

Asset description Cost Date placed in service Useful life Use allowance taken each year YTD accumulated use allowance taken Net book value 2 CFR Part 200 Changes Support for Conversion: Depreciation schedule should include the following: Asset description Cost Date placed in service Useful life

Annual straight line depreciation YTD accumulated depreciation Net book value 2 CFR Part 200 Changes Example: Converting from Use Allowance to Depreciation Expense 1 piece of equipment with a useful life of 10 years. Grantee opted to claim use allowance for first 5 years in accordance with OMB Circular A-87, then converted to depreciation in accordance with the Uniform Guidance (2 CFR Part 200) for the last 5 years. No Federal funds were used to purchase the equipment. Capitalized asset cost = $5,000. 2 CFR Part 200 Changes Example: Converting from Use Allowance to Depreciation Expense

Asset Life 1 2 3 4 5 6 7 8 9 10 Financial Statement Use

Allowable Depreciation Allowance Cost $500 $333 $333 500 333 333 500 333 333 500 333 333

500 333 333 500 500 500 500 500 500 500 500 500 500 $5,000 $4,165

2 CFR Part 200 Changes Example: Converting to Depreciation-Asset Outlived its depreciable life 1 piece of equipment has a capitalized cost of $5,000 and a useful/depreciable life of 7 years. Grantee opted to claim use allowance in accordance with OMB Circular A-87. In year 8, Grantee must convert to depreciation in accordance with the Uniform Guidance (2 CFR Part 200). No Federal funds were used to purchase the equipment. 2 CFR Part 200 Changes Example: Converting to Depreciation-Asset Outlived its depreciable life Asset Life 1 2

3 4 5 6 7 8 9 10 Financial Statement Use Allowable Depreciation Allowance Cost

$714 $333 $333 $714 $333 $333 $714 $333 $333 $714 $333 $333 $714 $333 $333

$714 $333 $333 $714 $333 $333 0 $333 0 $5,000 $2,664 2 CFR Part 200 Changes

Cost Principles changes Audit Costs: The costs of the Single Audit were and continue to be allowable Agreed upon procedures for sub-recipient monitoring of sub-recipients not subject to the Single Audit Act was and continues to be allowable 2 CFR Part 200 Changes Cost Principles changes Audit Costs: A-87 Appendix B 4.b said Other audit costs are allowable if included

in a cost allocation plan or indirect cost proposal, or if specifically approved by the awarding agency as a direct cost to an award. This language was intentionally removed from the Uniform Guidance as it violates the Single Audit Act. 2 CFR Part 200 Changes Cost Principles changes Software: Capitalize in accordance with GAAP Effective fiscal years beginning on or after January 1, 2016

Intangible assets include patents and computer software Software development projects-allowable interest 2 CFR Part 200 Changes Cost Principles changes: $5,000 Capitalization Threshold for Equipment and Software: 2 CFR 200, Subpart A, 200.33 Equipment: Equipment means tangible personal property (including information technology systems) having a useful life of more than one year and a per

unit acquisition cost which equals or exceeds the lesser of the capitalization level established by the non-Federal entity for financial statement purposes, or $5,000. See also 200.12 Capital Assets, 200.20 Computing Devices, 200.48 General Purpose Equipment, 200.58 Information Technology Systems, 200.89 Special Purpose Equipment, and 200.94 Supplies. 2 CFR Part 200 Changes Cost Principles changes: $5,000 Capitalization Threshold for Equipment and Software (continued): 2 CFR 200, Subpart A, 200.58 Information Technology Systems: Information Technology Systems means computing devices, ancillary equipment, software, firmware, and similar procedures, services (including support services), and related resources. See also 200.20 Computing Devices and 200.33 Equipment.

2 CFR Part 200 Changes Software development projects-allowable interest: 2 CFR 200 Subpart E, 200.449: (a) General. Costs incurred for interest on borrowed capital, temporary use of endowment funds, or the use of the non-Federal entitys own funds, however represented, are unallowable. Financing costs (including interest) to acquire, construct, or replace capital assets are allowable, subject to the conditions in this section. (b) (1) Capital assets is defined as noted in 200.12 Capital Assets. An asset cost includes (as applicable) acquisition costs, construction costs, and other costs capitalized in accordance with GAAP. (c) (2) For non-Federal entity fiscal years beginning on or after January 1, 2016, intangible assets include patents and computer software. For software development projects, only interest attributable to the portion of the

project costs capitalized in accordance with GAAP is allowable. 2 CFR Part 200 Changes Software development projects-allowable interest: 2 CFR 200 Subpart a, 200..12 Capital Assets: Capital assets means tangible or intangible assets used in operations having a useful life of more than one year which are capitalized in accordance with GAAP. Capital assets include: (a) land, buildings (facilities), equipment, and intellectual property (including software) whether acquired by purchase, construction, manufacture, lease-purchase, exchange, or through capital leases: and (b) Additions, improvements, modifications, replacements, rearrangements, reinstallations, renovations or alterations to capital assets that materially increase their value or useful life (not ordinary

repairs and maintenance). 2 CFR Part 200 Changes Unallowable Costs: Use allowance

Entertainment and employee morale Alcoholic beverages Uncollectible debts Contingency reserves Contributions Fund raising Goods or services for the personal use Under recovery on other federal grants The Basics of Cost Allocation What does Cost Allocation mean? The process of assigning to two or more departments the costs of an item shared by the departments. Cost allocation ensures that each program bears its fair share of the total costs.

The Basics of Cost Allocation What programs should use cost allocation method? Cost allocation is required only in situations in which resources are shared with another program and when a program receives services from two different Central service departments. The Basics of Cost Allocation Two types of departments are included in the Cost Plan: Central Service Departments: Departments that provide services to other departments throughout the county. Receiving Departments: Departments that receive services from Central Service Departments.

The Basics of Cost Allocation Two types of costs are included in the Cost Plan: Type I Allocated Type II Direct Billed The Basics of Cost Allocation Requirements for Type I (Allocated) Costs: Allowable Costs Appropriate Allocation Base Appropriate Support/Documentation The Basics of Cost Allocation Requirements for Type II (Direct Billed) Costs:

Appropriate Billing Methodology Appropriate Support/Documentation Included Within Appropriate Function Receiving Departments Accorded Consistent Treatment Cost Allocation Plan Framework Summary Schedule Building/ Equipment

Depreciation Carry Forward Schedule Central Service Department Function/ Activity Cost Allocation Plan Framework Summary Schedule

Building/ Equipment Depreciation Carry Forward Schedule Central Service Department Function/ Activity Cost Allocation Plan Framework

What is included in the Building Depreciation/ Equipment Depreciation Schedule: Narrative List of building or assets Depreciation Schedule Occupancy Schedule Cost Allocation Plan Framework What information goes into a narrative?

Detailed information on the types of service provided by the Department Provide a description of the method(s)used to determine the allocations to the various receiving departments Explain the rationale for applying the appropriate methodology to the cost category Significant changes Cost Allocation Plan Framework Summary Schedule Building/ Equipment

Depreciation Carry Forward Schedule Central Service Department Function/ Activity Cost Allocation Plan Framework What is included in the Function/Activity: Detailed allocation of costs to receiving departments

Direct Billing Allocation Basis Cost Allocation Plan Framework Summary Schedule Building/ Equipment Depreciation Carry Forward Schedule Central Service

Department Function/ Activity Cost Allocation Plan Framework What is included in the Central Service Department: Narrative List of functions/activities provided by the Central Service Department Salaries & Benefits, Other Expense & cost, total expenditures for each function/activity Costs allocated to receiving departments based on service provided via allocation basis

Cost Allocation Plan Framework Summary Schedule Building/ Equipment Depreciation Carry Forward Schedule Central Service Department

Function/ Activity Cost Allocation Plan Framework What is included in the Summary Schedule: Summary of total allocated costs broken down by receiving departments Totals provided for each central service department Cost Allocation Plan Framework Summary Schedule Building/

Equipment Depreciation Carry Forward Schedule Central Service Department Function/ Activity Cost Allocation Plan Framework What is included in the Carry Forward Schedule:

Actual Costs/Final Costs Fixed Costs/Estimated Costs from 2 Years ago Carry Forward The difference between Actual Costs and Fixed Costs Actual Costs with Carry Forward Adjustments Proposed Costs Carry Forward Schedule What is Carry Forward? A Carry Forward calculation is the difference between the actual costs from the current period and the fixed costs from prior period. Carry Forward Schedule

In other words Carry Forward means: A 2 year cycle true-up from your fixed (estimated) costs to your actual costs. FY 13-14 FY 14-15 FY 15-16 FY 16-17 FY 17-18 Carry Forward Schedule

What is Actual Cost? Actual cost is the cost that the cost plan is based on. Actual Costs are costs that the departments receiving services from the central services department experience on a fiscal year period (July 1st June 30th). For example: FY 15-16 Cost Plan is based on FY 13-14 actual cost. (July 1, 2013 June 30, 2014) Carry Forward Schedule Actual Cost Terminology: Actual cost is also known as:

Current Allocation Final Cost Current Cost Lets look at a few examples in the next few slides. Carry Forward Schedule Carry Forward Schedule Carry Forward Schedule Carry Forward Schedule What is Fixed Cost?

Fixed cost is the cost that is based on actuals reported in the cost plan 2 years ago. For example: FY 15-16 Cost Plans fixed costs are based on FY 13-14 Cost Plan actuals. Carry Forward Schedule FY 13-14 FY 14-15 FY 15-16 FY 16-17

FY 17-18 Actual Cost FY 11-12 Actual Cost FY 12-13 Actual Cost FY 13-14 Actual Cost FY 14-15

Actual Cost FY 15-16 Fixed Cost Actuals reported in FY 11-12 Cost Plan Fixed Cost Actuals reported in FY 12-13 Cost Plan Fixed Cost Actuals

reported in FY 13-14 Cost Plan Fixed Cost Actuals reported in FY 14-15 Cost Plan Fixed Cost Actuals reported in FY 15-16 Cost Plan Carry Forward Schedule Fixed Cost Terminology:

Fixed cost is also known as: Prior Year Allocation Fixed Cost Estimated Cost Lets look at a few examples in the next few slides. Carry Forward Schedule Carry Forward Schedule

Carry Forward Schedule Carry Forward Schedule Carry Forward Calculation: Actual Costs Fixed Costs = Carry Forward Carry Forward is also referred to as a Roll Forward Carry Forward Schedule Example: Receiving Department Actual Cost Fixed cost

Carry Forward Department A 100,000 80,000 100,000 80,000 = 20,000 Department B 100,000

150,000 100,000 150,000 = -50000 Carry Forward Schedule Carry Forward Schedule Carry Forward Schedule Carry Forward Schedule What is an Adjustment? An adjustment is made to capture an event that is not

reflected in your actual cost. Carry Forward Schedule Types of events that may require an adjustment: New Department Significant expansion to a department Significant reduction to a department Special project/assignment (only affects one year) Dissolution of department

Carry Forward Schedule Carry Forward Schedule Carry Forward Schedule Carry Forward Schedule What are proposed costs? Actual Cost + Carry Forward Any Adjustments = Proposed Costs Proposed Costs are what county departments use to claim their cost for services rendered Carry Forward Schedule

Carry Forward Schedule Carry Forward Schedule Key Points When you include adjustments in the cost plan you must include a narrative explaining the adjustment in detail. - Multiple adjustments must be labeled individually as A, B, C etc. in supporting documents. The Cost Plan Unit will include a note in the special remarks section of the negotiation agreement stating if the adjustment should/should not be included when calculating carry-forward in subsequent cost plans.

Negotiation Agreement Special Remarks Cost Plan Review Process Date November 30th December 31st January 31st June 30th September 30th Event Extension requests must be submitted to SCO

Cost Plans are due to SCO Cost Plans with extensions are due to SCO Deadline for SCO to approve Cost Plans submitted timely Deadline for SCO to approve all Cost Plans Cost Plan Review Process Desk Review N N Is there risk? N

Desk Review Finding? Y Field Review Y Revision Required Y Field

Review Finding? Revision ok? Y N Negotiation Agreement Issued SCO Desk Review Components of the process:

Review the cost plan, supplemental checklist, and other documentation submitted for materiality, completeness, and reliability of supporting data Review all required certifications in the supplemental checklist for appropriate authorized signatures SCO Desk Review Components of the process: (continued) Reconcile the plan to the countys budget or other financial documents used to support the plan Review prior negotiation agreements for any conditions or adjustments SCO Desk Review Components of the process: (continued)

Review other financial reports (actuarial reports, CAFR, depreciation schedules, etc.) Review for any findings/recommendations contained in the most recent Field Review report that should be considered in the current review SCO Desk Review Components of the process: (continued) Variance analysis of cost pools Review allocation bases Read any memos, narratives, and justifications provided by the county for any significant changes Cost Plan Review Process Desk Review

N N Is there risk? N Desk Review Finding? Y

Field Review Y Revision Required Y Field Review Finding? Revision ok? Y

N Negotiation Agreement Issued SCO Field Review What triggers a cost plan field review? Follow up on the Findings/Recommendations of a prior Field Review Report The appearance of functional problems in the plan High reserve balances with minimal support The reoccurrence of problems/issues SCO Field Review

What do we look at when we are in the field? Review the countys direct billing system (any departments that direct bill) We request supporting information on the bases used to allocate cost SCO Field Review What do we look at when we are in the field? ISF and Risk Management departments to review reserve balances if necessary Any other department that has issues that affect the cost plan and/or charge federally funded departments Cost Plan Review Process Desk Review

N N Is there risk? N Desk Review Finding? Y

Field Review Y Revision Required Y Field Review Finding? Revision ok? Y

N Negotiation Agreement Issued Cost Plan Revisions What happens if our county needs to submit a revised cost plan to the SCO? The desk review process starts all over again. The Cost Plan revision submission date replaces the original submission date. Cost Plan Revisions What kind of items typically require a revision?

Material keying errors Carry Forward calculation errors Desk/Field review findings Cost Plan Revisions Are there any special requirements for a cost plan revision? Please resubmit a new completed Certificate of Cost Allocation Plan along with a memo signed by the AuditorController or a high ranking official, explaining the changes in the revision and their impact on the cost allocation plan. Common Findings Improper tracking of program hours Inappropriate allocation basis

Overbilling Adjustments to carry forward are used incorrectly. High reserve balances for ISFs and Self-Insurance Funds unsubstantiated Internal Service Fund Some examples of Internal Service Funds (ISFs): Fleet Services/Motor Pool Information Technology/Information Services Printing department Purchasing department Internal Service Fund Question: Why do you look at the ISFs, they are not part of the cost plan?

ISFs bill Federal departments Within the scope of SCOs review ISFs rates Billing Methodology ISFs reserves Reserves for departments that are not identified as ISFs in the CAFR are unallowable Internal Service Fund What type of documentation should be provided to the SCO for ISFs? The items of expense making up the billed activity The data used to develop the billing rate(s) and how often they are updated Justification as to why the method used is the most

appropriate for the activity Methodology for tracking department owned assets Internal Service Fund What type of documentation should be provided to the SCO for ISFs? (continued) How often billings are compared to actual costs and usage How variances will be adjusted Any other information the cognizant agency requires to evaluate the reasonableness of the billing system Internal Service Fund Working Capital Reserves: ISFs are dependent upon a reasonable level of working

capital reserves to operate from one billing cycle to the next. Charges by the internal service activity to provide for the establishment and maintenance of a reasonable level of working capital reserve, in addition to the full recovery of costs, are allowable. Internal Service Fund What is a reasonable level for the working capital reserves? A working capital reserve as part of retained earnings of up to 60 days cash expenses for normal operating purposes is considered reasonable A working capital reserve exceeding 60 days may be approved by the cognizant agency for indirect costs in

exceptional cases Internal Service Fund How do you calculate the 60 days working capital? (Operating Expense Depreciation expense)/6 = 60 days working capital We compare that to the cash balance of the Unreserved Retained Earnings (fund balance) to determine if the reserve amount is reasonable. Internal Service Fund Example: Fleet ISF Operating Expense: $23,000,000 Depreciation Expense: $5,000,000 Unreserved Retained Earnings (cash): $12,000,000

(23,000,000 5,000,000)/6 = $3,000,000 reasonable 60 days working capital. 12,000,000 3,000,000 = $9,000,000 over Insurance Some areas we look at during our desk and field review: Types of insurance coverage and whether the county purchases insurance from a third party, belongs to a insurance pool, or self-insures Actuarial reports completed by a third party Insurance programs grant funded departments participate in Insurance Some areas we look at during our desk and field review:

If the county has changed from third party purchased insurance to self-insurance, we request a narrative explaining the rationale for conversion and a comparison of before and after rates If the rates have increased significantly, we also ask for an explanation for the causes behind the rate increases Insurance If the Self-Insurance fund reserves are reviewed by an actuarial study then SCO will: Review the actuarial study for a given self-insurance program Obtain the rate building methodology and reserve levels recommended by the actuarial study adopted by the County Board of Supervisors

Insurance If the Self-Insurance fund reserves are reviewed by an actuarial study then SCO will: Continued.. Determine the Countys plan concerning increasing or decreasing the fund balance in the future If the fund balance is above the adopted reserve levels of the Board of Supervisor resolution, then recommend a rate holiday or immediate rebate Insurance If the Self-Insurance fund reserves are reviewed by an actuarial study then SCO will: Continued.. Have the county identify all transfers during the year for the Self-Insurance program

Ensure that all rates are charged consistently and adjusted no less than annually Cost Plan Review Process Desk Review N N Is there risk? N Desk

Review Finding? Y Field Review Y Revision Required Y Field Review Finding?

Revision ok? Y N Negotiation Agreement Issued Concluding Steps After the Desk/Field Review, the cost plan is formalized with an Approved Negotiation Agreement Approved Negotiation Agreements are mailed to

Department of Social Services, Department of Transportation, Department of Child Support Services, Department of Health Care Services, Judicial Council, and Department of Corrections and Rehabilitation THE COUNTYWIDE COST ALLOCATION PLAN (CCAP) AND THE COUNTY EXPENSE CLAIM (CEC) By: California Department of Social Services (CDSS) Fiscal Systems Bureau (FSB) County Systems Section Background Information

In this part of the training we will discuss the function of the CEC and how it relates to the CCAP 12 3 Two Types of Claims: The Original Quarter Claim

The Adjustment Quarter Claim Original Quarter Claim (aka Current Quarter) The original CEC is due to CDSS on the first business day, 30 days after the end of the quarter. CEC Due Dates for FY 2015-16 Original CEC Final Filing Date September 2015

November 2, 2015 December 2015 February 2, 2016 March 2016 May 2, 2016 June 2016 August 1, 2016 Adjustment Quarter Claim

Adjustment CECs must be received at CDSS by the first business day nine months after the end of the original claiming quarter. Adjustment CEC Due Dates for FY 2015-16 Adjustment CEC Final Filing Date September 2014 July 1, 2015 December 2014

October 1, 2015 March 2015 January 4, 2016 June 2015 April 1, 2016 CASH CLAIMING The CEC operates on a cash claiming basis. Costs must be claimed in accordance with cash claiming

requirements set forth in the CFL No. 06/07-06, dated July 13, 2006. In accordance with 45 Code of Federal Regulations (CFR) Part 95.13, the CEC is a cash claim and costs should be claimed according to the date the payment is made. COUNTIES ENSURE: 1. Expenditures are reported in the quarter they are paid.

2. The CEC Certification certifies under penalty of perjury that warrants have been issued. 3. The CEC cannot be processed without the CEC Certification and verification of signature attached. Tracking CCAP Costs Fiscal Systems Bureau (FSB) receives approved CCAP from SCO

FSB contacts counties to identify the Budget Units and Amounts from the approved CCAP FSB verifies this amount in SCOs approved CCAP FSB adds the post CCAP annual amounts in a tracking sheet This tracking sheet calculates the quarterly CCAP cost

FSB verifies CCAP cost claimed in Original and Adjustment claims match those in the tracking sheet. Amounts claimed in excess of approved CCAP are not allowed County is contacted for consultation on the amount disallowed.

Counties are given the opportunity to correct the amounts. CCAP Internal Tracking Sheet Example APPROVED COUNTYWIDE COST ALLOCATION PLAN (CCAP) AND BUDGET UNIT TRACKING SHEET FISCAL YEAR 2014-15 COUNTY NAME: COUNTY NUMBER:

DATE CCAP RECEIVED FROM STATE CONTROLLER'S OFFICE: DATE CCAP BUDGET UNIT VERIFIED WITH COUNTY: BUDGET UNIT NUMBER: APPROVED ALLOCATION TOTAL AMOUNT ORIGINAL* REVISED If revised, enter revision date: QUARTERLY AMOUNT $ $ -

*DO NOT USE "TOTAL ALLOCATED", ALWAYS USE "PROPOSED COSTS" ORIGINAL 1ST QUARTER ADJ Total Claimed CURRENT 2ND QUARTER ADJ Total Claimed

SPACE LINE L DFA 325.1 $ - $ - PUB/PRIV AGY ALLOC.

LINE N3 DFA 325.1 $ - $ - $ -

$ - $ - $ - EDP DFA 325.1 A ALLOCATED

TOTAL $ - CURRENT $ - 3RD QUARTER ADJ Total Claimed

SPACE LINE L DFA 325.1 PUB/PRIV AGY ALLOC. LINE N3 DFA 325.1 EDP DFA 325.1 A ALLOCATED TOTAL $

- $ $ Balance: $ If negative, unallowed amount. - -

- CURRENT $ - 4TH QUARTER ADJ Total Claimed $ -

$ - $ - $ - $

- $ - $ - $ - $

- $ Total Claimed for Fiscal Year: $ - - Where CCAP Costs Are Claimed On the Expenditure Schedule (DFA 325.1) 1. Line L. Space-Countywide Cost Allocation Plan 2. Line N. Public & Pub/Private Agency Direct Bill:

N1. Pub/Prv Agy Dir BillCCAP N2. Pub/Prv Agy County Counsel N3. Public/Private Agency AllocatedCCAP On the EDP-Cost Detail Schedule (DFA 325.1A) 3. Public Agency/Purchase of Services-Allocated How CDSS Reviews CCAP Costs If the county claimed CCAP costs under the Direct Billed line, the CDSS will check that the county is approved under their CCAP A-87 Plan.

This is checked by reviewing the cover letter of the countys CCAP A-87 plan and verifying that the list of categories are approved in their CCAP Allocation under Section II for Direct Billing. Categories under Section II: Direct Billing Employee Fringe Benefits County Counsel

Utilities Clearing Internal Service Funds Self-Insurance Workers Compensation Unemployment Insurance Medical Liability Miscellaneous Insurance Example of the DFA 325.1

Example of the DFA 325.1A COSTS WITHOUT APPROVED CCAP Costs claimed without an approved CCAP from SCO are not allowed. FSB reduces the total claim by the amount of the CCAP costs disallowed.

Please check SCOs guidelines on CCAP submission timeline. Welfare and Institution (W&I) Code 10604.5 & 10604.6 Payment of county claims for federal or state reimbursements; there is a time limit for filing claims. CDSS Fiscal Monitoring Reviews Four on-site visits to County Welfare Departments (CWDs) Fiscal Operation offices per year

Four areas of review, one includes Support Operating Costs claimed to the CEC CDSS monitoring staff obtain list of County-Owned buildings related to CCAP space CDSS monitoring staff verify that these buildings are used by the CWD

CDSS monitoring staff cross check list of buildings to validate CCAP costs with buildings appearing in the sample for Line K Space to ensure there is no overlap. Resources OMB Uniform Guidance http:// www.whitehouse.gov/omb/grants_docs Uniform Guidance Crosswalk from Existing Guidance to Final Guidance

Uniform Guidance Crosswalk from Final Guidance to Existing Guidance. Resources 2 CFR Chapter I, Chapter II, Part 200 http:// www.gpo.gov/fdsys/pkg/FR-2013-12-26/pdf/2013-3 0465.pdf SCO Website: http://www.sco.ca.gov/ard_county_cost_allocation.h tml Cost Plan Assignments ERIC PEREZ

DARRYL MAR DARLENE JUSTICE SANDEEP SINGH 916-445-2989 916-327-9496 916-323-2369 916-445-2987 [email protected]

[email protected] [email protected] [email protected] AMADOR ALAMEDA COLUSA INYO

CALAVERAS ALPINE CONTRA COSTA LOS ANGELES DEL NORTE BUTTE EL DORADO MARIN

HUMBOLDT FRESNO MADERA MONTEREY IMPERIAL GLENN MARIPOSA

ORANGE LAKE KERN MERCED RIVERSIDE MENDOCINO KINGS MONO

SACRAMENTO NEVADA LASSEN NAPA SAN FRANCISCO PLACER MODOC

SAN DIEGO SAN JOAQUIN SAN BENITO PLUMAS SANTA BARBARA SAN MATEO SAN BERNARDINO SAN LUIS OBISPO

SANTA CRUZ STANISLAUS SHASTA SIERRA SISKIYOU SANTA CLARA TRINITY

SOLANO SONOMA TEHAMA YOLO VENTURA SUTTER TULARE YUBA

TUOLUMNE

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