HomeMy WebLinkAbout04.c. Approve Updated Overhead Percentage for FY 2011-12Central Contra Costa Sanitary District �. C
' BOARD OF DIRECTORS
POSITION PAPER
Board Meeting Date: ,1a11Uafy 6 2011
Subject: APPROVE UPDATED TOTAL OVERHEAD PERCENTAGE FOR FISCAL
YEAR 2011-12
Submitted By: Initiating Dept /Div.:
Debbie Ratcliff, Controller Administrative /Finance &Accounting
REVIEWED AND RECOMMENDED FOR BOARD ACTION:
,•° J
D. Ratclifry P rWu , 4fraves
7 James M. elly,
General Manager
ISSUE: Board approval is requested to adopt the annually updated total overhead
percentage.
RECOMMENDATION: Approve the use of the total overhead percentage of 173% for
Fiscal Year 2011-12.
FINANCIAL IMPACTS: The total overhead percentage is calculated annually for the
purpose of recovering administrative overhead and employee benefit costs when
recovering full costs for services provided to another agency, company or developer,
charging to capital projects and for customer billings involving labor costs.
ALTERNATIVES/CONSIDERATIONS: The total overhead calculation methodology
could be modified resulting in an increased or reduced percentage. This is not
recommended as a modification to the methodology would likely raise questions and
objections due to a lack of consistency.
BACKGROUND: In an effort to set the rate early enough to be used for the calculation
of rates and charges (which are used to charge other agencies, companies and
developers) and to notify the Clean Water Program of any changes by January 31 of
each year as specified in the Service Agreement, staff brings the annual updated
percentage to the Board every year by the first meeting in January.
The purpose of calculating administrative overhead, non -work hours, and employee
benefits rates is to follow the Board's direction for the District to recover the full cost of
the direct services it provides.
Administrative overhead consists of indirect costs that are incurred for a common
purpose benefiting more than one task. Indirect costs include expenses such as
Administrative Department expenses, General Manager and Department Directors
salaries and benefits, secretarial salaries and benefits, self - insurance fund expense,
depreciation expense (for the Headquarters Office Building, Administrative Furniture
and Equipment and Administrative /Engineering Pool Vehicles), and the GASB 45
N:\ ADMINSUPIADMINIPOSPAPER1Approve Administrative Overhead Percentage 01- 06- 2011.doc Pagel ot2
POSITION PAPER
Board Meeting Date: January 6, 2011
subject. APPROVE UPDATED TOTAL OVERHEAD PERCENTAGE FOR FISCAL
YEAR 201 1 -12
annual contribution (which includes Retiree Medical, Dental and Life Insurance and the
Annual Trust Contribution).
Non -work hours consist of the value of vacation, sick leave, administrative leave,
birthday holiday, and earned overtime expressed as a percent of salaries.
Employee benefits consist of costs associated with retirement payments, medical
premiums, deferred compensation contribution in lieu of social security and other
similar benefits, and is expressed as a percent of salaries.
The total overhead percentage is calculated using the most recent audited financials.
The total overhead percentage approved in the last two years for use in the 2009 -10
and 2010 -11 budget was 178 %. This year, based on the 2009 -10 audited financial
statements, the calculation results in a total overhead percentage of 173 %.
The current calculation is lower mainly due to substantial planned 2009 -10 O &M cost
savings and deferrals.
For the 2011 -12 Fiscal Year, the following rate would apply:
Administrative overhead
Non -Work Hours
Employee Benefits
Total
Recommended
for 2011 -12
93%
19%
81%
173%
Prior Years
2009 -10, 201011
98%
19%
61%
178%
The total overhead percentage was reviewed with the Budget & Finance Committee.
RECOMMENDED BOARD ACTION: Approve the use of the total overhead percentage
of 173% for Fiscal Year 2011 -12.
WADMINSUPIADMINIPoSPAPEMApprove Administrative overhead Percentage o1 -06 -2011A oc Page 2 of 2