HomeMy WebLinkAbout07.b. Approve updated Administrative Overhead Percentage of 194% for FY 2012-13Central Contra Costa Sanitary District 7 b
' BOARD OF DIRECTORS
POSITION PAPER
Board Meeting Date: December 15, 2011
subject: APPROVE UPDATED ADMINISTRATIVE OVERHEAD PERCENTAGE FOR
FISCAL YEAR 2012 -13
Submitted By Initiating Dept. /Div.:
Debbie Ratcliff, Controller Administrative / Finance & Accounting
REVIEWED AND RECOMMENDED FOR BOARD ACTION:
D. Ratcli Mu raves J Kelly,
Ge eral Manager
ISSUE: Board approval is requested to adopt the annually updated administrative
overhead percentage.
RECOMMENDATION: Approve the use of the administrative overhead percentage of
194% for Fiscal Year 2012 -13.
FINANCIAL IMPACTS: The administrative 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 administrative 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 and the negotiation of the Clean Water Program contract, 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 Director
salaries and benefits, secretarial salaries and benefits, self- insurance fund expense,
depreciation expense, and the GASB 45 annual contribution, including retiree
healthcare premiums.
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POSITION PAPER
Board Meeting Date: December 15, 2012
subject. APPROVE UPDATED ADMINISTRATIVE OVERHEAD PERCENTAGE FOR
FISCAL YEAR 2012 -13
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 expressed as a percent of salaries.
The administrative overhead percentage is calculated using the most recent audited
financials. The administrative overhead percentage approved last year for use in the
2011 -12 budget was 173 %. This year, based on the 2010 -11 audited financial
statements, the calculation results in an administrative overhead percentage of 194 %.
The current calculation of the administrative overhead portion is higher mainly due to
substantial increases in the GASB 45 contribution and retiree healthcare premiums.
The employee benefits calculation increase is due to increases in healthcare premiums
and pension contributions.
For the 2012 -13 Fiscal Year, the following rate would apply:
Administrative Overhead
Non -Work Hours
Employee Benefits
Total Overhead
Recommended
Prior Year
for 2012 -13
2011 -12
105%
93%
18%
19%
71%
61%
194%
173%
For those charged District overhead, such as contractors and the County Clean Water
Program, the increase in overhead rate will result in a 7.7% actual increase in cost to
them. This increase is anticipated to occur again in 2013 -2014 due to the increase in
retirement, OPEB, and healthcare costs.
RECOMMENDED BOARD ACTION: Approve the use of the administrative overhead
percentage of 194% for Fiscal Year 2012 -13.
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