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HomeMy WebLinkAbout05.c. Approve administrative overhead percentage for FY 2013-14Central Contra Costa Sanitary District
' BOARD OF DIRECTORS
POSITION PAPER Jr_. C •
Board Meeting Date: December 20, 2012
Subject: APPROVE UPDATED ADMINISTRATIVE OVERHEAD PERCENTAGE FOR
FISCAL YEAR 2013 -14
Submitted By: Initiating Dept. /Div.:
Thea Vassallo, Finance Manager Administrative / Finance & Accounting
REVIEWED AND RECOMMENDED FOR BOARD ACTION:
"Ooyl)
T. Vassallo
An arrell,
General Manager
ISSUE: Board approval is requested to adopt the annually updated administrative
overhead percentage.
RECOMMENDATION: Approve the use of the administrative overhead percentage of
220% for Fiscal Year 2013 -14.
FINANCIAL IMPACTS: The administrative overhead percentage is calculated annually
for the purpose of recovering administrative overhead and employee benefit costs when
charging to capital projects, recovering full costs for services provided to another
agency, company or developer, 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.
NAADMINSUP\ADMIN \FINANCE MANAGER \Position Papers\2012\2013 -2014 Admin OH Position Paper- draft.docPage 1 of 2
POSITION PAPER
Board Meeting Date: December 20, 2012
Subject. APPROVE UPDATED ADMINISTRATIVE OVERHEAD PERCENTAGE FOR
FISCAL YEAR 2013 -14
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 pension payments,
medical premiums, deferred compensation contribution in lieu of social security and
other similar benefits expressed as a percent of salaries. The 2012 -13 budgeted
employee benefit figures are used for this calculation since they include up -to -date
pension and healthcare rates.
The total overhead percentage is calculated using the most recent audited financials.
The total overhead percentage approved last year for use in the 2012 -13 budget was
194 %. This year, based on the 2011 -12 audited financial statements and the 2012 -13
budgeted employee benefits, the calculation results in an administrative overhead
percentage of 220% which would take effect in 2013 -14.
The current calculation of the administrative overhead portion is higher mainly due to
the GASB 45 OPEB Annual Required Contribution (ARC) increasing from $7.0 million
to $8.3 million. Administrative staff employee benefits, technical services and legal
services cost increases also increased this component of total overhead. The
employee benefits calculation increase is due to substantial increases in pension
contributions (due to the second phase of de- pooling that increased our terminal pay
assumption) and healthcare premium increases.
For the 2013 -14 Fiscal Year, the following rate would apply:
Administrative Overhead
Non -Work Hours
Employee Benefits
Total Overhead
Recommended
Prior Year
for 2013 -14
2012 -13
117%
105%
18%
18%
85%
71%
220%
194%
RECOMMENDED BOARD ACTION: Approve the use of the administrative overhead
percentage of 220% for Fiscal Year 2013 -14.
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