OMB A-87 Cost Allocation Plans/Full Cost Allocation Plans

An OMB A-87 plan as well as a Full Cost Allocation Plan calculates general fund support to non-general fund operations.

Shortly after the federal government began to distribute funding through grants, it recognized that local agencies were not being reimbursed for the indirect costs incurred to provide the programs that the federal government mandated. To address this issue, the Office of Management and Budget developed Cost Principles that defined the processes and mechanisms for reimbursing agencies for their indirect costs. The cost plan became the mechanism for developing and presenting each agency's indirect costs. The guidelines for cost plans for state, local and Indian tribal governments are currently referred to as 2 CFR, Part 225. These principles were previously known as OMB Circular A-87, which is why these cost plans are almost always referred to as OMB A-87 cost plans.

This process was then further expanded to create Full Cost Allocation Plans. OMB A-87 cost plans are a more conservative approach to calculating indirect costs for local agencies. This plan is bound by federal government restrictions eliminating certain costs. The Full cost plan was developed to expand on these guidelines but get a more accurate look at what the full cost of the agencies indirect cost is. The full cost plan is used to get indirect cost reimbursement for outside funds within the agency that uses the support services as well as to include a full cost component in to the calculation of user fees and rates.

The cost allocation plan identifies and allocates indirect costs to the agency's operating departments. The departments identified as those performing supporting functions for other departments are known as Central Service Departments (CSDs). The cost plan follows federal grant methodologies to allocate indirect costs from the CSDs to the agency's operating (or receiving) departments. The costs allocated to receiving departments are then used to claim reimbursement, in the case of grantee departments, or as an additional component of overhead costs for those operating departments that serve external entities.

CAP and its partners have prepared hundreds of Cost Allocation Plans and have reviewed thousands of plans over the last 26 years.

ICRP

An Indirect Cost Rate Proposal (ICRP) is created to calculate the rate of overhead to tack on to a service or project to charge to outside individuals or agencies for using that service. ICRP's are used to make sure agencies get their full cost reimbursement for grants, user fees and SB 90 claiming.

ICRP's are calculated for departments that are direct labor departments in nature, and calculates an overhead rate to assure that the “full cost” of providing the service is recovered. The cost allocation plan is a component of the ICRP but in this plan departmental overhead is also added to capture all overhead costs that should be a part of a persons overhead cost rate.

Rate Studies

Rate studies are used by local government agencies to determine the cost of services provided. The goal of any agency is to recover the full cost of services and in order to do that a rate study must be preformed.

Not only the direct persons time who is working on the services but the departmental indirect cost as well as the agency wide overhead costs are all a component of that fee.

CAP works with the agency to determine the cost of services from start to finish and everyone involved in order to ensure your agency can recover the full cost of services.

SB 90 Mandated Cost Reimbursement

The law in the State of California , (GC Sections 17500 through 17617), allows for reimbursement of costs incurred by local agencies and school districts for cost mandated by the state. In order for your agency to receive reimbursement for such mandated programs a claim must be prepared and filed. CAP partners determine what claims each agency can file and prepare and files the claims for the agency.

CAP's partners have over 30 years of experience preparing and reviewing SB 90 claims and this experience will ensure that all mandated programs your agency provides receive maximum reimbursement for all allowed expenses from the State of California . 

For additional information on our professional cost allocation services, please contact us.