By: Libi Uremovic | Original Article at patch.com
“There’s a ‘reasonable test’ and some ‘standard best practices’ we can use for overhead.”
The City is allowed to charge a fund for the cost of processing the funds’ paperwork, but the amount charged has to be based on actual amount of work performed. The State has complained that the City is claiming allocation charges that are not realistic.
$2.3 Million is all of the Administrative Staff’s pay, but know that we know that no one is running the City maybe it’s not that unrealistic. ..??
Beaumont Special Session July 28, 2015 Transcript: http://podcast.ci.beaumont.ca.us/CC_2015-07-28_agenda.htm
12:00 Busch: We’re having trouble understanding the Cost Allocation methodology. The City does not have a cost allocation plan. There is a methodology used, but we’re not sure if it’s the appropriate metrology going forward. There has been a history of Inner-Fund Transfers and Year-End Borrowing. Everyone in the room is probably familiar with the City’s Financials; there’s a negative cash in the General Fund. It is clearly borrowing from pooled cash to operate. Revenues, we believe, may be insufficient to meet prior expenditure levels. What we’re projecting could be revenues below what is budgeted last year. We have to deal with the negative cash and fund balances in the General Fund as part of this budget process.
18:00 Busch: You’ll also see some adjustment in the bottom is the overhead allocation. Historically the City has budgeted $2 Million; $2.3 Million to be exact. At this point; we don’t feel comfortable with $2.3 Million as a number. In fact, we don’t believe we can come up with a full allocation number until we finish the entire budget; looking at all the expenses and what’s programed. We will have to present a methodology for overhead allocation in the absence of a cost allocation plan. There’s a ‘reasonable test’ and some standard ‘best practices’ we can use for overhead that will satisfy your independent Auditors. At this point what we could justify was $600,000, so you’ll see a pretty substantial increase [decrease].