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Q: How does including the revenue reconciliation provide a benefit to an OMB plan?
Revenue reconciliations give you an opportunity to make sure that all necessary revenues are accounted for properly. The source documentation that you receive from the client related to direct billings is usually a different document from the revenue report from the financials. Being able to understand what types of revenues are classified as “unallowed or general government” and direct bills of off the top are very important to understanding how to do a cost plan.
Revenues considered unallowed/general government:
i. Taxes
ii. Fines
iii. Forfeitures
iv. Prior-year-cost-plan charges
v. Fixed fee services not based on hours vi. Sales of property
vii. Interest
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Q: What comes first, the cost plan or the audit? Do the auditors only audit OMB plans because you are using actual numbers in the computation of your plan?
It varies; it just depends on the purpose of the audit. Sometimes the audit will indicate that a cost plan is necessary, but most of the time the cost plan comes and then an audit is done on the plan. Depending on the type, the auditor will indicate whether or not they audit an OMB plan or a full cost plan.
If you are doing the cost plan for a federal purpose, your cognizant agency will do the audit on the plan. But if you are just using the cost plan internally then it is possible that the outside auditors will request a review of the cost plan even if it is a Full Cost Plan.
Q: Would a cost allocation plan be beneficial to someone who only has one enterprise fund?
Absolutely, a cost plan is beneficial for organizations of all sizes. Even those with only one enterprise fund. An enterprise fund means it is some type of utility like water, sewer, trash, that gets charged out to the public on a rate basis. If they do not have a cost plan that means they have no basis for charging an overhead component to the outside public who should be paying for that service.
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Q&A
QUARTERLY QUESTIONS WITH
Q: Is the interest on bonds/loans used to purchase buildings included in the allowable cost allocation? Are building improvement costs allowable? Is the cost of the land allowed?
Yes the interest expense on bonds/loans used to purchase buildings IS allowed in an OMB cost plan. In a cost plan, when you are looking at building use/depreciation cost, it is allowable to include the cost of the building improvements as well as any interest on the loan.
The land cost is NOT allowed. If you think about the property values in California vs. the property values in Texas, they vary greatly, so the federal government takes the cost of the land as a cost that is excluded.
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