3 0
6 8
CONSENT CALENDAR
City of San Bernardino
Request for Council Action
Date: December 3, 2025
To: Honorable Mayor and City Council Members
From: C. Jeannie Fortune, Interim Director of Finance & Management Services
Department: Finance & Management Services
Subject: Adoption of the Citywide Cost Allocation Plan and Office of Management and Budget (OMB) Compliant Indirect Cost
Plan Prepared by Matrix Consulting Group (All Wards)
Recommendation:
It is recommended that the Mayor and City Council of the City of San Bernardino adopt Resolution No. 2025-396, approving the Citywide Cost Allocation Plan (CAP) and OMB Compliant Indirect Cost Plan prepared by Matrix Consulting Group, based on the City’s Fiscal Year 2022/23 adopted budget, and authorizing its use for the following purposes:
1. Recovering indirect costs associated with state and federal grants, consistent with the requirements of 2 CFR Part 200; and
2. Establishing a fair and transparent method for allocating Citywide administrative expenses and charging intergovernmental and regional partners for shared services.
City Manager's Comments
By approving the Cost Allocation Plan that was calculated by Matrix Consulting Group, the City would be eligible to fairly charge both other regional partners and grants for eligible indirect costs incurred by the City. The study was done in 2022-2023. The City can update the plan in the future.
Executive Summary
The City engaged Matrix Consulting Group to prepare two financial management tools:
(1) a Citywide Cost Allocation Plan (CAP) and (2) an OMB-Compliant Indirect Cost Plan (also known as the Indirect Cost Rate Proposal). Together, these plans identify the full cost of providing City services, including administrative and support functions 3 0
6 8
such as Finance, Human Resources, City Clerk, City Attorney, and Facilities Maintenance, and establish a fair, transparent method for distributing those costs across departments, programs, and external partners. Adopting the CAP and OMB- Compliant Plan allows the City to: recover indirect costs associated with eligible state and federal grants, consistent with 2 CFR Part 200; bill regional or intergovernmental partners (i.e., shared service agreements) for their proportionate share of overhead; and ensure equitable cost-sharing among all City programs and funds, reducing reliance on the General Fund.
Although federal regulations require approval by a cognizant federal agency for grant purposes, such as the Department of Health and Human Services (DHHS), Department of Transportation (DOT), California law also requires City Council authorization before indirect costs can be charged to another agency or partner.
Adoption of this resolution fulfills both requirements, ensuring San Bernardino’s plan is legally defensible, financially transparent, and aligned with Cal Cities (formerly known as the League of California Cities) guidance and Government Finance officers Association (GFOA) best practices for full-cost recovery.
Cost Allocation Plans (CAP) often use budgets to provide a stable and predictable rate for internal planning, budgeting, and cost control, which allows departments to forecast and manage spending more effectively, since the CAP rate will not fluctuate with every expenditure change. OMB-compliant indirect cost plans use actuals to accurately and equitably recover the true cost of indirect expenditures, particularly for grant reimbursements; it ensures that the City is reimbursed for actual expenditures incurred, preventing or minimizing overpayments or underpayments for grant-funded activities.
Background
Every City department relies on shared services such as payroll, accounting, legal support, and building maintenance that are managed centrally. These costs are real but are often hidden within the General Fund.
A Cost Allocation Plan (CAP) identifies and distributes indirect costs to the various programs and funds that benefit from them, enabling the accurate determination of total service costs, fair reimbursement, and effective management. This process is essential for accurately accounting for administrative overhead, recovering costs from grants and other governments, and ensuring sufficient funds are available to maintain or improve public services.
The City’s CAP was based on the FY 2022/23 adopted budget and reflects the City’s organization structure and workload at that time. Matrix Consulting Group also prepared a federally compliant Indirect Cost Plan, which enables the City to recover a portion of administrative expenses from eligible federal and state grants.
Together, these two plans strengthen financial management, improve cost recovery, and promote long-term fiscal sustainability.
3 0
6 8
City staff is currently on updating the plan to reflect current year costs in preparation for the FY2026-27 Cost Allocation Plan and OMB Compliant Indirect Cost Plan. This will be included in the Budget Adoption.
Discussion
Citywide Cost Allocation Plan (CAP)
The CAP determines how the cost of shared administrative services such as payroll, purchasing, records management, legal review, and building maintenance are distributed to departments citywide.
The plan includes costs from central service areas such as:
City Clerk - Council and records support
City Attorney - Legal services for all departments
City Manager’s Office - Executive oversight and communications Human Resources - Employee support and benefits administration Finance Department - Accounting, payroll, purchasing, budget, and treasury functions
Facilities Maintenance - Custodial and building upkeep for shared facilities To ensure fairness, costs were allocated based on measurable factors such as the number of employees, department budgets, transactions processed, and space occupied.
Example:
Human Resources costs were distributed based on the number of employees per department.
Accounting costs were based on the number of accounts payable and receivable transactions.
Facilities costs were based on custodial hours and maintenance work orders.
This data-driven approach ensures that the CAP is transparent, equitable, and easy to update in future years.
OMB-Compliant Indirect Cost Plan
The OMB-Compliant Plan (also known as the Indirect Cost Rate Proposal) follows federal guidelines under 2 CFR Part 200 (Uniform Guidance). It identifies the portion of administrative costs that can be recovered from grants funded by the federal or state government.
The OMB Plan includes administrative divisions such as the City Clerk, City Attorney, City Manager’s Office, Human Resources, Finance (Accounting, Payroll, Purchasing, and Budget), and Facilities Maintenance. Costs were distributed using audited data from FY 2020/21 and measurable operational indicators such as staffing levels, budget size, or number of transactions.
3 0
6 8
This federally compliant methodology produces a defensible indirect cost rate that the City can apply to qualifying grants. By doing so, San Bernardino can recover legitimate administrative expenses tied to grant activity, reducing reliance on the General Fund and improving overall financial sustainability.
This federally compliant methodology produces an indirect cost rate that the City can apply to qualifying grants, ensuring the City recovers legitimate administrative expenses and does not rely solely on the General Fund to support grant activity.
Why Council Adoption is Needed
While the OMB plan requires approval from a federal “cognizant agency,” California cities must also obtain City Council authorization before charging indirect costs to other entities or regional partners. Adopting this resolution provides the necessary legal authority for:
Internal cost allocation across City departments and funds; Intergovernmental cost recovery for shared service agreements; and Federal and state grant reimbursement of indirect costs.
This action aligns with guidance from Cal Cities (formerly the League of California Cities) and ensures the City’s compliance with both federal and state requirements.
Adoption of the Citywide Cost Allocation Plan (CAP) and OMB-Compliant Indirect Cost Plan follows GFOA best practices for full-cost recovery. Together, these plans ensure that every program and fund contributes its fair share toward shared administrative costs, reinforcing the City’s commitment to transparency, accountability, and long-term fiscal stability.
2021-2025 Strategic Targets and Goals
This action aligns with all key targets of the City Council’s Strategic Plan: Improved Operational & Financial Capacity; Focused, Aligned Leadership and Unified Community; Improved Quality of Life; and Economic Growth & Development.
Fiscal Impact
Adoption of the Cost Allocation Plan and OMP Indirect Cost Plan has no immediate fiscal impact on the City’s budget. However, it authorizes Finance to recover indirect costs from federal and state grants, consistent with 2 CFR Part 200 and regional and interagency agreements for shared services. Based on prior cost analyses, the City may recover an estimated $2-4 million annually through indirect cost reimbursements and interagency billings once implementation begins.
Conclusion
It is recommended that the Mayor and City Council of the City of San Bernardino adopt Resolution No. 2025-396, approving the Citywide Cost Allocation Plan (CAP) and OMB Compliant Indirect Cost Plan prepared by Matrix Consulting Group, based on the City’s 3 0
6 8
Fiscal Year 2022/23 adopted budget, and authorizing its use for the following purposes:
1. Recovering indirect costs associated with state and federal grants, consistent with the requirements of 2 CFR Part 200; and
2. Establishing a fair and transparent method for allocating Citywide administrative expenses and charging intergovernmental and regional partners for shared services.
Attachments
Attachment 1 Resolution No. 2025-396 Cost Allocation Plan (CAP) & OMB-Compliant Indirect Cost Plan Adoption
Attachment 2 Matrix Consulting Group – FY 2022–23 Full Cost Allocation Plan
Attachment 3 Matrix Consulting Group – FY 2020–21 OMB-Compliant Indirect Cost Plan
Attachment 4 Matrix Consulting Group – Cost Allocation Plan and OMB Results Memorandum
Ward:
All Wards
Synopsis of Previous Council Actions:
N/A
CC: Eric Levitt, City Manager