From: Don Schwartz
To: Don Schwartz
Subject: Question and response re: Cost Allocation Study Date: Saturday, February 17, 2024 4:01:01 PM
Councilmembers,
One of you asked a question re: next week’s item on the cost allocation plan; here’s the question and the response from the consultant who did the report:
Question: What is "Gross Expense Net of Distortions?” This is a term used repeatedly in the cost allocation study.
Response: “Size of budget” is a common basis for distributing overhead costs, meaning a department receives overhead in proportion to its fiscal size on the city. In this case, for the scale and scope of Sebastopol, we chose a “size of budget” factor equal to a department’s total expenses but excluding items that would distort the outcomes unreasonably. The expense items we flagged as distortive to the outcome and removed from the allocation factor are as follows: transfers, existing overhead charges, and in wastewater, its large outlay for regional treatment. To leave these items in the allocation basis would generate a cost allocation to the receiving departments that would not reasonably reflect its demands on or benefit from the central service being allocated.
BCC: City Council, Department Heads
Don Schwartz | City Manager
City of Sebastopol | 7120 Bodega Avenue | Sebastopol, CA 95472 City Administration Department | Main Phone Line: 707.823.1153 | Cell: 707.836.6967 Email: [email protected]
Website: www.cityofsebastopol.gov
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