DEPARTMENT OF HOUSING AND COMMUNITY DEVELOPMENT: DEVELOP A COST-ALLOCATION SYSTEM

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DEPARTMENT OF HOUSING AND COMMUNITY DEVELOPMENT: DEVELOP A COST-ALLOCATION SYSTEM

 

Problem Identification:
HABC does not properly allocate general overhead and administrative costs across programs, greatly distorting actual program costs.

Recommended Action:
Develop a cost-allocation system that allocates overhead proportionately to each program.

Classification:
Organizational

Functional/Operational Area:
HABC/Financial Management.

Estimated Annual Impact:
Increased financial accountability.

Estimated Implementation Costs:
None

Barriers to Implementation:
None

Projected Implementation:
90 days

Next Steps:
Train staff where appropriate.

Analysis:
Presently, the operating budget absorbs a disproportionate share of the agency’s overhead. Little, if any, centralized costs are charged to capital (Comprehensive Grant Program, CGP, and HOPE VI), Section 8 and various resident programs.

As a general cost allocation strategy, overhead costs could be allocated based on each program’s percentage share of total direct personnel. For example, if there were 1,000 ‘direct’ HABC employees, and the Section 8 program employed 100 ‘direct’ employees, Section 8 would be allocated 10 percent of general overhead costs (100/1,000).