7.1.2 Cost Allocation Procedure
Related Minnesota State Board Policy: 7.3 Financial Administration
Related Minnesota State Board Procedure: 7.3.4 Cost Allocation
Related Normandale Community College Policy: 7.1 Financial Administration
Purpose: This procedure covers the allocation of both direct and indirect costs to college programs, activities and cost centers as required in Minnesota State System Procedure 7.3.4 Cost Allocation. This procedure establishes guidelines for reallocating direct costs to individual departments and for determining indirect cost rate charges.
Part 1: Definitions
Subpart A: Direct costs are those that can be specifically identified and assigned with relative ease and with a high degree of accuracy to a program or activity. These are costs where it is practical to track actual usage by program or activity. Direct costs shall include postage, supplies, duplicating and freight.
Subpart B: Indirect costs are costs incurred for multiple programs or activities and cannot be readily or easily identified with those programs or activities. These costs are not accumulated in units easily traceable to individual activities and therefore must be allocated using a rational and consistent method that approximates the activities' proportional benefit derived. Indirect costs shall include utilities, safety/security and maintenance/grounds.
Part 2: Direct Cost Allocation Procedure
Subpart A: Postage
a. Mailroom enters cost center/work area of postage request into a spreadsheet
b. Mailroom provides Financial Accountant in Fiscal Services with a list of postage to be charged back
c. Financial Accountant will charge the cost center, if known
d. If postage comes from a multi-departmental or dean area and a cost center is not provided, Financial Accountant will prorate the expense based on percentage of departments in the shared area (ex. Math 33%, Business 50%, Accounting 17%)
Subpart B: Supplies - Commonly stocked items (paper, envelopes, test forms, boxes)
a. Mailroom enters request in to ISRS
b. If supplies are for a multi-departmental or dean area, the Mailroom will prorate the costs in the ISRS Consumable Inventory module based on percentage of departments in the shared area (ex. Math 33%, Business 50%, Accounting 17%)
c. Once orders are closed, the expense posts to the correct cost center, so no chargeback necessary.
Subpart C: Supplies - Special Order Items Not Listed in Supply Catalog
a. Mail Clerk in Mailroom creates a PO for special order items from state-approved supplier
b. PO is to the cost center ordering the item
c. Chargeback is not needed as expense is recognized when invoice is paid
Subpart D: Supplies - Supply Catalog, On-Demand Items
a. Mailroom logs requests into a spreadsheet based on the cost center listed on the request form
b. Financial Accountant takes the spreadsheet provided by the mailroom for loading into ISRS
c. If supplies are for a multi-departmental or dean area, the costs are prorated based on percentage of departments in the shared area (ex. Math 33%, Business 50%, Accounting 17%)
Subpart E: Duplicating
a. Currently, no chargebacks to departments are being done, with the exception of student materials for courses that are sold in the Bookstore. In this case, the charge goes to the Bookstore and the Bookstore pays the college, with the revenue posting to CC 144350-ITS Printing and Copying (revenue previously posted to Duplicating).
Subpart F: UPS Freight Charges
a. Mailroom will enter cost center information on UPS request
b. That information is provided on the invoices we receive from UPS
c. Financial Accountant takes the information from the invoices and puts it into a spreadsheet to be loaded into ISRS
Part 3: Indirect Cost Allocation Procedure
Subpart A: Indirect costs are allocated based on square footage, using the template spreadsheet maintained by the Fiscal Services Office. The indirect costs are recorded with a standard journal entry to Object Code 7504-Allocated Indirect Costs once per year, the first week of August aligned with the SWIFT & ISRS fiscal year close.
Subpart B: Kopp Student Center (KSC) Revenue Fund
a. Charges based on the square footage of the KSC less the square footage of the Bookstore
b. Utilities: Determine utility charges per square foot for the college times the KSC square footage
c. Security: Determine security charges per square foot for the college times the KSC square footage
d. Maintenance: No maintenance charge reallocation due to KSC paying for their own General Maintenance Worker
Subpart C: Parking Revenue Fund
a. Charges based on the square footage of Parking.
b. Utilities: Determine electricity only charges. (Parking does not consume other utilities.) Per square foot for the college times the parking square footage. 90% of these costs will be subsidized by the GEN fund
c. Security: No security charge reallocation due to parking already paying for security personnel and expenses directly.
d. Maintenance: No maintenance charge reallocation due to parking paying for maintenance directly.
Subpart C: Bookstore
a. The bookstore is housed within the Kopp Student Center. The Bookstore pays a monthly rental fee to KSC and thus KSC will subsidize 100% of the utilities and security as their landlord. Charges based on the square footage of the College Store and Textbook Depot.
b. Utilities: Determine utility charges per square foot for the college times the College Store and Textbook Depot square footage. 100% of these costs will be subsidized by the KSC Revenue fund.
c. Security: Determine security charges per square foot for the college times the College Store and Textbook Depot square footage. 100% of these costs will be subsidized by the KSC Revenue fund.
d. Maintenance: Determine maintenance charges per square foot for the college times the College Store and Textbook Depot square footage.
2. Subpart D: Continuing Education and Customized Training (CECT)
a. Charges based on the square footage of CECT
b. Utilities: Determine utility charges per square foot for the college times the CECT square footage
c. Security: Determine security charges per square foot for the college times the CECT square footage
d. Maintenance: Determine maintenance charges per square foot for the college times the CECT square footage
e. 100% of these costs will be subsidized by the General Fund.
Procedure History:
Date of Adoption: 8/2016
Date of Implementation: 8/2016
Date and Subject of Revisions: November 2023: Update position titles
Next Review Date: 2027