Sec.17a-306-33. Cost allocation plan

In this section, the Connecticut Department on Aging authorizes area agencies on aging to directly allocate their indirect costs and describes how to accomplish this.

(a) Authorization for a Cost Allocation Plan for Reimbursement of Area Agency on Aging Indirect Costs

(1) Normally, nonprofit organizations or agencies elect to charge their programs directly for all costs except those identified as "supporting services" costs. These organizations usually separate their costs into two basic categories:

(A) "Program Services," which include direct functions such as community service activities, research, education and training; and

(B) "Supporting Services," which include general administration and general expenses, and fund raising expenses. These two expense groups are usually separately disclosed in the financial statements.

(2) Many joint costs, such as depreciation, operation and maintenance of facilities, and telephone expenses, are prorated individually to each activity within program services (including projects performed under Federal awards) and to each activity within supporting services. Each joint cost would be prorated by using the most appropriate distribution base. The direct allocation method is acceptable provided each joint cost is prorated on a distribution base which is:

(A) Established in accordance with reasonable and consistently applied criteria,

(B) Adequately supported by current data of the organization, and

(C) Based on benefits received.

(3) The general administration and general expenses are allocated to Federal awards and other activities within program services and to fund raising by an indirect cost rate(s). The process of developing indirect cost rates under the direct allocation method is summarized below.

(A) Eliminate capital expenditures and unallowable costs identified in Attachment B of OMB Circular A-122.

(B) Compute the indirect cost rate by dividing the allowable general administration and general expenses by the rate base. The rate base would consist of program services and fund raising costs.

(4) Inasmuch as area agencies on aging do not provide services directly, such indirect costs should not be allocated to supportive services. Any allocations that can be made must be made among the general administrative expenses authorized under the separate funding sources: the various Titles of the Older Americans Act, Job Training Partnership Act, etc. It is to these cost objectives that indirect costs should be directly allocated. For such cost objectives, an area agency seeking reimbursement for its indirect costs should pinpoint each kind of indirect service provided or indirect cost incurred and allocate each cost or base representative of the beneficial or casual relationships of such cost to the underlying activity. For example, such representative indirect cost services and related bases could include:

Type of	Suggested
Indirect Service	Bases of Allocation
Accounting	Number of transactions processed
Auditing	Direct audit hours
Data processing	Machine hours (CPU)
Disbursing service	Number of checks written
Fringe benefits	Salaries using fringe benefit rate
Insurance	Dollar value of insurance premiums
Legal	Direct hours
Motor pool	Miles driven and/or days used
Office machines utilization	Direct hours
Office space use	Square feet of space occupied
Payroll	Number of employees
Personnel	Number of employees
Printing and reproduction	Direct hours, job basis, pages printed, etc.
Local telephone	Number of telephone instruments
Fidelity bonding	Employees subject to bond amount

Other indirect costs such as workers' compensation, office supplies, postage, training, recruiting, etc., shall be allocated in any way the area agency on aging believes to be equitable.

(5) Area agencies on aging seeking reimbursement for indirect costs using the direct allocation method shall prepare an allocation plan and submit it in connection with its annual plan as part of the agency's budget to the Connecticut Department on Aging.

(Effective November 8, 1991)