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Running Head: ACT Case 4 & SLP 4 1ACT Case 4 & SLP 4 Name:College:US Army corps of engineers worry about cost allocations because there is no preferredrecommended approach to cost allocation. But considering the federal point of view, costallocation is required for most of the federal government multipurpose projects havingreimbursable purposes. This implies that cost allocations are made in order to derive an equitabledistribution of project costs among authorized project purposes or those proposed for authorization. On the contrary, the US Army Corps do not request allocation of project costsunless a major reformulation of a project is required and such actions require Congressionalauthorization, despite the fact that they are part of the federal government.It matters whether costs are allocated because purposefully allocating project costs is away of determining the repayment responsibility with respect to cost recovery, cost sharing, or both as the situation may require. The federal government wants cost allocation to be done for most of its multipurpose projects having reimbursable purposes. Cost allocation plays animportant part in planning process where cost sharing will be required because it providesinformation needed to determine the magnitude and share of estimated project costs that arereimbursable. Cost allocation also provides data that is useful in allocation of actual costs andexpenditures for future projects hence ensuring that cost accounts are maintained in accordanceto the plan formulation and allocation principles.

ACT Case 4 & SLP 4

I agree with the cost allocation factors selected by the city of Seattle for some of thedepartments but not all. For example a department like office of sustainability and environmentcost allocation plan depends on the departments 2009-2010 work plan. This is okay because thecost allocation factors are consistent with the central service department and it is a true and fair process because the allocations of costs for the department depend on what the department dealswith and analysis of their actual work plan for the financial year the funds are allocated for.But I do not concur with the cost allocation factors for some of the departments such asthe city auditor because allocation of costs for 2009-2010 depends on 2006 and 2007 audit hours.This is not the right cost allocation factor because the circumstances in 2006 and 2007 are far away to be considered in 2009-2010 allocation plans and yet circumstances are not the same inall years. It is sensible to have individual departmental cost factors considered other than auniform one for all departments because the departments are different and do not operate in thesame way, and it would be unfair for some departments.Cost allocation methods are not mostly meant for manufacturing companies but for anyorganization that deals with money. Cost allocation in the government setting because it enablesthe government to assess and account for all its allocations to city departments. It also enablesthe government to have set the amount to allocate to each department. Since there is moneyinvolved, allocation enables the government to b e free from corrupt activities and avoidembezzlement of funds by superior officers in charge of various departments. Cost allocationalso enables the government avoid increased expenditure on its departments that could affecteconomic operating conditions such as inflation. Like any other organization, the governmentalso wants to be as efficient as possible in its operations and cost allocation depending on variouscost driving factors enables the government to cut down on costs incurred.

ACT Case 4 & SLP 4

The US Department of human services has a special division for cost allocation becauseit is a wide department dealing with issues relating to people such as health services and humanresource services. This contracting of a separate division to deal with this issues help thegovernment avoid a conflict of interest in its operations, provide independence to a body that willoversee human services with a lot of openness, and release a work load from the governmentemployees. The division of cost allocation provides negotiation services for indirect cost rate proposals and cost allocation plans. The division also reviews cost allocation methods and practices of entities that receive federal funds to ensure that indirect cost paid by the federalgovernment are fair, equitable, and in accordance with federal regulations.The special division reviews cost allocation for universities hospitals and non- profitorganizations by reviewing and negotiating cost rates for them. 85% of cost rate proposals for colleges and universities, hospitals, non-profit organizations are reviewed and negotiated within180 days of receipt. The special division conducts annual statewide reviews of cost allocation plans to ensure billing methods follow Federal regulations and approved accounting practices. If the division discovers overbilled amounts, it seeks to obtain a refund.Cost allocation is not only relevant for government agencies but any other organizationthat want a suitable way of dealing with money issues and proper cost allocations. For examplemultinational corporations with many affiliates in many countries all over the world rely need toimplement a cost allocation plan as the one used by government agencies. This is because such amove will guarantee the organization that it will avoid fraudulent activities in its accounting practices thus leading to flaws. Cost allocation will enable such organizations to properlyaccount for money issued to different multinational affiliates overseas. Due their big state of operations, cost allocation plans will enable the whole organization to cut down on expenses and