Where to Allocate

Introduction

Cost allocation is an important method used as organizations attempt to capture costs associated with certain products and services. These costs may be intangible or tangible. Organizations may assign specific amounts or a percentage of the expense to certain division to spread the costs which may overlap multiple divisions. Rather the organizations are government or commercially owned and operated, cost allocation remains practical. The U.S. Army Corps of Engineers (Corps), City of Seattle, and the Department of Human Services, allocate costs to account for expenditures. This report will address specific cost allocation approaches utilized by each government agency.

U.S. Army Corp of Engineers

Corps, a Department of the Federal government, was not free from the responsibilities of cost allocation. The expectation for Corps was to identify responsibility for cost recovery, sharing, or both. Corps was under legal responsibility to recover costs allocated for projects. From a Federal perspective, cost allocations were made to derive an equitable distribution of project costs among authorized project purposes, or those proposed for authorization. Laws and regulations requiring reimbursement or cost-sharing generally specify recovery of costs incurred for the service or function. Cost allocation was, therefore, required for most Federal multipurpose projects having reimbursable purposes. (Corps) Standard policy for the Corps was to review and have preliminary allocation completed.

A concern for the Corps was reallocation. It has been Corps policy not to request reallocation of storage and/or project costs unless a major reformulation of a project was required. Such a reformulation might include the additi...

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... such as the Army Corps of Engineers example stated earlier. Indirect costs need to be justified; the City of Seattle has numerous cost drivers and categories for cost allocation. Even though this may be confusing, the City of Seattle found that substantial categories were needed. Realistically, allocating costs in such a detailed measure could substantiate budgets. Needless, to say each of the three government agency applied cost allocation in order to spread costs evenly and fairly for either reimbursement or cost sharing.

Works Cited

Program Support Center. “2009 PSc Service and Product Directory.” PSC.gov. N.p., 2009. Web. 2 Dec. 2011. .

U.S. Army Corps of Engineers. “Walla Walla Project .” Army.mil. N.p., 9 May 2011. Web. 2 Dec. 2011. .