Get Full Government Meeting Transcripts, Videos, & Alerts Forever!
Get email alerts on the Indirect Cost Allocation topic
No spam. Unsubscribe anytime.
City updates indirect cost allocation; $7.9M allocated to Water Sewer Fund from general‑fund support services
Summary
An updated indirect cost allocation completed in 2024 allocates about $33.6 million of general‑fund support costs across city departments, with $7.9 million assigned to the Water Sewer Fund; the study will be used to set FY2026 indirect charges included in the utility rates.
City staff and consultants described an updated indirect cost allocation study at the finance committee hearing, explaining that the city revalidated how general‑fund support services are charged to enterprise funds. The Office of Management and Budget used FY2025 budgets as a baseline and applied department‑level cost drivers to allocate support costs.
Why it matters: Indirect costs are part of the Water Sewer Fund’s O&M budget and feed into rate calculations. The updated analysis allocated roughly $33.6 million in general‑fund support costs across 42 direct divisions; about $7.9 million was allocated to Water Sewer Fund direct divisions, an increase compared with prior studies and a factor in proposed rate changes.
How it was done: Consultants said each of 27 indirect cost centers (finance, IT, procurement, council/administration, etc.) identified up to three cost drivers — e.g., staff time, number and value of contracts, transaction volumes or FTE counts — to allocate costs to city departments. Examples given: OMB allocations used staff time, transaction counts and FTEs; procurement allocations used contract counts and contract value tiers; IT allocations used personnel time, FTE counts and contracted‑services usage.
"The purpose of that was to really support to determine what support services are provided by the general fund and then determining the cost of those support services, and then allocating the cost of those support services to the water sewer fund direct departments," said Prabhu Kumar of Black & Veatch, summarizing the methodology.
Implications: The city will apply the updated allocation model to FY2026 budget numbers to set indirect‑cost charges in the enterprise fund O&M budget. Council members raised equity questions — for example, how costs are shared with wholesale customers and how contract operations at the wastewater treatment plant affect indirect allocations. Commissioner Williams and the finance director said the methodology follows common public‑sector practice and reflects services actually provided by the general fund.
Follow‑up requested: Council Member Bass‑Knight asked for a list of DBE subcontractors and amounts; the administration agreed to prepare that list. Several council members also asked for further detail on how allocations affect New Castle County wholesale billing and how contract operations were treated in the model.
Ending: The indirect cost allocation is an input to the water/sewer rate model; the administration said OMB will use the allocation model going forward to calculate FY2026 indirect charges and to inform rate calculations included in the upcoming budget ordinances.
