City finance staff present cost-allocation study; board debates timing and water/sewer impacts

Andy Richards, the city’s chief financial officer, presented a draft departmental cost-allocation study at the Fort Smith Board of Directors study session on Jan. 28, 2025.

Richards said the study—prepared by Landmark and based on 2023 data—had two parts: a review of an indirect cost rate and a direct allocation of departmental costs across funds. He said the report estimated indirect cost rates around 10.63 percent but noted the federal de minimis administrative rate for grants had risen from 10 percent to 15 percent, making the simpler de minimis approach more beneficial for grant charging. Richards recommended applying changes beginning in 2025 rather than retrospectively to 2024 because the reallocation did not achieve the intended relief for the water and sewer fund in 2024.

Using the draft percentages on the amended 2024 budget would shift $1,676,000 in costs to the general fund, Richards said; the sales-tax fund’s allocation would fall by $574,000, the street maintenance fund would see $796,000 in relief, and the water and sewer operating fund…