Res 2019-103/approving a Fee Policy that incorporates a cost recovery methodology

Home Browse Search

C INDIRECTCOST: Indirect costs are not directly attributable to a program or service, but are necessary to support the effort. Division level and shared costs, such as departmental leadership, accounting support, technology, administrative support, computer (software, license, hardware etc), and on-going facility maintenance and repairs. It is Staff recommendation to not allocate indirect cost to any user fee within the first three years of the policy implementation to evaluate the impact of the fee structure on the community and review cost recovery performance measures. Cost Accounting at the Program/Service Level is Challenging The process of accounting for expenses in a more detailed, consistent manner in order to readily identify the cost recovery rates for each category of service can be challenging. The initial effort is considered to be a start, and work will continue, particularly during the first year of implementation, to further refine the calculations. During the first year of implementation, staff will have the opportunity to respond to the volume of information that is now available to them, allowing them to further refine definitions and calculations, and re-evaluate early decisions made in this process. During the Cost of Service study each department will have the opportunity to revise and update calculations. The accounting system is not currently setup to track expenditures at the activity level. The structure needs to be modified to allow coding at the activity level so that cost recovery can be accurately measured and used as an effective planning tool. Each year will reflect improved reporting capabilities leading to increased accuracy and continuous process improvement. Step 5: Setting the Price While not quite as simple as determining the costs and applying the recovery goal, this is the basic concept behind determining the price. The pyramid assists us in establishing the base level of cost recovery and where the program/service fits. Just as the expenditures and recovery goals vary for each program/service, so does the pricing methods and actual determination of the price. A pricing model is developed for each user fee and assists staff in determining the price. Fee Calculation: (total cost' cost recovery %) / q of participants The initial fee is not the final price. There are many influential factors and considerations each department goes through before determining a price to present to stakeholder groups and then to City Council for adoption with the annual budget each year. Step 6: Understanding and Preparing for Influential Factors and Considerations Inherent to sorting programs onto the pyramid model using the program benefits and other criteria is the realization that other factors come into play. These factors can aid in determining final price adjustments. Such factors could be local competitors, peer city comparison, economic indicators, or political influence. It is not a sustainable practice to keep fees artificially low in order to ensure that all can afford to pay. C Adjusting fees and charges to reflect a value -based approach to pricing is only one strategy to maximizing cost recovery and leveraging existing funding. Measuring cost recovery provides indications 17