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Indirect Cost Study

Since 1996, Pioneer Consulting Group, Inc. has completed more than 50 indirect cost studies.

Indirect costs are those that cannot be directly or exclusively assigned to one service. Enterprise funds often benefit from expenditures made by the general fund.

For example, a collector whose salaries are paid by the general fund makes process enterprise user-billed payments. We recommend that these indirect costs be identified and allocated to the enterprise fund using clearly established formulas to prorate the expense among departments.

Indirect Cost Analysis

The plan of action we follow for each project entails:

  1. Developing a List of Departments to Interview - The departments to be interviewed are determined based on each governmental organization’s structure, but generally include administration, finance department, treasurer/collector, clerk, health, DPW, etc.
  2. Determining the Expense Categories – The expense categories include health, dental and life insurance, retirement, unemployment benefits, workers compensation, property and liability insurance, legal, audit, etc.
  3. Interviewing of Department Heads – We interview the department heads to determine the amount of time and effort dedicated to the enterprise fund
  4. Development of a Matrix of Time and Cost by Function – We develop a time matrix and expense based upon the interview results. We assign the percent of time for each department, by employee, and the associated expenses. The results are summarized by salary and wages, and the associated fringe benefits.
  5. A Review of Our Findings With Department Heads – Once we complete the initial calculations, we review each allocation with the department heads. Adjustments are made when necessary
  6. Preparation of Reports – We prepare the reports outlining our calculations and recommendations
  7. Presentation of Our Findings – We meet with the governing officials to discuss our findings and recommendations