January 15, 2000

Departmental Budget Officers
Departmental Accounting Officers

REVISION TO THE 1999-00 STATEWIDE COST ALLOCATION PLAN

The Department of Finance and the Federal Department of Health and Human Services (DHHS) recently completed negotiations on the 1997-98 Statewide Cost Allocation Plan (SWCAP). As a result of these negotiations, the total allowable central service expenditures were reduced from $502 million to $481 million. The reduction is associated with adjustments for the Health Benefits for Retired Annuitants and various other functions. The adjustment amounts by agency are shown on the attached schedule.

If your Indirect Cost Rate Proposal (ICRP) or Cost Allocation Plan (CAP) has been submitted, your department may be required to resubmit the ICRP or Cap incorporating the revised SWCAP amount. However, you may be able to demonstrate to your federal cognizant agency that a revised ICRP or CAP for your department may be unnecessary if the following are considered:

• Will the adjustment have a material effect on your ICRP or CAP? Will the adjusted cost recovery outweigh the cost of preparing, reviewing, and approving the revised ICRP or CAP?
• Did your department include all costs in the initial ICRP or CAP? Can you show that you have additional allowable costs that offset the adjustment?
• If you must recalculate your ICRP or CAP, are there costs that should have been included in the original ICRP or CAP but were not? Do such costs minimize the effect of this adjustment?

If you have not yet prepared and submitted your 1998-99 ICRP or CAP, please use the revised SWCAP allocation for your department. Should you have any questions or need additional information, please contact Osman Sanneh, SWCAP analyst at 916-445-3434, extension 2136 or e-mail at fiproswp@dof.ca.gov.

Sincerely,
Wanda D. Kelley
Fiscal Systems and Consulting Unit