According to a Performance Audit by the State Auditor's Office on "Allocating Overhead Costs," 11/28/11:
"Washington’s cities spend about $500 million per year for overhead costs such as information technology, human resources, accounting and facility maintenance. Approximately one-third of these costs are paid from funds whose use is restricted by law, including water, sewer and other utility funds.Source; http://www.sao.wa.gov/AuditReports/AuditReportFiles/ar1006136.pdf
As municipalities increasingly face shrinking revenue, they commonly use utility or other dedicated funds to help pay for overhead services. However, our past audits have found cases in which cities overcharged their utilities for overhead, essentially shifting costs onto utility ratepayers that should have been borne by all taxpayers....
The following cities participated in the audit: Aberdeen, Bainbridge Island, Bellevue, Monroe, Mukilteo, Redmond, Spokane and Tacoma. Read More >>
When the City of Redmond allocated overhead costs to its utilities, it excluded other funds and departments that benefited from that overhead. These exclusions occurred because the plan had not been updated since 2003. Because the City used outdated square footage figures to allocate building maintenance, allocated budgeted and not actual overhead costs, and did not charge all funds and departments that received overhead services, it overcharged its utility funds in 2009 as follows:
• Building Maintenance $196,000
• Information Technology $270,000
• Budget Department $98,000
The City updated its overhead allocation plan in 2010 for use in 2011.
The City began updating its allocation plan before the audit started, when its new Finance Director recognized shortly after his arrival that the plan was outdated. The City began using the new plan in 2011. The new plan appears to incorporate most of the leading practices we identified."
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