§ 3170.60. Administrative overhead.
(a) Generally. Administrative overhead costs are those incurred for a common or joint purpose and are not readily assignable to one specific cost category. These costs are the supportive activities which are necessary to maintain the direct effort involved in providing the services. The activities include, but are not limited to: general supervision; bookkeeping; data processing; auditing; to the extent that these costs are not directly charged to the services being provided.
(b) Department policy. The cost of administrative overhead, as defined, shall be apportioned into the direct delivery cost of the services being provided. Thus, in order to be claimed, the cost of general supportive activities provided to a program or another unit of a program’s organization shall be apportioned into the service as an administrative overhead or indirect cost. The overall objective of the allocation process is to distribute the administrative overhead costs of the organization to its various services or cost categories in reasonable proportion with the benefits provided to these services or cost categories. In effect, this policy is indicating that there shall not include line item costs which are lumped together and labeled administrative overhead costs, but that costs charged by the program shall be specifically identified. Those costs that a program may have identified as administrative overhead or indirect costs thus become a direct cost, if they can be properly identified, documented, and allocated. This chapter outlines the limitations and methods by which administrative overhead costs may be apportioned. The limitations are as follows:
(1) Costs accumulated in the administrative cost center, as defined in the account structure, shall not be apportioned among the service cost centers. It is not the intention of this section to prohibit county agencies from allocating the portion of an administrator’s or administrative staff costs that can be justifiably charged to the direct provision of a given service.
(2) In the case of general government, costs for elected officials, such as county commissioners, comptroller, and sheriff, shall not be included in the cost apportionment. The cost of general support services, however, such as data processing, central purchasing and supplies, and maintenance, may be included in the cost apportionment. When costs are claimed, they shall be specifically identified and shall be included in the cost allocation plan.
(c) Methods for allocating administrative overhead. The basis for allocating these costs is at the discretion of the program; however, this basis shall result in a fair and equitable distribution of costs, in direct relation to actual benefits accruing to the services to which the costs are charged. Programs shall note that when administrative overhead costs are allocated into direct services, these costs shall not be claimed for Departmental reimbursement as a separate nonallocated service or cost category. In order to claim administrative overhead costs, the program shall submit a copy of the cost allocation plan to the regional office for approval. They shall also submit prior-year financial data—that is, expenditure data for the most recent financial periods—in accordance with and in support of their cost allocation plan.
Cross References This section cited in 55 Pa. Code § 3170.11 (relating to purpose); 55 Pa. Code § 3170.22 (relating to direct provision of services); 55 Pa. Code § 3170.23 (relating to purchase of service); 55 Pa. Code § 3170.83 (relating to establishing rates); and 55 Pa. Code § 3170.85 (relating to responsibility of the county).
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