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Cost Allocations: Relevance to US Army Corp of Engineers, City of Seattle, US DHS

1. Why does the US Army Corp of Engineers worry about cost allocations? Aren't they a branch of the US Federal Government? Why does it matter whether or not costs are allocated?

2. The City of Seattle reading lists a series of costs and associated cost drivers for allocating these costs. Do you agree with the cost drivers (cost allocation factors)? Why do you suppose these drivers were selected? Does it make sense to have all of these individual costs and drivers identified or should there be a more uniform method of allocating costs? Why do they allocate costs anyway in a government (City Government) setting -- aren't cost allocation methods mostly for manufacturing companies?

3. Why does the US Department of Human Services have a special division just for Cost Allocation? What are some of the ways in which they adminster cost allocation for hospitals, colleges, and non-profit organizations?

4. Is cost allocation only relevant for govenment agencies like those above? Why or why not? Support your arguments with references or examples as appropriate

Readings:

US Army Corps of Engineers - Walla Walla Project retrieved August 17, 2009 from: http://www.nww.usace.army.mil/lsr/reports/misc_reports/allocate.htm

City of Seattle Budget for 2009 - 2010 retrieved August 17, 2009 from: http://www.cityofseattle.net/financedepartment/0910adoptedbudget/Cost_Allocation_2009_Adopted_and_2010_Endorsed_Budget.pdf

US Department of Human Services, Financial Accounting, Division of Cost Allocation retrieved August 17, 2009 from: http://www.psc.gov/directory/2009directory.pdf (search for Cost Allocations)

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1. Why does the US Army Corp of Engineers worry about cost allocations? Aren't they a branch of the US Federal Government? Why does it matter whether or not costs are allocated?

Even though the US Army Corps of Engineers are a part of US Federal government it is important for them to allocate costs. One of the prime reasons for allocating project costs is to identify who is responsible for cost recovery, cost recover or both. The US Army Corps of Engineers are a part of the US Federal government but the government wants cost allocation get a fair allocation of project costs among those projects that are authorized. Further, there are laws and regulations that require cost-sharing and specific recovery of costs that are incurred for a particular service provided. Moreover, when there is a multipurpose planning, cost allocation in the US Army Corps of Engineers is required for giving information about the extent of project costs that are reimbursable. This cost allocation is essential to assess financial feasibility and acceptability of the plan. The cost allocation is important because it provide vital information for allocating incurred expenses and makes sure that cost accounts are maintained that match the plan and allocation principles. When the US Army Corps of Engineers requests for reformation of a project or request reallocation of storage/project costs, Congressional authorization is required. Congressional authorization could have directive language relating to allocation of costs. The cost allocation done by the US Army Corps of Engineers ensures that cost has been allocated in accordance with the directive of the Congress.

2. Cost allocation is essential in ...

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