Cost Allocation 101 Webinar June 6, 2018, 2:00-3:30 PM ET U.S. - PowerPoint PPT Presentation

Cost Allocation 101 Webinar June 6, 2018, 2:00-3:30 PM ET U.S. Department of Transportation Federal Transit Administration

Presenters Todd Hansen Assistant Research Scientist, Transit Mobility Program, Texas A&M Transportation Institute (TTI) Richard Garrity Senior Associate, RLS & Associates, Inc.

Polls 1 - What best describes your agency/organization/company? • Rural Transit Provider • Tribal Transit Provider • Small Urban Transit Provider • State Agency • Other 2 - What method of cost allocation do you currently use? • One-variable method • Two-variable method • Other method • Not sure • Don’t currently use a cost allocation method

Benefits of Two-Variable Cost Allocation Methodology for Transit Providers Prepared for National RTAP Webinar June 6, 2018 Todd Hansen Texas A&M Transportation Institute

Topic Overview • Managing multiple services • Need for cost allocation • Benefits of the cost allocation methodology • Results and opportunities 2

Managing Multiple Services Transit agencies may be one system but have: • Multiple service types • Flexible routes (motor bus), commuter bus, and demand response • Multiple transit districts • Rural district and Urban district(s) • Multiple counties and cities • Multiple funding sources • Section 5307 Urbanized and 5311 Nonurbanized 3

Data Reporting Complexity NTD reporting requires that transit agencies report: • By mode — fixed-route bus, commuter bus, demand response, etc. • By jurisdiction — urbanized, non-urbanized • By service type — directly operated or purchased* • By sponsored service — e.g.. Medicaid NEMT, university* *for full reporters Transit agencies needs a good model to allocate costs by service 4

Need for Cost Allocation • Allocate expenses by function • Allocate system expenses by service type • Allocate system expenses by district • Apply cost allocation to funding sources 5

Benefits of a Cost Allocation Methodology • Accurately allocate costs by service and district • Consistency in assignment of expenses • Efficient in staff time/resources • Transparent in documenting actual expenses • Monthly documentation for requests for reimbursement (RFR) • Manage data for multiple different fiscal years from different entities (NTD and state fiscal years) 6

Value Added • Documentation for actual expenses month to month • Cumulative totals by district, service type, and funding source • Supplements existing documentation, not a replacement • Source of data to measure and manage performance • Tool for budgeting and funding projections 7

Structure of Cost Allocation Chart of accounts • All expenses occurring during the period 8

Structure of Cost Allocation (cont.) Total expenses • Chart of accounts expenses are classified into transit functions 9

Structure of Cost Allocation (cont.) Operations data by route • Actual service statistics 10

Structure of Cost Allocation (cont.) Route data by district, funding source, and service type 11

Two Variable Cost Allocation • Methodology is based on a two-variable model of cost drivers • Operations: vehicle hours • Vehicle maintenance: vehicle miles • Allocate fixed costs based on variable percentage ratio • Identify true costs of services • Valid way to allocate fixed costs 12

Results • Total expenses are now accurately reported by route, service type, district, and funding source • Methodology uses actual data inputs • Consistent approach in allocating expenses • Efficient use of resources and staff time (replicable) • Transparent process 13

Questions So Far?

Opportunities to Apply Cost Allocation • Measure and manage efficiency and effectiveness • Request for reimbursement • NTD reporting • Upcoming Fiscal Year budgeting 15

Report by Federal Funding Source NTD Reporting • By Mode • By Section 5307 and Section 5311 • By Chart-of-Account Line Item (Object Class) • By Function • By Service Type (Directly Operated/Purchased) 16

Know Cost and Make Decisions Passenger Cost per Total Trips per Passenger Route Funding Source Mode Cost Vehicle Hour Trip FIXED ROUTE Route 1 Section 5307 Small Urban MB $177,954 8.21 $6.03 Route 6 Sectin 5311 Rural MB $61,039 1.00 $48.55 Route 7 Section 5307 Small Urban MB $178,375 4.07 $12.19 Route 14 $128,410 3.30 $15.73 Section 5307 Large Urban MB Yellow Section 5307 Small Urban CB $153,575 2.02 $25.28 Purple Section 5307 Small Urban CB $129,101 2.36 $21.25 DEMAND RESPONSE General Public Section 5311 Rural DR $94,865 1.31 $31.40 Sponsored Services: Veterans Section 5311 Rural DR $32,815 0.74 $65.50 17 Adult Day Care Section 5311 Rural DR $101,419 2.63 $19.37

Measure Performance Cost per Cost per Passenger Total Total Cost per Trips per Vehicle Vehicle Passenger Route Vehicle Hour Hour Mile Trip 5.68 $52.81 $2.33 $9.31 FIXED ROUTE DEMAND RESPONSE 1.76 $46.15 $3.03 $26.16 5.41 $52.36 $2.36 $9.68 GRAND TOTAL Summary by Funding Source Section 5307 Small Urban 5.63 $54.79 $2.21 $9.74 5.63 $8.52 Section 5307 Large Urban $48.00 $2.77 Section 5311 Rural 4.55 $50.43 $2.51 $11.07 Summary by Mode 6.14 $8.17 MB $50.15 $2.56 4.64 $12.68 CB $58.80 $1.98 18 1.76 $26.16 DR $46.15 $3.03

Cost per Cost per Total Total Cost per Price Services Vehicle Vehicle Passenger Route Hour Mile Trip $52.81 $2.33 $9.31 FIXED ROUTE $46.15 $3.03 $26.16 DEMAND RESPONSE General Public $41.25 $4.27 $31.40 Sponsored Services: Veterans $48.61 $2.69 $65.50 Adult Day Care $51.00 $2.46 $19.37 GRAND TOTAL $52.36 $2.36 $9.68 Summary by Funding Source $9.74 Section 5307 Small Urban $54.79 $2.21 $8.52 Section 5307 Large Urban $48.00 $2.77 $11.07 Section 5311 Rural $50.43 $2.51 Summary by Mode $8.17 MB $50.15 $2.56 $12.68 CB $58.80 $1.98 $26.16 19 DR $46.15 $3.03

Understand Costs by Funding Source Facility Total Funding Source Operations Fuel Maint. Maint. Admin. Planning Cost $982,644 $290,117 $362,975 $10,914 $592,749 $10,000 $2,249,400 Section 5307 Small Urban $391,995 $80,947 $101,275 $4,001 $217,287 $0 $795,505 Section 5307 Large Urban $355,447 $85,066 $106,429 $3,746 $203,458 $0 $754,146 Section 5311 Rural $1,730,086 $456,130 $570,679 $18,662 $1,013,494 $10,000 $3,799,051 GRAND TOTAL Could also include funding source by contract to provide human services transportation 20

Backup for Monthly Request for Reimbursements (Expenses Incurred) Section 5307 Small Urban (Month Expense Incurred * Line-Item %) Month Account Vehicle Facility Expense Operations Fuel Maintenance Maintenance Administration Planning Total Description $316,588 Total Operating $81,774 $24,176 $30,248 $923 $50,230 $833 $188,183 $110,772 Salaries $43,949 $0 $9,495 $0 $10,955 $0 $64,400 $58,327 Fringe $23,141 $0 $5,000 $0 $5,768 $0 $33,910 $1,960 Utilities $779 $0 $162 $0 $198 $0 $1,139 Fuel/ Oil $38,011 $0 $24,176 $0 $0 $0 $0 $24,176 $3,293 Tires $0 $0 $2,095 $0 $0 $0 $2,095 Training $94 $0 $0 $60 $0 $0 $0 $60 21

For The Accountant — Why It Matters Accounting Methodology for cost allocation to services Provides: • A consistent and equitable operating cost distribution across routes, programs, modes, jurisdictions • Transparent documentation for federal grant reimbursement • NTD and state reporting • Basis for accounting system to automate financial reporting • Basis for budgeting operating expenses and funding need 22

I’m Not An Accountant— Why It Matters To Me As a Manager You Can Answer the Questions: • How much does Route 6 cost per passenger, per mile, per hour and why? • Why is the fixed route cost per passenger different than demand response cost per passenger? • What is the ranking of fixed routes by cost effectiveness (cost per passenger)? • What line item of expense is driving my costs? • How should I price commuter bus service for an employer? 23

References • National Transit Database Policy Manual • 2 CFR 200 Final Rule 2013 • FTA Circular 9030.1E Urbanized Area Formula Program 2014 • FTA Circular 9040.1G Formula Grants for Rural Areas 2014 • FTA Circular 9070.1G Enhanced Mobility of Seniors and Individuals with Disabilities 2014 • FTA Circular 5010.1E Grants Management Requirements 2017 TTI’s Making Dollars & Sense of Transit Finance: • https://groups.tti.tamu.edu/transit-mobility/resources/making-dollars- and-sense-of-transit-finance/ 24

Contact Information Todd Hansen, AICP t-hansen@tti.tamu.edu (713) 613-9205

National RTAP Cost Allocation 101 Webinar: Uses of a Good Cost Allocation Plan June 6, 2018 Presented by: Rich Garrity, Senior Associate . RLS & Associates, Inc.

Session Content A. Using a Cost Allocation Model in Rural Transit 1. Pricing of Services Provided Under Contract 2. Analyzing I mpacts of Changes in Service 3. Allocating Cost Between Modes for NTD 4. Setting Rates for Eligible Charter Services 5. Determining Service-Based Local Match Shares

Topic 1 PRICING TRANSIT SERVICES PROVIDED UNDER CONTRACT