Consideration and Approval of Contract:  First Amendment to the Cooperative Purchase Contract with MGT of America, LLC to add Cost Allocation Services in the amount of $46,300 for a total contract award of $85,490 for Audit and Consulting Services.

1. Approve the First Amendment to the Cooperative Purchase Contract with MGT of America, LLC to add Cost Allocation Services in the amount of $46,300 for a total contract award of $85,490 for Audit and Consulting Services; and
2. Authorize the City Manager to execute the necessary documents.

On September 25, 2023, the City entered into a Cooperative Purchase Contract with MGT of America, LLC for the development of Citywide Cost Recovery Policy. The City is now seeking to expand the scope of the Contract to add Cost Allocation Services for a term of three (3) years. The September 2023 Cooperative Purchase Contract approved by Council was for $39,190. The First Amendment is in the amount of $46,300. The annual aggregate expenditure to MGT of America, LLC is anticipated to be $85,490, and will exceed $50,000, thereby, requiring City Council approval. 

The City annually prepares a Full Cost Allocation Plan, a 2 CFR Part 200 Cost Allocation Plan, and a Citywide Indirect Cost Rate based on the 2 CFR Part 200 Cost Allocation Plan with the assistance of a consultant.  A Cost Allocation Plan is a financial document that reports and identifies Citywide indirect costs and distributes those costs to benefiting departments and funds. Indirect costs are those costs associated with administrative or support divisions and sections such as Human Resources, Finance and the City Attorney's Office, that provide services to other sections and divisions of the City. The City intends to use these Cost Allocation Plans to allocate administrative and support costs to each allowable City fund to ensure each fund pays for its appropriate share of these costs and to calculate the appropriate indirect cost rate for Federal grants annually.

The annual Cost Allocation Plan is budgeted in the General Fund in account 001-09-402-1314-1-4206 for $16,500 for FY2023-24.

Priority Based Budget Key Community Priorities and Objectives High Performing Governance

• Maintain the organization’s fiscal stability through strong financial policies and best practices

Yes, on September 25, 2023, the City entered into a Cooperative Purchase Contract with MGT of America, LLC for the development of a Citywide Cost Recovery Policy. This First Amendment add to the scope of work for the consultant to perform.

1. Approve the First Amendment to the Cooperative Purchase Contract to add additional Auditing and Consultant Services; or
2. Do not approve the First Amendment and direct staff to conduct an independent procurement to procure Cost Allocation Services. This option is not recommended by staff as it may delay the required preparation of the Cost Allocation Plan.

Annually, City staff work with a consultant to prepare a Full Cost Allocation Plan and a 2 CFR Part 200 Cost Allocation Plan, a Citywide Indirect Cost Rate based on the 2 CFR Part 200 Cost Allocation Plan for the City. These Cost Allocation Plans are financial documents that report and identify Citywide indirect costs and distributes those costs to benefiting departments and funds based on Federal regulations and guidances. 

The Full Cost Allocation Plan utilizes a methodology that is in accordance with generally accepted accounting principles (GAAP).  Incorporated within GAAP are three basic principles related to the allocation of central service support costs to operating departments that have been adhered to in the preparation of the Cost Allocation Plan. First, costs should be necessary and reasonable for proper performance of a program. Second, costs should be charged or allocated to programs in accordance with relative benefits received. A program should only be charged for services it utilizes or benefits from and should only be charged in relation to benefits derived from the service. Third, costs should be accorded consistent treatment as either direct or indirect.  A cost should not be charged to a program as a direct cost if any other cost incurred for the same purpose in like circumstances have been allocated to the program as indirect costs. The methodology accommodates detailed analysis of all service areas through the provisions of a structure that identifies total costs (both direct and indirect) by activity and allocates/assigns costs to benefiting services utilizing a base that appropriately represents the level of benefit provided or derived from each activity by each service. The latest full Cost Allocation Plan allocated $7,420,990 of administrative and support cost to other City funds.

The City also prepares 2 CFR Part 200 Cost Allocation Plan to calculate a Citywide indirect cost rate that is allowable in accordance with federal regulations. The City uses this indirect cost rate to charge overhead cost to federal grants. 2 CFR Part 200 Cost Allocation Plans are different from a full Cost Allocation Plan as federal guidances and regulations limits what administrative costs are allowable to be allocated to federal grants.