To ensure that it charges its clients appropriately for the work it performs, General Services should reassess the construction unit's methodologies for determining the hourly burden rate and direct administration fees.
DCU has revised its rate and cost estimating processes for the 2013/14 fiscal year to fully address the State Auditor's concerns. Specifically, the revised process provides that DCU's hourly burden rate be calculated based on prior year expenditure data and projected billable hours. Further, the process provides that a predetermined percentage for various individual types of administrative fees will no longer be added to estimates for new projects started during the 2013/14 fiscal year. Instead, the costs are either being included in the hourly burden rate or estimated individually on a project by project basis.
The Department of General Services has revised its method for calculating its hourly burden rate and applying direct administration fees, using prior year expenditure data and billable hours, and adjusting for any known or projected increases or decreases. We reviewed the department's methodology for determining its hourly burden rate and determined the process is based on supportable information and is mechanically correct.
General Services revised its rate-setting process for fiscal year 2013-14 to ensure that the hourly burden rate is accurately and properly calculated based on prior year expenditure data and projected billable hours.
General Services did not provide the revisions made by its construction unit or the methodology for determining the direct administration fee.
General Services stated that its construction unit will revise its rate-setting process for fiscal year 2013–14 to fully address the state auditor's concerns. General Services also stated that the revised process will ensure that the construction unit's hourly burden rate and direct administration fees are accurately and properly calculated based on prior year expenditure data and projected billable hours. Further, General Services stated that, to date, the construction unit has consulted with General Services' budget, accounting, and information technology staff on improvements that can be made to its rate and fees calculation function. (See 2013-406, p. 174)
Agency responses received after June 2013 are posted verbatim.