Interdepartmental Charges

What kinds of charges are billed between departments?

• Custodial costs for school civic center use and custodial services provided to lessees, charter schools, preschools, food services
• Field trips
• Vehicle repair
• Maintenance charges to schools, charter schools, and lessees
• Catering provided by the Food Services department
• Duplicating
• Fingerprinting and other on-boarding costs
• Mailing costs

Here’s an example for calculating labor rates for maintenance.  Labor_Rates_File

You’d think it would be fairly straightforward to charge another department for work performed.  However, there are various items to consider.

• Does the cost of collecting the fee outweigh the usefulness of collecting it?
• If you want schools and departments to follow certain established procedures, do you undercharge or provide the service for free to deter unauthorized activities?
• When charging out do you use historical actuals or a budgeted amount?
• Do you need to recoup all departmental costs, so that the department’s net annual cost is as close to zero as you can get it?  What happens if your charge-outs don’t recoup all costs. or if you over-collect?
• Do you carry forward un-recouped costs to the new year and attempt to recover these from this year’s users?
• Do you try to make a “profit” on charge-outs to cover expenses that are (for whatever reason) not charged out?
• Should outside entities be charged the same rate as internal customers?

Types of Costs

Costs to be charged out are in two general categories:  variable and fixed.  Variable charges for a vehicle repair job would be the actual cost of parts used in the repair as well as the cost of labor (so many hours at a rate per hour).  Fixed costs are such items as the cost of various tools and machinery used in the shop as well as the cost of the supervisor and his or her office staff, along with any costs to run the office.  If the fixed costs for a department are $50,000 and the mechanics put in a total of 10,000 productive hours per year, then in addition to the cost of their labor and parts, $5 per hour needs to be billed out for overhead.

Productive Hours

Employees are generally paid for 8 hours per day, 5 days a week, 52 weeks per year.  That’s 2080 hours per year.  However some of that paid time is for paid holidays and vacation.  Then there are sick days, meetings, time spent on paperwork and cleaning the shop.  Don’t forget the two daily paid breaks of 10-20 minutes each.  You can see that 2080 paid hours per year can easily translate into 1,500 or fewer productive hours per year.  Ideally all productive hours will be billed out and the mechanic’s total cost will be recouped in the process.  If a mechanic’s total annual cost is $80,000 then his hourly billable rate is $80,000 divided by, say, 1,500 productive hours ($53.33 per hour) not divided by 2,080 ($38.46 per hour).