Appendix 14

Administrative Costs

HOW TO DETERMINE

a\. Absence of Guidelines. The Office of Management and Budget

(OMB) has not published any guidelines on developing

administrative cost charges (what it costs HUD to collect the

claim) to be recovered from the debtor. Accordingly, the

following fixed monthly charge has been developed for assigning

a fair share of administrative costs attributable to each claim

owed HUD.

b\. Factors Used. The cost factors used relate to accounting,

claims collection, and automation operations with a view to

assigning reasonable identifiable costs.

1\. Labor cost expended is figured based on the average grade

of personnel who participate in recording, billing, and

collecting delinquent debts.

a\. Accounting (Estimated).

GS-7, Step 1 \$17,824 per annum

average salary

Plus (per OMB Circular):

Retirement 24.7%

Life and health insurance 4.0

Workman\'s compensation 1.9

Annual, sick, and holiday

leave 18.0

Supervision and supplies 20.0

68.6%

\$17,824 + (17,824 x .686) divided by 2,080 hours =

\$15/hr.

Use factor of 15/60 or .25 times minutes

b\. Claims Collection (Random Sample).

GS-12, Step 6 \$35,503 per annum

average salary

\$36,503 + (36,503 x .686) divided by 2,080 hours = \$30/hr.

Use factor of 30/60 or .50 times minutes

Page 1 of 4 OCT 26 1987

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Appendix 14

Administrative Costs

HOW TO DETERMINE (continued)

2\. In conjunction with the HUD Office of Information Policies

and Systems (IPS), it was determined that the cost of the

central processing unit (CPU) is 7 cents per second and the

cost of mass storage of data is \$1.70 per megabyte/month.

The costs are based on hardware rental and maintenance, and

do not include overhead items such as operators, space,

electricity, supervision, and management. The actual use

of CPU and storage facilities by CCO\'s is minimal;

therefore, further calculation and use of ADP cost data

per claim is not considered cost effective and will not be

costed to delinquent debtors.

3\. Collection costs are calculated on a manual basis since

automated operations are primarily restricted to inventory

and reporting of claims in the Delinquent Debt Control

(A97) System.

Preparation of demand letter 30 minutes

Recording 15 minutes

Aging (available in A97) 5 minutes

Interest calculation 15 minutes

Penalty computation 10 minutes

Establishing claim file 30 minutes

Processing claim file 60 minutes

4\. Application of these factors will be done by personnel

involved with a debt after it becomes delinquent (claim).

The costs factored will be entered onto the Claims

Collection Checklist, (See Appendix 12) and computed on an

item or time basis as appropriate.

OCT 26 1987 Page 2 of 4

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Appendix 14

Administrative Costs

WORKSHEET

Debtor \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

HUD Claim No. \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

PROGRAM ACCOUNTING CLAIMS

DELINQUENT DEBT Initials/Time Initials/Time Initials/Time

FUNCTIONS Date Date Date

Demand letter(s)

Recording

Aging

Interest Calculation

Penalty Computation

Establishing Claim

File

Review Analysis

Other (specify):

Total Time

x Factor .50 \$

Total Time

x Factor .25 \$

Total Time

x Factor .50 \$

Grand Total \_\_\_\_\_\_\_\_\_\_\_\_

Time \_\_\_\_\_\_\_\_\_\_\_\_

Cost \$\_\_\_\_\_\_\_\_\_\_\_\_

NOTE: Insert this sheet in the claim file.

Page 3 of 4 OCT 26 1987

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Appendix 14

Administrative Costs

SAMPLE CALCULATIONS

Accounting Office

Recording debt 15 minutes

Calculating Interest 15 minutes

Aging 5 minutes

Total 35 minutes

Apply factor .25

Cost \$8.75

Claims Collection

Preparing demand letters (2) 60 minutes

Recording claim 15 minutes

Computing penalty 10 minutes

Processing claim file 60 minutes

Total 85 minutes

Apply factor .25

Cost 42.50

Program

Preparing demand letter (initial) 30 minutes

Establishing claim file 30 minutes

Total 60 minutes

Apply factor .50

Cost \$30.00

Total \$81.25

The above is only an example. In actual practice, the functions may

vary by individual office and time as to who performs what. As Field

Office performance data is developed and reported, the times noted

here will be adjusted appropriately.

OCT 26 1987 Page 4 of 4

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