Principal investigators (PIs) often have multiple concurrent funded projects. Costs must be charged to one or more projects in reasonable proportion to the benefit provided to each project. Allocation is the process of assigning a cost, or a group of costs, to one or more projects, and for a federal proposal allocation best practices are governed by the principles contained in the 2 CFR Part 200 (Uniform Guidance).
If an expense solely benefits one project, it should be charged entirely to that project. However, if a cost benefits two or more projects or activities, a split allocation is appropriate and allowable. Be sure to document the basis for the split allocation method that you choose at the time of the cost being incurred. Such a split must also be approved in advance by the Principal Investigator (PI) of the awards to which the costs are allocated. When it is not possible to allocate costs to the benefiting sponsored awards at the time when the goods or services are purchased, costs must be recorded in a non-sponsored account (i.e. DeptID), instead of being charged to a specific grant.
Note: If costs are initially recorded in a non-sponsored account, the eventual distribution of these costs to a sponsored award is a cost transfer that must comply with the University’s cost transfer procedure.
If a cost benefits two or more projects or activities in proportions that can be easily determined, without undue effort or cost, the cost should be allocated to the projects using these proportions.
Example: Two awards require the purchase of mice to conduct experiments. The specific aims for one award indicate that 150 mice are needed to conduct the research, and the specific aims of the second award require 50 mice to conduct the research. The PI orders 200 mice and allocates the cost of the mice 75% / 25% between the awards.
The individual that initiates the allocation transaction must have first-hand knowledge of the benefit to the sponsored project, and/or must have received the appropriate proportional allocation instructions in order to execute the purchase using this method.
If a cost benefits two or more projects or activities in proportions that cannot be easily determined due to the interrelationship of the work involved, then the cost may be allocated to the benefiting projects on any reasonable basis, which should logically relate to the type of expense incurred.
Examples of methodologies that can be used as a basis for allocating costs include:
Effort: The cost of lab supplies is allocated based upon the PI’s/lab personnel effort charged to each project.
FTE: The cost of renting space is allocated based upon the number of FTEs working on each project.
Number of experiments: The cost of syringes is allocated based upon the number of experiments performed on each project.
Number of hours: The cost of equipment is allocated based upon the number of hours logged on for each project.
Sampling: Cost of laboratory supplies is allocated based on actual usage records for a representative sample.
Number of patients served: The cost of tests is allocated based upon the number of patients served by each project.
Square footage: The cost of glasware for the two laboratories that are conducting similar research is allocated based upon the square footage of the two laboratories.
Costs may not be allocated based on:
Amount of available funds on a given award;
Budgetary convenience (to accommodate an award that is either over or under budget, budget is ending soon, etc.);
Avoidance of restrictions imposed by regulations or terms of a given award;
Offset (costs charged to budget A one-time and budget B the next time).
Allocation methodologies should be reviewed by the investigators and their LRAs periodically to ensure they continue to be appropriate and reasonable. Allocations based on FTE’s must be updated to reflect any changes in headcount or effort. Methodologies based on sampling, surveys, etc., should be reviewed, updated, and approved by the PI at least once each fiscal year and/or when new awards are received.
Please contact your Central Post-Award representative with questions regarding the allocation of expenses to sponsored awards.