backBack to Nova Southeastern University
NSU Research
Office of Sponsored Programs

Allocating Expenses to Sponsored Awards

  1. Research
  2. Sponsored Programs
  3. Resources
  4. Allocating Expenses to Sponsored Awards

Please review and keep for easy reference the Quick Guide for Sponsored Project Expenses in Ariba & Concur.

General Guidance

Principal Investigators/Project Directors (PI/PDs) often have multiple concurrent projects, whether they are sponsored or non-sponsored. Costs must be charged to one or more projects in a reasonable proportion to the direct benefit provided to each project. Allocation is the process of assigning a cost, or a group of costs, to one or more projects. All federal financial assistance awards (grants and cooperative agreements) must adhere to the requirements outlined in 2 CFR 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart E of 2 CFR 200 outlines the cost principles, or general rules of what federal funds are allowed to be spent on. Some sponsors may impose additional restrictions or require prior approval for certain allocation methodologies. Always review award terms and consult the Office of Sponsored Programs if unsure.

If an expense solely benefits one project, it should be charged fully to that project. If a cost benefits two or more projects or activities, a split allocation is appropriate. The basis for the split allocation method should be documented at the time of the cost being incurred and approved by the PI/PD. If you are unsure how to allocate a cost before making the purchase, contact your OSP Grant Officer to avoid the need for corrections later. Allocation decisions must be based on the relative benefit received by each project—not convenience, funding availability, or administrative ease.

Allocable cost: A cost is allocable to a particular sponsored project, if the goods or services involved are specifically for the benefit of the sponsored project, it benefits both the sponsored project and other work of the university that can be distributed based on proportions that may be approximated using reasonable methods, and it is assignable in part to the sponsored project.

Allowable Cost: A cost is allowable to a sponsored project if it is necessary and reasonable for the performance of the project; it conforms to the applicable cost principles and any limitations or exclusions set forth by the sponsor; it is consistent with policies and procedures that apply uniformly to sponsor-financed and other activities of the university; it is allocable to the project; and the necessary and proper authorizations have been obtained, as applicable (also refer to OSP Policy No. 39 – Prior Approval Requirements).

Direct cost: Those costs that can be identified specifically with a particular final cost objective, such as a federal award, or other internally or externally funded activity, or that can be directly assigned to such activities relatively easily with a high degree of accuracy. Typical costs charged directly to a sponsored award include compensation of employees who work on that award, their related fringe benefit costs, the costs of materials and supplies, and other items of expense (including subawards) that are specifically identifiable to the sponsored project.

Facilities and Administration (F&A) Costs/Indirect Costs: Those costs incurred for a common or joint purpose benefitting more than one cost objective that cannot be readily assigned to a particular sponsored project. F&A costs are also referred to as "indirect costs”. Examples of F&A costs include:

  • Depreciation and interest costs associated with the University’s physical plant
  • Operating and maintenance costs such as utility costs, security costs, and custodial costs
  • Common administrative functions such as payroll and purchasing.

Reasonable cost: A cost that does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost. In determining reasonableness of a given cost, consideration must be given to (a) whether the cost is of a type generally recognized as ordinary and necessary for the performance of the sponsored project, (b) the restraints or requirements imposed by such factors as arm’s length bargaining, federal and state laws and regulations, and sponsored agreement terms and conditions, (c) market prices for comparable goods or services for the geographic area; (d) whether the individuals concerned acted with prudence in the circumstances considering their responsibilities to the university, its employees, its students or membership, the public at large and the sponsor, and (e) whether the university significantly deviates from its established practices and policies regarding the incurrence of costs.

Unallowable cost: A cost that is not allowed to be charged to a sponsored project.

Proportional Benefit: 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. 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.

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.

Interrelationship Benefit: 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.

A PI spends 70% effort on Award A and 30% effort on Award B. The PI uses lab supplies totaling $6,000/month on the two Awards. Award A is charged $4,200 (70% of $6,000) and Award B is charged $1,800 (30% of $6,000).

A Research Assistant spends 50% effort on Award A and 50% effort on a non-sponsored project. The Research Assistant uses lab-maintained and owned dive gear equally for both projects so as each project is charged 50/50 for the dive gear. The dive gear log maintained in the lab reflects this distribution.

  • FTE: The cost of renting space is allocated based upon the number of FTEs working on each project.

A research center is located remotely and pays $10,000 in monthly rent. There are three FTEs employed on Award A, six FTEs employed on Award B, and one FTE paid from another non-award funding source. These are all the FTEs at this site and the only two Awards with work performed and managed at this site. Award A should be charged $3,000 monthly rent (3/10 FTEs x $10,000 monthly rent) and Award B should be charged $6,000 (6/10 FTEs x $10,000 monthly rent). The remaining $1,000 monthly rent cannot be charged to either Award.

  • Number of experiments: The cost of syringes is allocated based upon the number of experiments performed on each project.

A Principal Investigator uses syringes to conduct experiments on two of their research Awards. The PI keeps a log of how many experiments are performed on each Award each week. Syringes are ordered every two weeks at $1 per syringe. The log indicates the following:

Award A: Week 1: 25 Experiments, Week 2: 39 Experiments
Award B: Week 1: 19 Experiments, Week 2: 16 Experiments

The total cost of the syringes is $99 (99 experiments x $1/syringe). Award A should be charged $64 (64 experiments x $1/syringe) and Award B should be charged $35 (35 experiments x $1/syringe).

  • Number of hours: The cost of equipment is allocated based upon the number of hours logged on for each project.

A researcher uses the same specialized computer program for two Awards. Because the Awards require significantly different usage of the program and the tasks are long, the researcher keeps a log of how much time they use the program for each Award, rounded to the hour. The department is billed quarterly for use of the program. At the end of the quarter, the amount billed is $500 for 50 hours ($10/hour) of work on the two Awards. The researcher’s log shows that 40 hours were used on Award A for a cost of $400 and 10 hours were used on Award B for $100.  

  • Sampling: Cost of laboratory supplies is allocated based on actual usage records for a representative sample.
  • Usage: The cost of lab supplies allocated based on the quantity used on each Award.

A Principal Investigator uses 5 gallons of solution per month on Award A and 7 gallons of the same solution per month on Award B. The department orders 12 gallons of solution per month at $10 per gallon including tax and shipping for a total cost of $120. Award A should be charged $50 ($10/gallon x 5 gallons) and Award B should be charged $70 ($10/gallon x 7 gallons).

  • Number of patients served: The cost of tests is allocated based upon the number of patients served by each project.

Allocation methodologies should be reviewed by the PI/PD periodically to ensure that they continue to be appropriate and reasonable. Allocations based on FTEs must be updated to reflect changes in 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 OSP Grant Officer with questions regarding the allocation of expenses to sponsored awards.

The following allocation practices are generally unacceptable because they do not meet University standards for a high degree of accuracy or do not consider actual relative benefit.

  • Rotating charges among sponsored projects or activities on a monthly basis without establishing that the rotation schedule reflects the relative benefit to each sponsored project or activity.
  • Using any allocation methodology that is based only on available sponsored funds.
  • To avoid restrictions imposed by law, terms of the sponsored award, or for other reasons of convenience.
  • Budgetary convenience, e.g., accommodating an award that is either over or under budget.
  • Offset where costs are charged to Award A one-time and Award B the next time.
  • Describing an expense inaccurately to confound understanding of what the expense is and, therefore, how it benefits the project or activity.
  • Charging expenses exclusively to sponsored projects when the expense also supports non-sponsored activities.
  • Assigning charges to sponsored projects or activities in advance of the benefit to the project.

Assigning charges directly to sponsored projects when they are consistently treated as indirect costs in like circumstances.

  • Once the allocation methodology has been determined and approved, retain the documentation in the department in accordance with sponsor terms, federal regulations and University records retention policy.
  • Document the type of costs to be included in the allocation methodology (e.g., consumable lab supplies, animal per diems, equipment service maintenance contracts, rent on non-federal awards).
  • Document the rationale or logic that supports the linkage between costs incurred and proportional benefit to all benefiting projects.
  • Document the determination or calculation of percentages used to allocate costs to all benefiting projects, including all supporting metrics, such as effort, FTEs, etc.
  • Document the process for updating the methodology, including the frequency of review, revision, and approval to ensure that costs remain allocated based on relative benefit to all benefiting projects.
  • If costs are accumulated in a research incentive account, document the account string and its timely and complete reconciliation.
  • If the allocation requires a calculation for each distribution, attach documentation supporting the calculation to each allocation journal entry.
  • If the allocation does not require a calculation for each distribution and uses a department-approved methodology, document the journal entry with support for the expenditure, as required by University policy.