Allowability of Costs
9.7 Allowability of Costs
(See also Chapter 6.1: Principles of Sponsored Project Support)
9.7.1 Cost Allocations
Goods and services purchased by the University to conduct research may often benefit more than one sponsored award. Such costs must be allocated to the sponsored awards in proportion to the actual benefit received by the awards. If it is impossible or impractical to determine how much of the goods or services are actually used for each award, an allocation methodology must be developed that reasonably estimates the actual benefit to each award. Costs are then distributed to each benefiting sponsored award using the allocation methodology.
OMB Circular A-21 allows for two methods for allocating an allowable direct cost to two or more grants:
• Proportional Benefit: If a cost benefits two or more projects or activities in proportions that can be readily determined, the cost should be allocated to the projects.
• Interrelationship: 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.
Examples of acceptable allocation methodologies include: effort of research personnel (headcount or fulltime employees), laboratory space (square footage), number of experiments, actual usage records, or modified total direct cost budget (excluding subawards) of benefiting sponsored projects.
Please consult PAFO for assistance in developing appropriate cost allocation methodologies.