How to Allocate Expenses Across Multiple Grants

When one cost benefits several grants, you split it based on the benefit each grant received, and you document how you did it. Available budget is not a reason to charge a grant. Federal rules apply to federal awards, including federal money you receive through a pass-through entity. Other grants follow their agreements and your organization's accounting policies.

The guide covers allocation methods, worked examples, and practices that hold up in an audit.

Why allocation matters

Allocation affects both compliance and the accuracy of your reports.

Compliance reasons

• Under 2 CFR 200.403 and 200.405, costs charged to federal awards must be allowable, reasonable, allocable, and treated consistently.
• Auditors test your allocation method.
• An incorrect allocation can lead to an audit finding.

Practical reasons

• Grant budgets stay accurate, and funders get fair reports.
• No single grant pays more than its share.
• You can see the true cost of each program.

Types of costs

Direct costs

A direct cost can be tied to one specific grant, e.g., the salary of a person who works only on that grant, supplies bought for one program, or travel for one grant activity. You charge the whole cost to that grant, so you don't need to allocate it.

Shared direct costs

A shared direct cost directly benefits more than one grant, e.g., the salary of a person who works on several grants, supplies used by several programs, or equipment used by several projects. You split these costs among the grants that benefit.

Indirect costs

Indirect costs, also called facilities and administrative (F&A) costs, support the whole organization. Examples include rent, utilities, executive salaries, and IT systems.

Treat each type of cost the same way every time, as either direct or indirect, under your written policy. For a federal award, use the indirect cost rate the award allows, e.g., a negotiated rate or the de minimis rate, and apply it to the base the rate specifies. The de minimis rate uses a modified total direct cost (MTDC) base, but don't assume that base applies to every award.

Allocation methods

Method 1: Time worked (best for personnel)

The time method splits a person's pay by the actual time they spent on each grant. First, staff record their time on each grant. Second, you calculate each grant's share of the time. Third, you allocate the salary in the same proportion.

For example, an employee earns $60,000 a year:

• Grant A: 50% of time = $30,000
• Grant B: 30% of time = $18,000
• Grant C: 20% of time = $12,000

For federal awards, 2 CFR 200.430(g) requires salary charges to be based on records that accurately reflect the work performed. The records must be supported by your internal controls, and they must cover all of the person's paid activity. The rule doesn't require a specific format such as timesheets, signatures, or semiannual certifications. Budget estimates can be used for interim charges only, and you must adjust them when the actual work differs.

Method 2: Percentage of a reasonable base (common for shared costs)

The percentage method splits a cost using a percentage drawn from a reasonable base. Common bases include direct labor hours or costs, total direct costs, square footage for space costs, headcount, and units of service.

For example, you split $10,000 of shared supplies by direct labor cost:

Grant	Direct labor	Share	Supplies allocated
Grant A	$100,000	50%	$5,000
Grant B	$60,000	30%	$3,000
Grant C	$40,000	20%	$2,000

Method 3: Measured usage

The usage method splits a cost by actual, measured use. For example, $1,000 of printing is split by pages printed. Grant A printed 600 pages (60%), so it gets $600. Grant B printed 400 pages (40%), so it gets $400.

Usage works well for mileage by trip, printing by project, phone charges by call log, and postage by mailing.

Method 4: Headcount or FTE

The headcount method splits a cost by the number of full-time equivalent staff (FTEs) on each grant. For example, $5,000 of office supplies is split between Grant A with 3 FTEs and Grant B with 2 FTEs. Grant A gets $5,000 × 3/5 = $3,000, and Grant B gets $5,000 × 2/5 = $2,000.

Method 5: Square footage (for space)

The square footage method splits space costs by the area each activity uses. For example, rent is $10,000 a month:

Space	Square feet	Share	Rent allocated
Grant A program area	1,000	40%	$4,000
Grant B program area	750	30%	$3,000
Shared and admin area	750	30%	$3,000 (indirect)

Building an allocation plan

Step 1: List the shared costs

List every cost that benefits more than one grant, e.g., personnel with split effort, shared supplies, shared equipment, shared space, and travel that serves several grants.

Step 2: Choose a base for each type of cost

Type of cost	Suggested base
Personnel	Time worked
Supplies	Direct costs or headcount
Equipment	Hours of use or direct costs
Space	Square footage
Travel	Direct charge when possible

Step 3: Write down the method

Your written method should state which costs you allocate and which base you use for each. It should also explain how you do the calculation and when you record allocations in your close and reporting schedule.

Step 4: Apply it consistently

Use the same method in the same circumstances. A different base can be right when the benefit is different, but document why. Never allocate based on a grant's remaining budget. Under 2 CFR 200.405(c), you also can't move a cost to another federal award to cover a funding shortfall or to avoid award restrictions.

Federal requirements

Under 2 CFR 200.405(a), a cost is allocable to a federal award if it meets any one of these tests:

1. It is incurred specifically for the award.
2. It benefits both the award and other work, and you can split it using a reasonable method.
3. It is necessary to the overall operation of the organization, and part of it can be assigned to the award under the cost principles.

Under 200.405(d), if you can determine the share of benefit without undue effort, you must allocate by that share. If the work is so intertwined that you can't determine the shares, you may use any reasonable, documented basis.

In practice, base each allocation on the benefit received, apply it consistently, and support it with documentation.

Common compliance problems

Inconsistent methods

The problem is using different methods for similar costs. To fix it, write down one method and follow it.

Missing records of time worked

The problem is allocating personnel costs without records of the work performed. To fix it, set up records and controls that support the work performed and the payroll split. Timesheets are one option, but no single format is required.

Allocating by available budget

The problem is splitting costs based on which grant has money left. To fix it, allocate based on benefit.

Changing past allocations to hit budget targets

The problem is changing old percentages to make a budget work. To fix it, never change an allocation just to use up a budget. Correct a real error with support, approval, and an audit trail. When the facts change, apply the new estimate going forward.

Records of time worked for personnel

Personnel costs are usually the hardest costs to allocate. Use records that accurately reflect the work performed, and reconcile interim estimates to actual activity. Timesheets, activity logs, payroll distribution reports, or an integrated time system can all work, depending on the facts. Follow any stricter award terms or organizational policy.

Auditors usually look for these things:

• The records are part of your official records.
• Your review controls actually ran.
• The records cover all paid activity and every grant or activity the person worked on.
• You made timely, supported adjustments when interim estimates differed from actual activity.

Common scenarios

Staff on several grants

An employee works on three grants and on administration. Record the time each week, and allocate salary and benefits by actual time. Reconcile and adjust on the schedule in your written policy, and document changes in effort.

Shared program supplies

Participants in several programs use the same supplies. Track the supplies by program when practical. Otherwise, allocate by participant count or direct costs, and document the base you chose.

Conference attendance

A staff member attends a conference that serves several grants. Allocate the registration by the time spent on each grant's topics, or split it evenly if the content applies broadly to all of them. Document the reason.

Shared equipment purchase

Staff on several grants will use a new piece of equipment. First, check whether the item meets the federal definition of equipment and whether award approval, property, or disposition rules apply. Under 2 CFR 200.1, equipment is property with a useful life of more than one year and a per-unit cost at or above the lower of your capitalization level or $10,000. For smaller items, allocate by user time or direct costs, and track usage if practical.

Avoiding audit findings

1. Document the method, the calculations, and the approvals.
2. Use the same method for the same type of cost.
3. Make sure each allocation is reasonable for the cost.
4. Review the methods when the facts change and on the schedule in your policy. No federal rule requires a quarterly review.
5. Correct errors with a supported cost transfer, and never rewrite history just to fix a budget.
6. Get any funder-approved exception in writing.

Tools for allocation

Manual tools include spreadsheets for the calculations, timesheets for personnel, and a monthly reconciliation. Automated tools include grant management software with allocation features, time tracking systems, and allocation features in your accounting system.

When you choose software, look for tools that track time by grant, calculate allocations, keep an audit trail, and connect to your accounting system.

How GrantLink supports this today

QuickBooks Online remains your accounting system. In GrantLink, you add a grant by hand or by uploading its award documents. Then, in the grant's QuickBooks section, you choose the QuickBooks Customers, Projects, Locations, or Classes for that grant under Expenses and Money received. GrantLink automatically allocates matching QuickBooks expense activity to the grant. For shared costs and exceptions, you can classify a transaction or split it across grants on the Ledger page.

GrantLink is read-only toward QuickBooks by default, so allocations in GrantLink don't change your QuickBooks transactions. An admin can allow specific QuickBooks updates in Settings > QuickBooks > Permissions, and each update still needs its own review before GrantLink applies it.

Sources

• 2 CFR 200.1, definitions, including equipment and modified total direct cost
• 2 CFR 200.403 and 200.405, allowability and allocable costs
• 2 CFR 200.430, compensation for personal services, with documentation standards in paragraph (g)
• 2 CFR 200.439, equipment and other capital expenditures, including prior approval rules