How to Allocate Expenses Across Multiple Grants

When you have multiple grants funding similar work, some expenses will benefit more than one grant. Allocating these shared costs correctly is both an art and a compliance requirement.

This guide covers the methods, math, and best practices.

Why Allocation Matters

Compliance Reasons

• Federal grants require "reasonable" cost allocation
• Costs must be allocated consistently
• Auditors will test your methodology
• Incorrect allocation = audit findings

Practical Reasons

• Accurate grant budgets
• Fair reporting to funders
• Avoid overcharging one grant
• Avoid leaving money unspent

Types of Costs

Direct Costs

Costs that can be identified specifically with a particular grant.

Examples:

• Salary of a person working 100% on one grant
• Supplies purchased specifically for one program
• Travel for a specific grant activity

Allocation: Charge directly to the single grant (no allocation needed)

Shared Direct Costs

Costs that directly benefit multiple grants and must be allocated.

Examples:

• Salary of a person working on multiple grants
• Supplies used by multiple programs
• Shared equipment used by different projects

Allocation: Must be split among benefiting grants

Indirect Costs (F&A)

Overhead costs that benefit all activities.

Examples:

• Rent
• Utilities
• Executive salaries
• IT infrastructure

Allocation: Recovered via indirect cost rate applied to a base (MTDC, etc.)

Allocation Methods

Method 1: Time-Based (Best for Personnel)

Allocate based on actual time spent on each grant.

How it works:

1. Staff track time spent on each grant
2. Calculate percentage of time per grant
3. Allocate salary proportionally

Example: Employee salary: $60,000/year

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

Documentation Required:

• Timesheets or time logs
• Signed time certifications
• Consistent tracking methodology

Method 2: Percentage-Based (Common for Shared Costs)

Allocate using a predetermined percentage based on a reasonable basis.

Common bases:

• Direct labor hours or costs
• Direct costs
• Square footage (for space costs)
• Headcount
• Units of service

Example: Allocating Shared Supplies by Direct Labor Cost Total supplies: $10,000

• Grant A direct labor: $100,000 (50%)
• Grant B direct labor: $60,000 (30%)
• Grant C direct labor: $40,000 (20%)

Allocation:

• Grant A: $10,000 × 50% = $5,000
• Grant B: $10,000 × 30% = $3,000
• Grant C: $10,000 × 20% = $2,000

Method 3: Usage-Based (When Measurable)

Allocate based on actual usage metrics.

Example: Printing Costs by Pages Printed Total printing: $1,000

• Grant A: 600 pages (60%)
• Grant B: 400 pages (40%)

Allocation:

• Grant A: $600
• Grant B: $400

Works well for:

• Mileage (by trip destination)
• Printing (by project)
• Phone (by call logs)
• Postage (by project mailings)

Method 4: Headcount or FTE-Based

Allocate based on number of staff per grant.

Example: Office Supplies Total supplies: $5,000 Staff:

• Grant A: 3 FTEs
• Grant B: 2 FTEs

Allocation:

• Grant A: $5,000 × (3/5) = $3,000
• Grant B: $5,000 × (2/5) = $2,000

Method 5: Square Footage (For Space)

Allocate space costs by area used.

Example: Rent Allocation Total rent: $10,000/month Space usage:

• Grant A program area: 1,000 sq ft (40%)
• Grant B program area: 750 sq ft (30%)
• Shared/admin: 750 sq ft (30%)

Allocation (program portion):

• Grant A: $4,000
• Grant B: $3,000
• Admin/indirect: $3,000

Building an Allocation Plan

Step 1: Identify Shared Costs

List all costs that benefit multiple grants:

• Personnel (partial effort)
• Shared supplies
• Shared equipment
• Shared space
• Travel benefiting multiple grants

Step 2: Choose Allocation Bases

For each shared cost type, select a reasonable basis:

Cost Type	Recommended Basis
Personnel	Time worked
Supplies	Direct costs or headcount
Equipment	Usage hours or direct costs
Space	Square footage
Travel	Direct identification when possible

Step 3: Document Your Methodology

Write down:

• What costs are allocated
• What basis is used for each
• How calculations are performed
• When allocations are recorded (monthly, quarterly)

Step 4: Apply Consistently

The same methodology must be used:

• Across all grants
• Across all periods
• Regardless of budget status

Compliance Requirements

Federal Grants (Uniform Guidance)

2 CFR 200.405 requires that costs be allocable if they:

1. Are incurred specifically for the award
2. Benefit both the award and other work and can be distributed reasonably
3. Are necessary to the overall operation and assignable to the award per allocation principles

Key principles:

• Allocation must be based on benefits received
• Must be consistently applied
• Must be supported by documentation
• Cannot shift costs to avoid deficits

Common Compliance Issues

Issue 1: Inconsistent Methods Using different allocation methods for similar costs.

Fix: Document and follow a consistent methodology.

Issue 2: Missing Time Documentation Allocating personnel costs without time records.

Fix: Implement timesheets for all staff charged to grants.

Issue 3: Budget-Based Allocation Allocating based on available budget rather than actual benefit.

Fix: Allocate based on benefit, not budget availability.

Issue 4: Retroactive Changes Changing allocation percentages to meet budget targets.

Fix: Prospective changes only, with documentation.

Time Tracking for Personnel

Personnel is usually the largest allocation challenge.

Requirements

• Document time worked on each grant
• Periodic certifications of accuracy
• After-the-fact confirmation (not estimates)
• Contemporaneous records

Acceptable Methods

1. Time sheets — Daily or weekly
2. Time logs — Activity-based tracking
3. Personnel activity reports — Periodic certifications
4. Time tracking software — Automated tracking

What Auditors Look For

• Signed timesheets
• Supervisor approval
• Consistency with budget estimates
• Adjustment entries when estimates differ from actuals

Common Scenarios

Scenario 1: Staff on Multiple Grants

An employee works on three grants and administration.

Solution:

• Track time weekly
• Allocate salary/benefits based on actual time
• Adjust quarterly if needed
• Document changes in effort

Scenario 2: Shared Program Supplies

Supplies used by participants in multiple programs.

Solution:

• Track by program when practical
• Otherwise, allocate by participant count or direct costs
• Document the basis chosen

Scenario 3: Conference Attendance

Staff attends conference relevant to multiple grants.

Solution:

• Allocate registration based on time spent on each topic
• Or split evenly if broadly applicable
• Document rationale

Scenario 4: Shared Equipment Purchase

Equipment used by staff across multiple grants.

Solution:

• If major equipment ($5K+), may need different treatment
• For smaller items, allocate by user time or direct costs
• Track usage if practical

Avoiding Audit Findings

1. Document everything — Methodology, calculations, approvals
2. Be consistent — Same method for same cost types
3. Be reasonable — Allocations should make intuitive sense
4. Review regularly — Quarterly review of allocations
5. Adjust prospectively — Don't change history to fix budgets
6. Get it in writing — Document any funder-approved exceptions

Tools for Allocation

Manual Tracking

• Spreadsheets for allocation calculations
• Timesheets for personnel
• Monthly reconciliation

Automated Tools

• Grant management software with allocation features
• Time tracking systems
• Accounting system allocation modules

Best Practice

Use software that:

• Tracks time by grant
• Calculates allocations automatically
• Maintains audit trail
• Integrates with accounting system

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