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Examples of Allocation Methods

Occasionally, you may need to purchase supplies and then allocate those materials and their costs to several projects. Purchases of chemicals, glassware, or other stores, for example, may be made “in bulk” and then apportioned to the various projects on which they will be used.

It is sometimes impossible to precisely allocate such costs, and governing regulations allow for the exercise of judgment

Distribution methods must be REASONABLE and must be DOCUMENTED. A 50 – 50 allocation of costs between two projects may be appropriate, but there must be an explanation in the project files to support that allocation. The basis for the allocation should RELATE TO THE WORK BEING PERFORMED on the projects. For example, some possible allocation bases follow:

Project headcount, or number of researchers on each project receiving the allocation compared to the total number of all researchers on all projects receiving the allocation

  • Number of experiments/projects being performed and estimated usage for each project
  • Square footage of lab space for each project receiving the allocation, compared to the total square feet of all projects receiving the allocated costs
  • The amount of some other related project costs, e.g., lab animal costs

You may have noticed a few allocation methods that are NOT on this list. It is NOT appropriate to allocate costs solely on the basis of which project has the most money. It is also NOT appropriate to pool costs and charge them all to one project in one month and then to another – unless the materials involved are actually being used that way.

Some examples of applying allocation methodologies follow:

  • Maintenance agreement for scientific equipment. If the equipment is utilized 50% on project A, 20% on project B and 30% for general academic purposes, the cost of the maintenance should be allocated in the same proportions (50% to Project A, 20% to Project B, and 30% to a departmental account).
  • Honoraria for a guest speaker. If the speaker’s topic of discussion is relevant to both a project and to the general field of study, thus is attended by not only the project’s research staff but other department staff as well, then one possible allocation is based on the attendees from the project as a percent of all attendees.
  • Equipment. If a piece of equipment is to benefit more than one research project, an estimate of the use on each project could be used to determine an allocation percentage. Of course, the estimated use should be compared to actual use after a reasonable period of time, with any necessary adjustments made to the allocation percentage.
  • Supplies. Supplies (for example, isotopes and chemicals) may be purchased in bulk and then used on various projects. It may be possible to internally requisition supplies and charge actual cost to a project. For example, if 100 units are purchased and placed in the Department’s central area, then 10 units are requisitioned for Project A, Project A would be charged for 10% of the cost. If a process for internally requisitioning supplies does not exist, then the estimate of what portion of the purchase is to be expended for each project should be the basis for allocating the cost. Of course, the estimated use should be compared to actual use after a reasonable period of time, with any necessary adjustments made to the allocation percentage.

There is no “one right way” to allocate costs. Methods will vary based on circumstances. The PI needs to exercise judgment, and then to document the selected method in the project files. A memo to the file can describe how, in the PI’s judgment, the benefits to the involved projects warrant that allocation of costs.

NOTE: Clerical and administrative costs may not be collected and allocated among projects. Office supplies and other administrative expenses are presumed to be an indirect cost and, in order to be charged directly, they must be specifically identified to and budgeted for a particular project. For Federal sponsors, this must be a “major project” as explained in Module 6.