4.13 Allocation of Joint Costs

4.13.2 Allocable Costs¹

Effective date: TBD

1. A cost is allocable to a particular grant or cost objective¹ in accordance with relative benefits received. If treated consistently with other costs incurred for the same purpose, then the cost is allocable. The allocable standard is met if the cost:²
   • Is incurred specifically for the grant;
   • Benefits both the grant and other work, and can be distributed in reasonable proportions to the benefits received;
   • Is necessary to the overall operation of the recipient and is assignable in part to the grant.
2. All activities benefitting from the recipient's indirect facilities and administration (F&A) cost, including unallowable activities and donated services by the recipient or third parties, will receive an appropriate allocation of indirect costs.³
3. Any cost allocable to a particular grant or other cost objective under the principles provided for in this part may not be shifted to other grants to overcome funding deficiencies, to avoid restrictions imposed by law or by the terms and conditions of the grants, or for other reasons. This exclusion would not preclude the recipient from shifting costs that are allowable under two or more federal grants in accordance with existing federal statutes, regulations, or the terms and conditions of the federal grants.⁴
4. Direct cost allocation principles: If a cost benefits two or more projects or activities in proportions that can be determined without undue effort or cost, the cost must be allocated to the projects based on the proportional benefit. If a cost benefits two or more projects or activities in proportions that cannot be determined because of the interrelationship of the work involved, then, notwithstanding paragraph (c) above, the costs may be allocated to the benefitted projects on any reasonable documented basis.⁵

• ¹ 2 CFR 200.405
• ² 2 CFR 200.1 "Cost objective"
• ³ 2 CFR 200.405(a)
• ⁴ 2 CFR 200.405(b)
• ⁵ 2 CFR 200.405(c)
• ⁶ 2 CFR 200.405(d)

4.13.3 Direct Costs¹

Effective date: TBD

Direct costs are costs that can be identified specifically with a particular final cost objective, such as a federal grant, or that can be directly assigned to specific activities with relative ease and with a high degree of accuracy.

• ¹ 2 CFR 200.413

4.13.4 Indirect (F&A) Costs

Effective date: TBD

Indirect (F&A) costs are costs incurred for a joint purpose benefitting more than one cost objective, and that are not readily assignable to the cost objectives specifically benefitted. The allocation method used to distribute joint costs must be based on a reasonable measurement of the benefit received by each cost objective and shall be supported by a written cost allocation plan. This cost allocation plan must include all recipient funding. Cost allocation plans must distribute costs based on actual activities. Budget estimates do not qualify as support for final charges. However, the effort required distributing the cost should not be disproportionate to the amount of costs charged.

4.13.5 Cost Allocation Plans¹

Effective date: TBD

Costs shall be allocated according to the following provisions:

1. Written Support. For audit purposes, a written plan for the allocation of costs related to all funding sources is necessary to support the distribution of any joint costs related to the grant. Accounting records must support the final charges allocated by the plan.
2. Content. The allocation plan of the recipient shall cover all joint costs, including costs to be allocated under plans of other non-federal entity units which are to be included in the costs of DWD-DET programs. The cost allocation plan shall be presented in a single non-Federal entity-wide document. The allocation plan shall contain, but not necessarily be limited to, the following:
   • An organization chart of the non-Federal entity.
   • A listing of all programs administered by the non-Federal entity.
   • A description and explanation of the activities/services performed by the non-Federal entity.
   • The procedures used to identify and a listing of all allocated costs.
   • The methods and justification used in distributing costs, including examples of the allocation.
   • Certifications that the plan is in accordance with OMB A-87.
   • Other data as required by the grant agreement.
3. Methodology. The cost allocation methodology must be consistent with GAAP and applicable OMB Circulars and be accepted by the recipient's independent auditors.

• ¹ 2 CFR 200.1 "Cost allocation plan"