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Whenever possible, expenses should be individually charged to a specific sponsored agreement. When this is not appropriate, allocation of expenses is allowable. A-21 defines allocation as the process of assigning a cost to one or more cost objectives in reasonable and realistic proportion to the benefit provided, or to another equitable relationship that exists.
A cost is allocable to a sponsored agreement if:
- It is incurred solely to advance the work under the sponsored agreement.
- It benefits both the sponsored agreement and other work of the institution, in proportions that can be approximated through use of reasonable methods.
- It is necessary to the overall operation of the institution and, in light of the principles provided in the Circular, is deemed to be assignable in part to sponsored projects.
Criterion (1) above indicates the best approach to justify a cost on a specific sponsored agreement. Certain types of costs incurred for the benefit of a specific research agreement may easily be uniquely identified. Examples include approved pieces of equipment, animal costs, or chemicals purchased solely for one project.
Other costs may clearly be allowable and reasonable but a question arises: how best to allocate among one or more sponsored agreements that benefit from that cost? The most typical example of a cost that must be allocated among sponsored projects is general laboratory supplies. A-21 acknowledges that it is sometimes impossible to precisely identify or allocate such costs; governing regulations thus allow for the exercise of judgment: "A precise assessment of factors that contribute to costs is not always feasible, nor is it expected. Reliance, therefore, is placed on estimates in which a high degree of tolerance is appropriate." A-21, J8b(1)c.
Allocability Criteria
At Harvard University, an acceptable cost allocation methodology must meet the following criteria:
- The cost allocation methodology must provide a reasonable
linkage between the cost incurred and the benefit to individual
sponsored agreements.
- The cost allocation methodology must be identified
in advance of the allocation of costs and documented
in a way that a person unfamiliar with research management would understand.
For example, a cost allocation methodology should be determined in advance and applied for an entire fiscal year or project period.
- The cost allocation methodology must be applied
uniformly to the entire population of sponsored agreements among
which similar costs are incurred. The population may consist of the portfolio
of sponsored agreements of an individual investigator if the costs, e.g.
supply costs, can be segregated from the purchases of all other investigators.
Or the appropriate population may be the entire portfolio of research
agreements of departments in one similar area.
For example: If the population is Dr. X's 3 research grants and the cost allocation methodology is total awarded amount, then the costs for pipettes purchased for the lab must be allocated based on the relative size of the three grant budgets.
- It is not acceptable to use "remaining unspent funds" or "that it is this
grant's turn" as an allocation methodology.
- Using relative square footage occupied by individual research grants is
not likely to be a reliable measure
for allocating direct laboratory charges due to use of shared equipment
and infrastructure.
- The fact that an awarding agency approved an item in the awarded budget is not adequate justification for charging an expense to that agreement unless all the other criteria noted above are met.
Some acceptable cost allocation methodologies include the following:
- Allocation based on total non-salary grant budget awarded.
- Allocation based on headcount in the laboratory.
- Allocation based on the number of experiments performed.
- Allocation based on the amount of another lab cost that highly correlates to the need for the cost being allocated, e.g. animal costs.
