USA Indirect Allocations


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Hi Guys,

My CFO and I are having a discussion about indirect allocations for a new project which we were given a grant for. In the grant proposal he did not budget any indirect expenses. However, I did an allocation because I thought it was the right thing to do. His reasoning is these grant is for people who do not incur any indirect expenses. However I do not agree, I feel that even though these people work remotely they still get a portion of the indirect allocations. Can anyone shed some light on what they've done in the past?
 
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Drmdcpa

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Depends on what the grant covers. It also depends on the cost drivers and allocation method used. But in general, any cost driver used to determine the amount billed against the grant should have some overhead or indirect costs associated with them assuming the grant allows for them.

For example an outside subcontractor still may cause increases in worker's comp costs. They also will take up some administrative costs to acquire, pay and supervise them.

Further certain overhead costs need to be allocated to every dollar of income. For example officers' salaries particularly the CEO but maybe not all VPs.

General liability insurance is another example of an overhead cost that needs to be allocated to every sales dollar particularly to subcontractors; they tend to increase liability exposure even when they carry their own coverage.

The cost of the home and satellite offices may also need to be allocated again particularly for the locations used by the CEO.
 
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Steve-LevelUp

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With grants that I have worked with in the past, we were only allowed to charge wages and not overhead. So it is possible that it specific to the language of the particular grant as to what the grant money can actually be used for. In this case, it was a grant from the Government of Canada, and they were clear in their stipulations. They did however, include a fixed % that can be allocated to overhead. So, for $100 in wages, you can add $40 in overhead, but this was a fixed rate and only dependent on wages. So, perhaps re-confirming the language in the grant itself might help resolve the question.
 

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