Brown must comply with the federal regulations in the Cost Accounting Standards (CAS) and the Office of Management and Budget (OMB) Uniform Guidance. For costs benefiting a single project, expenses should be allocated and directly charged to that project.

Uniform Guidance (§ 200.405) stipulates that it is necessary to substantiate the proportional benefit of costs when costs benefit two or more projects:

The Division of Research’s allocation methodology guidance meets the reasonableness and documentation requirements in the Uniform Guidance. It guides users to apply a reasoned basis to a recurring cost, or a recurring group of costs, according to the anticipated proportional benefit that advances the work of each project or activity.

This guidance is applicable to all PIs and department administrators at the University within all schools, units, divisions, University-wide initiatives and centers, who are involved with the initiation, administration and conduct of sponsored projects.

All Brown PIs, faculty and staff are responsible for monitoring the expenditures throughout the lifecycle of their sponsored projects to ensure that costs are allocated in accordance with this guidance.

Principal Investigators (PIs)

PIs have primary responsibility for ensuring compliance with federal, sponsor and University regulations as well as the monitoring of expenditures, timely review and correction of errors and proper allocation of expenses. The PI should perform routine reviews of award expenditures and allocation methodologies to ensure alignment with relative benefit.

Grant Managers and Department or Local Level Managing Units 

Individuals responsible for account monitoring and management assist PIs in the timely review and reconciliation of expenditures, including reconciliation of suspense/holding accounts, while offering valid cost basis options for an allocation methodology. Administrators should familiarize themselves with this guidance and be prepared to provide options to the PI if more than one allocation cost basis appears to fit the circumstance. 

Local managing units should establish the valid allocation methodologies and maintain adequate documentation in accordance with the University retention policy, with approvals where applicable, as well as support for individual allocations.

Sponsored Projects

The Division of Research’s Sponsored Projects team is responsible for publishing this guidance and related materials, and providing additional guidance and clarification, when applicable.

Allocation Methodology

Allocation methodology refers to the reasoned basis used to approximate the proportional benefit to benefiting activities when the relative benefit cannot be easily determined. Allocation methodologies are used in allocations to support the assignment of costs.

Cost Basis

Cost basis refers to the units that represent the approximation of relative benefit over which the costs are allocated. The cost basis is part of the allocation methodology used in the allocation.

Direct Charge to a Single Project (Measurable)

If there is an easily determined, measurable benefit to the project or activity, the direct cost may be charged to that project or activity. 

Direct Charge to a Single Project (Approximate)

If the relative benefit is known but not easily determined or practically measurable across several funding sources, the measurable benefit may be reasonably approximated in order to distribute a direct cost to a project or activity. 

Distribute Cost Across Projects

If there is an easily determined, measurable relative benefit, the direct cost may be distributed across several benefiting projects or activities.

A valid allocation methodology establishes a reasoned basis for apportioning or transferring costs in proportional benefit to two or more projects or activities.

There are three basic components of an allocation: the percent of the cost charged to each project or activity; the method or reasoning used to derive that percentage; and the accompanying documents and, where applicable, approvals

At Brown University, a valid allocation methodology meets all of the following criteria:

• It provides a reasonable linkage between the cost(s) incurred and the benefit to each individual project or activity.
• It is identified prior to the allocation of expenses to sponsored projects or activities.
• It is documented with sufficient detail that a person unfamiliar with grants management would understand.
• It allows for the consistent treatment of costs that meet the criteria of the allocation methodology.
• It is reviewed periodically and adjusted as needed.

Allocation Methodology Examples (PDF)

A valid allocation methodology follows several best practices.

Identify the Methodology Before Purchase

Identify the basis of the allocation method in advance of purchasing, or at the time of ordering, the goods or services whenever possible to avoid the need for manual journals or cost transfers. 

Use the Methodology the Fits Best

Apply different allocation methodologies across a department or research group to best fit the expense type and allocation cost basis, rather than using the same methodology for all costs in the department.

Document the Methodology

Document the allocation methodology prior to, or concurrently with, the costs being incurred and allocated. Include the rationale for using the selected basis to approximate the relative benefit received by each project or activity.

Review Allocation

Review allocations regularly to ensure they continue to reflect proportional benefit.

Significant changes to factors used in the allocation cost basis will indicate the need to review the allocation components, or even the allocation methodology, outside of the regular review period. This review should include monitoring for changes in funding as sponsored projects or activities begin and end.

• If costs are allocated and charged directly to sponsored projects or activities at the time of purchase, perform at least quarterly monitoring to ensure allocations continue to reflect relative benefit to all benefiting projects or activities 
• If costs are accumulated in a nonsponsored account, ensure allocating journal entries are completed at least quarterly to comply with Brown’s Cost Transfer Policy and perform monitoring to ensure allocations continue to reflect relative benefit to all benefiting projects or activities.
• Do not use sponsored funds as a placeholder for costs, before they are allocated.
• Provide sufficient justification for all journal entries or cost transfers.

The following allocation practices are generally unacceptable because they do not meet University standards for a high degree of accuracy or do not consider actual relative benefit.

• Rotating charges among sponsored projects or activities on a monthly basis without establishing that the rotation schedule reflects the relative benefit to each sponsored project or activity
• Using any allocation methodology that is based only on available sponsored funds, budgets, or to avoid restrictions imposed by law, terms of the sponsored award, or for other reasons of convenience
• Describing an expense inaccurately to confound understanding of what the expense is and, therefore, how it benefits the project or activity
• Charging expenses exclusively to sponsored projects when the expense also supports nonsponsored activities
• Assigning charges to sponsored projects or activities in advance of the benefit to the project (exclusion from this may be for advance travel expenses, such as airfare or conference registration fees)

Once the allocation methodology has been determined and approved, retain the documentation in the department or local units in accordance with sponsor terms, federal regulations and University records retention policy.  This information should also be updated as supporting documentation to Workday and PCard transactions. 

Documentation should include the following:

• The type of costs to be included in the allocation methodology (e.g., consumable lab supplies, animal per diems, equipment service maintenance contracts)
• The rationale or logic that supports the linkage between costs incurred and proportional benefit to all benefiting projects.
• The determination or calculation of percentages used to allocate costs to all benefiting projects, including all supporting metrics (e.g., headcounts, full-time equivalents)
• The process for updating the methodology, including the frequency of review, revision and approval, to ensure that costs remain allocated based on relative benefit to all benefiting projects

If costs are accumulated in a nonsponsored account, process a timely allocation to sponsored project accounts not less than quarterly.

If the allocation requires a calculation for each distribution, attach documentation supporting the calculation to each allocation journal entry.

If the allocation does not require a calculation for each distribution and uses a department-approved methodology, document the journal entry with support for the expenditure, as required by University policy.

In order for two or more awards to share in research expenses on an ongoing basis, you first need to establish and document that interrelatedness exists between the projects on the basis that theoretical approaches are the same, studies of the same phenomenon are conducted by the same or different techniques and studies of different phenomenon are conducted by the same technique.

Afterwards, the appropriate split must be established with an allocation methodology, so the split should not always be 50/50, unless appropriate. 

If expenses are to be shared on two or more projects that are not interrelated, use the Proportional Benefit Rule. This rule applies when it is possible to determine the proportional benefit of the cost to each sponsored project without undue effort or cost.

Share the allocation basis and methodology with your Post-Award contract and grant accountant for review and approval prior to implementation.