So you’ve been awarded a million-dollar contractual grant! Congratulations! But do you know the true cost of performing the services you’ve committed your agency to fulfill? Are you factoring in your overhead costs? Do you know if the full cost of the grant will actually exceed $1,000,000? And if it will, how can you get that additional administrative expense reimbursed? The answer is by preparing a cost allocation plan.
What Is a Cost Allocation Plan?
A cost allocation plan is a tool that is most commonly used to calculate the indirect costs of an agency for overhead reimbursement and cost analysis.
You’ve probably heard of recent changes to the OMB Uniform Guidance (2 CFR Part 200), also known as the Omni-Circular. These changes have made it easier to receive the 10 percent de minimis indirect cost rate you are entitled to file for. But in most cases, we’ve found that overhead costs for an agency are actually closer to 40 percent. Instead of filing for the 10 percent, check the overhead cap in your grant’s requirements to see if you are able to recoup a higher amount. If so, the only way you’ll be able to do this is by preparing a cost allocation plan to help you accurately calculate and justify your true costs to your grantor.
Even if you are already creating a cost plan, you may not be using it to its full capacity. If you will be submitting your plan to a governmental agency, you will want to be fully compliant with the OMB Uniform Guidance so you are not leaving money on the table. When choosing the way to prepare your cost plan, it’s important to do research, and use a platform that will help you calculate the true cost of operations so your agency receives the full benefits of grant funding.
Strategizing with a Cost Plan
Did you know that you can also use a cost plan as a strategic tool? Whether you're pursuing grants from a private grantor or a governmental agency, preparing a cost plan can help you determine which grants are best for you. By preparing a cost plan before you even start your grant applications, you'll be able to strategically plan for things like what staff you may need to hire to support the grant’s requirements. More important, you’ll know if you can afford the overhead costs for any grant you’re interested in by comparing your actual indirect rate percentage against the overhead cap outlined by the grantor—enabling you to pass on a grant that could have been detrimental to your agency.
In a perfect world, accepting grant funding should never have negative results. Preparing a cost plan can help minimize that risk.
About the Author
Nicolie Lettini has over 15 years of experience creating over 600 cost allocation plans. She has enjoyed a highly successful career as an outside cost plan consultant, maximizing reimbursements for her clients in places others rarely think to look. She is the president of CostTree, the nation’s premiere Web-based cost allocation plan software company.
Have questions about using a cost plan with your grant funding? You can email CostTree at email@example.com or leave a comment below. Interested in learning more about the specifics of the new Uniform Guidance? Here's a handy desk reference guide of 2 CFR Part 200.
Free 2 CFR 200 (UGG) Training Video
- VIDEOS: Question & Answers about Indirect Costs (Panel)
- VIDEOS: Uniform Guidance Indirect Cost Training (Mak Karim, HHS)
- VIDEOS: COFAR Promising Practices (Panel)
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