What does cost allocation have to do with grants management? The answer is everything. Cost allocation allows for accurate calculation of indirect costs, which is critical to ensuring that resources are available to carry out the purpose of a grant program. Getting this calculation wrong leads to unspent grant dollars and financial instability.
Covering Program Costs
While nonprofits are dependent upon the public sector for funding, the government is dependent on the nonprofit sector to provide services to its constituents.
As subrecipients of state and local government, nonprofits deliver many important services required by federal grant programs. They play a critical role in the ecosystem of federal, and non-federal, grants management. Establishing a better process to calculate and cover allowable program costs is vital to program performance and the overall fiscal health of the nonprofit sector. Losing these key community partners will reduce the capacity to achieve the program outcomes required by grant awards. The survey data below depicts how much of nonprofit program costs are covered.
(Source: Nonprofit Finance Fund’s ‘State of the Nonprofit Sector Survey).
In a time where performance is front and center, a better strategy to help properly calculate the true cost of a program is a tremendous opportunity for all stakeholders. Fortunately, there are several organizations, private foundations, nonprofits and state and local governments that are currently working together to create a better method of calculating and allocating funds through collaborative strategies, shared resources and technology. More to come on this in a future post.
Cost Allocation Software
In April of 2018, eCivis acquired CostTree, the only SaaS cost allocation software for the public sector and nonprofits. eCivis can now help organizations maximize their indirect cost reimbursements, better understand their true cost of service, and run scenarios to determine what cost structure provides the greatest organizational impact. Additional features include comprehensive audit tools for cognizant and reviewing agencies and their recipients; a dynamic Indirect Cost Rate Proposal framework that removes the frustration and complexity from your rate submission and review processes; and powerful transfer pricing and cost analysis tools that put full control at the fingertips of the end user. CostTree has been deployed in nearly 100 state and local governments, including the Maryland Department of Education; Glendale, CA; and El Paso County, CO. If you are interested in learning how to mitigate loss of funds and maximize your funding, contact us today to learn more about cost allocation software.
The Urban Institute provides a variety of excellent research on this topic. Learn more.
A recent article on demystifying indirect costs covers the basics with links to further resources: Learn more.
Free Training Videos
- VIDEOS: Question & Answers about Indirect Costs (Panel)
- VIDEOS: Uniform Guidance Indirect Cost Training (Mak Karim, HHS)
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