Cost Allocation Assistance

The importance of cost allocation cannot be underscored—how an organization allocates its shared costs can have a significant impact on its management and financial well being.

The selection and use of proper cost allocation methods will aid in the management of the organization. Among other things, it helps in the identification of inefficient program management or ineffective fundraising. Additionally, when establishing indirect cost rates for contract reimbursement, a properly determined rate will help assure that the organization is being reimbursed for the maximum amount that is allowable.

If the organization is responsible for establishing indirect cost reimbursement rates, it is extremely important that the rate be properly calculated in compliance with the requirements of the grantor. Organizations may potentially be underreimbursed if the indirect rate is lower than what it should be. If the organization’s calculation of the indirect cost rate is more than what is allowable, it could potentially need to return funds received and possibly face penalties.

At BPM, we’ve audited indirect cost or overhead rates in compliance with variance government agencies. We can also assist in establishing a cost allocation system, including determining the method or combination of cost allocation methods in allocating indirect costs for both for-profit and nonprofit organizations.