Document the allocation methodology: Documentation should explain how the allocation methodology is reasonably related to the costs being allocated. Document how measures such as headcount, square footage, or hours directly relate to the benefit received. Documentation should be retained along with the purchase receipt and made available for review.
The allocation methodology must be used consistently in like circumstances. See Unlike Circumstances: Budgeting direct costs that are normally classified as indirect costs.
Routinely review the methodology: Periodically review the methodology to make sure it continues to represent a reasonable basis for distributing costs. The methodology should be updated if it is determined that it no longer represents a reasonable distribution of costs.
Review estimated allocations on a routine basis. If a cost has been allocated to an award based on an estimate, that cost can be reallocated - if needed - using a cost transfer. Ensure that reallocations are completed promptly so that accurate costs are recorded on the appropriate funding source within 90 days of the original expense posting date.
Update allocations when a funding source is no longer available, or a new source has been added. The methodology should not change unless it no longer provides a reasonable representation of the benefit provided.
Consider the end dates of the award. The benefit received on each Award may be impacted if, for example, two Awards have significantly different end dates. Purchases made near the end of an award may require additional justification and/or sponsor approval. For example, equipment purchases near the end of the award period (generally within the last 90 days) often undergo additional scrutiny to understand how the equipment will directly benefit the award when it is nearing completion.