Have you recently been awarded a sizable grant? Congratulations! Efficient grant management, now that you have received this award, requires that you fully understanding the true cost of performing the services you have committed to complete. Have you factored in all of the potential costs? What if the services you have committed to perform cost more than the granted amount? Can you get that additional expense covered? You should be preparing a cost allocation plan (CAP) to learn the answers to these questions and more.
Exactly What Is a Cost Allocation Plan?
A cost allocation plan is a helpful, grant management tool that is most commonly used to calculate the indirect costs of an agency, for overhead reimbursement and cost analysis. The cost allocation plan should ideally be tailored to fit the specific policies of your organization. If your organization’s policies are different in any of the categories, you will need to specifically identify the methodology used. Although there are different methodologies available for allocating costs, the methodology used should result in an equitable distribution of costs to all programs. Recipients must have a system in place to equitably charge costs. Additionally, time distribution records must reflect an after-the-fact determination of the actual activity of each employee. Considerations in determining an appropriate base for allocating costs include the relative benefits received, the materiality of the cost, and the amount of time and cost to perform the allocation.
Preparing a cost allocation plan can help your organization accurately calculate the actual costs, and justify them to your grantor. To ensure you are using your cost allocation plan to its full capacity, you will want to comply with the OMB Uniform Guidances. Also, when you are preparing your cost allocation plan, be sure to do some research, utilize a platform that will assist you in calculating the true cost of operations, this way your agency can receive the full benefits of the grant funding.
In addition to helping you determine the true cost of your grant funded services, the cost allocation plan can be used as a strategic tool. Having a cost allocation plan can also help you to determine which grants are the best fit for your organization. Doing this in advance of starting your grant applications will help you to see the details of the grant requirements that may otherwise be overlooked, such as, what staff you might need to hire in order to support the grant’s requirements. Another significant, and possibly the most important benefit of the cost allocation plan is the knowledge you will gain of whether or not you can afford the overhead costs related for any grant you might be interested in. This is possible by comparing indirect percentage rates against the cost caps set by the grantor. This way you can know which potential grants, if awarded, would actually be cost prohibitive or cost beneficial, to your organization.
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Contact us here at RBP Methods to learn more about grant management technology. Find out how we can help in your overall nonprofit success by getting you the nonprofit accounting software solutions and support you need to help in all areas of your business.