Vanderbilt University

Guidelines for Budgeting and Charging Direct Costs on Sponsored Projects (11/15/96)

Direct Costs: Allocability

B. Allocability

Government Regulation......

Allocability: General Rule

A cost is allocable to a particular sponsored project if the goods or services involved are chargeable or assignable to the sponsored project in accordance with relative benefits received or other equitable relationship. Subject to the foregoing, a cost is allocable to a sponsored agreement if:

1. it is incurred solely to advance the work under the sponsored agreement; or
2. it benefits both the sponsored agreement and other work of the institution, in proportions that can be approximated through use of reasonable methods.

[Office of Management and Budget Circular A-21, Section C.4.a.]

 Exception to Allocability Rule: Capital Equipment

Where the purchase of equipment or other capital items is specifically authorized by the sponsor (NOTE: "authorized" means approved by the sponsor (or internally approved, if such internal approvals are allowed by the sponsor)], the amounts thus authorized for purchase are assignable to the sponsored agreement regardless of the use that may subsequently be made of the equipment or other capital items involved.[Office of Management and Budget Circular A-21, Section C.4.a.]

Cost Benefits Two or More Projects

If a cost benefits two or more projects or activities in proportions that can be determined without undue effort or cost, the cost should be allocated to the projects based on the proportional benefit. If a cost benefits two or more projects or activities in proportions that cannot be determined because of the interrelationship of the work involved, then the costs may be allocated or transferred to benefited projects on any reasonable basis. However, this allocation cannot be used to eliminate cost overruns. [Office of Management and Budget Circular A-21, Section C.4.d.(3)]