Monthly Webinar Recording | September 2026 | Cost Allocation in Practice: Building Defensible, Compliant, and Practical Approaches-Video Recording

Video Transcription

Video Summary

Claire Hillary and Megan Otto of Baker Tilly presented a foundational overview of cost allocation for organizations managing federal grants. They explained that costs should be assigned according to the relative benefit received—not a program’s budget, available funding, or prior-year percentages—and that all benefiting activities must be included in the allocation base.<br /><br />Under 2 CFR 200.405, organizations need reasonable, consistently applied methods, though the Uniform Guidance generally does not prescribe a single cost allocation plan format. Effective practices include identifying costs as direct, shared, or indirect; grouping similar costs into appropriate pools; and selecting allocation drivers—such as staff time, square footage, or service usage—that reflect actual benefits.<br /><br />The presenters emphasized documenting the rationale, source data, calculations, approvals, and review frequency so another person can reproduce the results. Plans should be practical, proportionate to organizational risk and complexity, and updated when circumstances change. Common pitfalls include incomplete documentation, inconsistent methods, outdated data, overly complex processes, and excluding non-federal activities that benefit from shared costs.<br /><br />These weaknesses can lead to questioned costs, audit findings, reduced cost recovery, and increased scrutiny. Recommended practices include assigning ownership, training staff, reviewing methods regularly, and using technology to reduce manual errors.

Keywords

cost allocation

federal grants

Uniform Guidance

2 CFR 200.405

allocation base

indirect costs

shared costs

allocation drivers

documentation

allocation methods

audit findings