How can knowing your indirect cost maximize opportunities in your organization?
Today, financially responsible organizations of all sizes ask the same question:
How can we improve yearly revenue without compromising our productivity?
Here’s the easy answer: Know your indirect cost and how to leverage it.
What are indirect costs?
Indirect costs are expenses identified to support all the programs and services your organization maintains. These costs can include costs from departments like Finance, Human Resources, and Facilities Maintenance, and are absolutely critical to both short and long-term operations.
An indirect cost supports the overall success of your organization and promotes the sustainability of your organization. An individual indirect cost may be fixed or variable, incurred from a common purpose or a cost that cannot be directly traced to one specific grant, service, or project.
Accounting for indirect costs is a large part of any budget process. You’ll need to understand what your indirect cost is so you can charge for these services and reimburse the General Fund for the services they are performing. Calculating a cost allocation plan gives you the GAAP compliant, justifiable calculation of an indirect cost, providing exact figures that reflect expenses paid for services rendered.
How can I calculate a cost allocation plan?
There are several ways that your organization can calculate a cost allocation plan. Typically, organizations will calculate cost allocation plans through one of three methods:
- Cumbersome Excel spreadsheets
- Expensive consultants or firms
- Tools that in-house all calculations
Most agencies avoid calculating indirect cost on their own because they don’t know what they don’t know. Other organizations feel they need consultants to help them maintain full compliance with the 2 CFR Part 200.
Fortunately, the best solution for cost allocation planning looks nothing like an outdated spreadsheet or an overly expensive consulting firm. The right tool allows you to generate a fully compliant indirect cost plan — one you can use to track enterprise funds, user fees, even grant applications — with the push of one button.
Use Questica Budget to populate your budget. With a single click, you’ve completed your cost allocation plan and fully accommodated compliance with 2 CFR Part 200 parameters.
2020 Census figures reinforce conclusions we’ve already reached:
Cost Allocation Plans can benefit over a million agencies in the United States.
Here’s the breakdown:
- 3,143 counties
- 35,999 municipalities and townships
- 51,296 special districts
- 1.8 million nonprofits (approximately)
Each of these agencies can create an indirect cost plan that will:
- Report all their indirect costs
- Contribute to indirect cost rate calculation for grants and federal reimbursement
- Allow them to charge and receive indirect costs from internal departments and funds like utilities and user fees
Leveraging a comprehensive cost plan affords your agency the opportunity to maximize revenue opportunities and prioritize sustainability at every stage.
Reimagine your cost allocation process entirely, through Questica and Allocate.