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Indirect Cost Allocations & Grant Compliance

I've joined the nonprofit in Q3, and noticed the previous accountant hadn't allocated any G&A to programs since beginning of the FY. She only allocated payroll and benefits based on timesheets.

Do I go back to the beginning of the year and allocate total G&A costs based on monthly timesheets? or Do a manual JE for the % and allocate as "indirect cost" bucket vs breaking it down to specific expenses?

-- For Grant reporting, she calculated the max % - eg. if we were allowed 15%, she dropped in 15%. No based on P&L.

Looking for advice on how to adjust. Thank you.

Answers

Timothy Watson
Title: Partner
Company: Benford Brown & Associates, LLC
(Partner, Benford Brown & Associates, LLC) |

You are typically allowed to use FTEs or time studies/timesheets to establish actual allocation percentages. It sounds like this was done and so you probably should use the payroll and benefits allocations for the rest of your G&A. I would recommend doing a journal entry for each time payroll and benefits were allocated in order to show a consistent process. Make sure that you are able to support your calculations for audit purposes.

Regarding the grant reporting, there is a problem since the amounts reported don't match your financials. This problem is even greater if the actual G&A allocation is lower than the maximum. Based on your post you may have to revise the grant reports to reflect the proper indirect cost calculations.

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