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Financial Management - Sharing Costs Across Projects Vs Shared or Indirect Costs
Financial Management - Sharing Costs Across Projects Vs Shared or Indirect Costs
Financial Management - Sharing Costs Across Projects Vs Shared or Indirect Costs
CIVIL SOCIETY
GLOBALLY
Implementation Tips
for USAID Partners
Sharing Resources and Knowledge Among the Global CSO Community Financial Management 5 | 2018
A.
An organization with more than one project incurs three
Shared Project Costs—Goods and
categories of expenses:
services used by multiple projects (and
for which a vendor cannot invoice each • Direct project costs. Costs that can be clearly attributed to
project separately) that are charged a specific project such as a dedicated staff person, or specific
to each benefiting project based on a equipment and supplies used only by a single project.
reasonable and consistent manner. • Shared project costs. Costs that are required to carry out a
Modified Total Direct Cost—TDCmeans project, but are difficult to attribute to a specific project, such as
all direct salaries and wages, applicable electricity or administrative support staff or office space used by
fringe benefits, materials and supplies, project staff.
services, travel and up to $25,000 of each • Non-project costs. Legitimate organizational expenses, but costs
subaward. MTDC excludes equipment, not related to any specific project or costs that are not “allowable.”
capital expenditure, charges for patient
care, rental costs, tuition remission, Shared Resources vs. Shared Costs
scholarships and fellowships and There is an important difference between a resource that may be
participant support costs. shared by more than one project and something that is a shared or
indirect cost.
Negotiated Indirect Rate Cost
Agreement—NICRA is a rate negotiated A resource that may be shared by more than one project typically falls
individually between an organization and into the direct cost category. For example, let’s think of a professional
the USG to cover indirect costs. staff member as a resource that may devote time to more than one
project. Since the individual’s time is tracked on a timesheet, you
will know exactly how many hours were spent working on Project A
versus Project B. Therefore, you can allocate the exact number of
References hours and salary to each project as direct costs.
USAID Best Practices Guide for
Indirect Costing Another example: If your organization has a vehicle, it may be used
for trips by more than one project. However, every trip taken should
be noted in the vehicle usage log book. Therefore, the expenses for
each trip can be allocated as direct costs to each project based on
the log book.
NGOConnect.net
Implementation Tips for USAID Partners
Financial Management 5 | 2018
A shared or indirect cost, on the other hand, is one that has been
Items to Consider incurred for common or joint purpose and benefits more than one
Q: If we have a NICRA, do we still program. Consequently, it is not easy to allocate these costs to the
need to allocate shared costs? different programs. Examples of common shared office costs are
utilities, Internet service charges and expendable office supplies like
It is tempting to think that having an
paper and paper clips. Unlike the examples above, it is not obvious
established Negotiated Indirect Cost
how much should be charged directly to any one project.
Rate Agreement (NICRA) will solve the
challenge of allocating shared project Some organizations that are prime recipients and receive USAID
costs. A NICRA can simplify how you funding directly have gone through a process with USAID to establish
are reimbursed for your overhead a Negotiated Indirect Cost Rate Agreement (NICRA) and use that
costs in certain USG-funded projects. to address these kinds of costs. But most organizations do not have
However, if you have projects funded a NICRA (or only have a NICRA for headquarter expenses) and,
by other donors you may still have costs therefore, need a method for figuring out how to allocate these kinds
that are shared among different donors; of costs.
thus, regardless of whether or not you
Set—and Keep up to Date—a Shared or Indirect Cost Policy
have a NICRA, it is a good management
Keep these guidelines in mind when setting a policy that answers the
practice to establish a policy for
following questions:
allocating shared project expenses.
• What specific costs and resources are considered “shared?”
• How will your organization divide shared costs among
different projects?
• When will the formula be reviewed and revised?
page 2 NGOConnect.net
Implementation Tips for USAID Partners
Financial Management 5 | 2018
page 3 NGOConnect.net