THE TEN PERCENT
WHY COST ALLOCATION IS IMPORTANT.
The 10% de minimis does not give you that perspective. It does not give you insight. It just gets you a “little bit” more reimbursement for indirect cost. You will still need to look elsewhere to pay for the remainder of your indirect costs. And you still need to hope that this is enough to remain sustainable, so you are around to collect it.
When you are a nonprofit, any money received is viewed as money towards your mission, money that helps serve your constituents. Getting a grant is “free” money right? Not really. Accepting a grant without knowing the true cost of performing to that grant has the potential to cause hardship, and in some cases, even closure of your nonprofit. This is real reason why it is so vitally important to take the extra step to calculate your true cost, rather than settling for the 10% de minimis.
What if we told you that the grant you are going for will actually cost you MORE than you get in money for that grant? Would you believe that? Well, it could. If the grant that you are going after is a little bit outside the scope of your mission and it takes a little more support to get it up and running, a little more training to get up to speed and more resources to manage, it is quite possible the indirect cost of this grant will be considerably higher than the programs that aligns with your mission directly. Knowing this before accepting the grant gives you the ability to determine whether or not you choose to pursue this grant (see exhibit A). You will see in the example that Grant 2 actually cost more in indirect cost, than it does in direct. The direct cost of this grant is $103,750. However, the indirect cost is $135,935. So, if you saw this before going after this grant, you might decide to take the $135,935 it would have cost you in indirect costs and actually DOUBLE your effort on Program A, that directly supports your mission.
Total Cost Claimable with
10% de Minimis (C)=(A+B)
Actual Collectable: $54,926
18 CAPTURE. COSTTREE 2016 Q1 ISSUE
Real %: 7.93%
10% de minimus
Subsidy
True Cost
Total Cost if collect
True Cost (E)=(A+D)