Lesson 7.3: Setting Up Allocation Bases and Accounts

Before you can run an Indirect Cost Allocation in FastFund Online, you must configure your Chart of Accounts to handle the specific calculation methods you intend to use. This lesson covers the five available Allocation Bases (the mathematical rules for splitting costs) and the necessary Account Setups—specifically “Account Designators” and “Exclusions”—required to make those calculations work.

Understanding Allocation Bases

An “Allocation Basis” is the method used to determine the fair and equitable distribution of pooled costs. FastFund offers five bases that meet the strict criteria of major public and private funding sources:

1. Direct Cost: Calculates percentages based on the total expenses in each benefiting program relative to the total expenses of all benefiting programs.

    ◦ Use Case: Allocating Administrative costs based on the size of each program’s spending.

2. Direct Revenue: Similar to Direct Cost, but calculates percentages based on the total revenue in each program.

    ◦ Use Case: Allocating overhead to departments based on how much income they generate.

3. Fixed Numeric Value: Calculates percentages based on a static number you enter, such as square footage, number of meals served, or number of active clients.

    ◦ Use Case: Allocating Rent and Utilities (Occupancy) based on the square footage of each department.

4. Fixed Percentage: You manually assign a fixed percentage to each benefiting program.

    ◦ Use Case: Management decides that Program A always bears 60% of the cost and Program B bears 40%.

5. Total by Specific Account: Similar to Direct Cost, but instead of using all expenses to calculate the split, it uses only specific accounts (like Salaries) to determine the ratio.

    ◦ Use Case: Allocating Fringe Benefits (Health Insurance, Payroll Taxes) based on the total Salaries paid in each program.

Setting Up Account Designators

If you plan to use the Total by Specific Account basis (e.g., allocating based on Salaries), you must first tag the relevant General Ledger accounts with an Account Designator. This tells the system which accounts to sum up to calculate the allocation percentages.

To Create an Account Designator:

1. Navigate to Administration > Administration > Account Designations.

2. Click New +.

3. Enter a name (e.g., “Salaries for Allocation”) and click Save.

To Assign the Designator to an Account:

1. Navigate to Lists > Chart of Accounts > Segments.

2. Select Object Code from the dropdown.

3. Open the specific expense account (e.g., “5000 – Salaries”).

4. In the Account Designation dropdown, select the designator you created (e.g., “Salaries for Allocation”).

5. Click Save.

6. Repeat this for every account that should be included in the calculation base (e.g., all salary accounts across all departments).

Excluding Accounts from Allocation

Sometimes, a specific cost within a pooled cost center should not be allocated to other programs. For example, a grant might stipulate that “Capital Equipment” or “Bad Debt” cannot be used as a basis for indirect costs, or perhaps a specific unallowable expense should remain in the Administrative pool rather than being distributed.

To Exclude an Account:

1. Navigate to Lists > Chart of Accounts > Segments.

2. Select Object Code.

3. Open the specific account you wish to exclude.

4. Check the box labeled Exclude from Allocations.

5. Click Save.

When you run the allocation process later, the balance in this account will be ignored during the calculation and will remain in the source cost center.

Allocation Analysis (Pre-Work)

Before setting up the actual allocation worksheets in the next lesson, you should perform an Allocation Analysis. Create a list or spreadsheet answering the following:

• Source: Which Cost Center holds the pooled costs? (e.g., Administration).

• Basis: Which method will you use? (e.g., Square Footage).

• Targets: Which Cost Centers will receive the costs? (e.g., Program A, Program B).

• Data: Do you need to gather square footage numbers? Do you need to tag Salary accounts?

Note: The Indirect Cost Allocations program does NOT work with Sub-Accounts. You must rely on Funds, Cost Centers, and Object Codes.