2 CFR 200.405 sets 3 requirements for organizations that receive federal grants and cooperative agreements. Applies when you build your application and budget, and to every cost you charge after award.
Charge a cost to the award only if it is assignable to that award in accordance with relative benefits received — i.e., it is incurred specifically for the award, benefits both the award and other work in proportions approximable by reasonable methods, or is necessary to overall operations and assignable in part under these principles (para (a)).
Every cost item, especially shared or split-funded items
A cost allocable to a particular Federal award must not be charged to other Federal awards to overcome fund deficiencies, avoid restrictions, or for other reasons; shifting is permitted only for costs allowable under two or more awards consistent with statutes, regulations, and award terms (para (c)).
Applicant holds multiple Federal awards or proposes charging shared work across awards
Where a cost benefits two or more projects in determinable proportions, allocate it based on proportional benefit; where proportions cannot be determined because the work is interrelated, allocate or transfer on any reasonable documented basis; equipment specifically authorized under an award is assignable to it regardless of later use (para (d)).
A budgeted cost benefits two or more projects or activities
Upload the funding notice and your draft budget or narrative, and ask. Grantable answers from its compliance database of federal, agency and state rules, with citations.
(a) Allocable costs in general. A cost is allocable to a Federal award or other cost objective if the cost is assignable to that Federal award or other cost objective in accordance with the relative benefits received. This standard is met if the cost satisfies any of the following criteria:
(1) Is incurred specifically for the Federal award;
(2) Benefits both the Federal award and other work of the recipient or subrecipient and can be distributed in proportions that may be approximated using reasonable methods; or
(3) Is necessary to the overall operation of the recipient or subrecipient and is assignable in part to the Federal award in accordance with these cost principles.
(b) Allocation of indirect costs. All activities which benefit from the recipient's or subrecipient's indirect cost, including unallowable activities and donated services by the recipient or subrecipient or third parties, will receive an appropriate allocation of indirect costs.
(c) Limitation on charging certain allocable costs to other Federal awards. A cost allocable to a particular Federal award may not be charged to other Federal awards (for example, to overcome fund deficiencies or to avoid restrictions imposed by Federal statutes, regulations, or the terms and conditions of the Federal awards). However, this prohibition would not preclude the recipient or subrecipient from shifting costs that are allowable under two or more Federal awards in accordance with existing Federal statutes, regulations, or the terms and conditions of the Federal awards.
(d) Direct cost allocation principles. If a cost benefits two or more projects or activities in proportions that can be determined without undue effort or cost, the cost must be allocated to the projects based on the proportional benefit. However, when those proportions cannot be determined because of the interrelationship of the work involved, then, notwithstanding paragraph (c), the costs may be allocated or transferred to benefitted projects on any reasonable documented basis. Where the purchase of equipment or other capital asset is specifically authorized under a Federal award, the costs are assignable to the Federal award regardless of the use that may be made of the equipment or other capital asset involved, when no longer needed for the purpose for which it was originally required. See also §§ 200.310 through 200.316 and 200.439.
(e) Costs of contracts subject to CAS. If a contract is subject to CAS, costs must be allocated to that contract according to the Cost Accounting Standards, which take precedence over the allocation provisions in this part.
Source: eCFR · checked Sep 17, 2026
Charge a cost to the award only if it is assignable to that award in accordance with relative benefits received — i.e., it is incurred specifically for the award, benefits both the award and other work in proportions approximable by reasonable methods, or is necessary to overall operations and assignable in part under these principles (para (a)). A cost allocable to a particular Federal award must not be charged to other Federal awards to overcome fund deficiencies, avoid restrictions, or for other reasons; shifting is permitted only for costs allowable under two or more awards consistent with statutes, regulations, and award terms (para (c)). Where a cost benefits two or more projects in determinable proportions, allocate it based on proportional benefit; where proportions cannot be determined because the work is interrelated, allocate or transfer on any reasonable documented basis; equipment specifically authorized under an award is assignable to it regardless of later use (para (d)).
Every cost item, especially shared or split-funded items. Applicant holds multiple Federal awards or proposes charging shared work across awards. A budgeted cost benefits two or more projects or activities.
Plain-English summaries for information only, not legal advice. Always check the regulation text, your award terms and your agency’s guidance.