Grants-Reminders

Important Reminder: Proration of Expenses in Sponsored Programs

In sponsored programs, proration refers to adjusting expenses, so they reflect the actual period or portion of a cost that benefits a specific project or activity. This is important when costs are incurred over multiple periods, benefit multiple projects, or are shared among different activities.  Examples for these types of expenses include subscriptions, memberships, service agreements, and usage of equipment.

When Proration Applies

• Multi-period funding: If a budget spans more than one fiscal or calendar year, expenses are prorated to match the actual time the cost was incurred or if the length of time extends beyond the award period of performance
• Multi-project costs: When a cost benefits more than one project, it must be allocated based on proportional benefit. If the benefit is easily measurable, allocate directly; if not, use a reasonable documented basis 
• Shared resources: Costs for facilities, utilities, or personnel that serve multiple projects may be prorated to reflect each project’s actual usage

Common Proration Methods

• Time-based proration: Divide total cost by the number of months/quarters in the period and multiply by the actual months/quarters the cost was incurred.
• Usage-based proration: Allocate based on measurable usage (e.g., square footage, hours, equipment time).
• Proportional benefit allocation: Distribute costs across projects in proportion to their benefit, even if benefit is not easily measurable

Steps for Proper Proration

• Identify the cost and confirm it is allowable, allocable, and consistent.
• Determine the period of work (e.g., fiscal month, grant period).
• Calculate the proportion of work completed in that period compared to the total project period.
• Apply the proportion to the total cost to determine the prorated amount.
• Document the method and rationale for the proration (e.g., days worked, milestones achieved)

In short, prorating expenses on sponsored programs is a compliance requirement when work spans multiple periods. It must be done consistently, with clear documentation, and in proportion to the work or benefit received during that period. This ensures costs are allowable, allocable, and reasonable under federal and institutional rules

Questions? Please contact financecustomercare@ohio.edu