The simplified allocation is best used by organizations that have only a single major function (for example, the provision of AIDS-related supportive services)
covering just a few awards, and where the level of federal awards to an organization is relatively small.
With this method, indirect costs are allocated to various grants or revenue sources by totaling all of an organization’s allowable indirect costs
for a covered period, then dividing that amount by the total allowable direct costs for that period.
This yields a percentage that is applied to a particular grant or project’s direct costs as a factor that will yield
that project’s or grant’s indirect costs. For example, the simplified allocation method may be used to allocate the cost of office space
where staff of an organization carry out a federal grant program, as well as activities supported by other sources of funds.
Among the authorized options, the rent may be allocated to the federal grant in the same proportion
that total direct staff salaries are allocated to the federal grant. Caution must be used with this method,
since HOPWA regulations cap administrative costs for grantees and sponsors. With this method, total administrative costs are blended with other indirect costs
and thus total administrative costs charged as a part of total indirect costs may be obscured.