Allocation of country office shared costs and cost recovery deficit

Total DPC: USD 4,800,000. Allocation rate: 1,140,000 / 4,800,000 = 23.75% of DPC.

The deficit is USD 298,800, i.e. 26.2% of shared costs. It comes mainly from G3 (63% of the deficit), then from G5 and G4: these grants allow little or no direct charging of support costs. G1 and G2 are balanced: the direct lines are below the allocated share, which is compliant (a grant must never bear more than its allocated share as direct costs).

1. Country director at 100% on G1: not compliant. He spends 50% of his time on cross-cutting functions that benefit all grants; charging them to G1 alone exceeds G1's allocated share (already covered at 100.7%) and breaches the consistent allocation method. Risk: ineligible costs to be repaid at audit.

2. Vehicles on G2: not compliant. The level of spending on a line does not justify a charge: a cost must be charged according to the benefit the grant derives from it. G2 would exceed its allocated share. Risk: ineligible costs and an audit finding on the allocation method.

3. Reclassifying rent as "activity spaces" on G3: not compliant and misleading. Donor C excludes office costs as direct costs; relabelling a cost to get round a rule is a false declaration. Risk: ineligible costs, loss of trust, possible characterisation as fraud.

4. Retroactive timesheets: not compliant and serious. Having documents produced today and presented as contemporaneous is falsification. Risk: document fraud, sanctions, exclusion from the donor's funding. The right course: acknowledge that there are no timesheets, present the documented allocation method (in proportion to DPC), propose a reconstruction clearly dated and identified as such if the donor accepts it, and introduce monthly timesheets from now on.

Next year: rate = 1,180,000 / 6,200,000 = 19.03% of DPC. G6: 1,000,000 × 19.03% = USD 190,323; G7: 400,000 × 19.03% = USD 76,129. These amounts must appear as direct lines, justified by the allocation method, within the limits of the rules of donors A and B (eligible as direct costs).

Current year (USD 298,800): (1) check that actual shared costs follow the budget and cut what can be cut (freeze on non-essential support recruitment, pooling of vehicles); (2) charge directly, with timesheets from now on, the time of support staff who actually work on a specific project (for example a logistician assigned to a distribution), where the donor allows it; (3) ask headquarters to cover the deficit from unrestricted own funds, or for a temporary increase in the share of ICR passed on (for example from 40% to 60%, i.e. +USD 60,600); (4) make an explicit decision on keeping G3 and G5 in their current form.

Next year: (1) budget the full allocated share in all new proposals where the donor allows it; (2) for donors that fund only the ICR (C, E), negotiate direct coverage of project-related costs (assigned support staff, dedicated field office), or check that the portfolio can absorb these grants; (3) renegotiate the Beirut lease in 5 months or move (each 10% reduction in the rent and utilities heading saves about USD 31,000); (4) set an internal rule: no proposal is submitted without a shared cost recovery calculation validated by the grants team.

"Line 6.1, country office shared costs: USD 190,323. This line covers the project's share of the operating costs common to the country office (rent and utilities of the Beirut and field offices, management functions, finance, human resources, central logistics, security, IT, liaison vehicles), which benefit all the actions in the portfolio. Planned shared costs for the year amount to USD 1,180,000. They are allocated between all grants in proportion to their direct programme costs, using a written method applied consistently to all donors: the project represents USD 1,000,000 out of USD 6,200,000 of planned direct costs, i.e. 16.13% of direct costs and a line equal to 19.03% of its own direct costs. The amounts charged will be adjusted to actual costs and to the project's actual share, supported by accounting documents and, for staff, by timesheets. No cost charged to this line is covered by the indirect cost rate."

To the project managers: the figures show the opposite: G1 and G2 bear their fair allocated share, no more (coverage of 100.7% and 99.5%). The deficit comes from the grants that do not allow support costs as direct costs, and it is being dealt with by headquarters and through negotiation, not by loading G1 and G2. I share the allocation table with them.

To the country director: I refuse: producing timesheets today and presenting them as having been kept for six months is falsification, and I can neither approve it nor present it to the donor. The risk (ineligibility of the whole line, fraud, loss of donor A) is out of all proportion to that of a visit finding. I propose to present the allocation method and its supporting documents honestly, to acknowledge the gap, and to show the timesheets introduced this month and a corrective plan. If the instruction is maintained, I have it confirmed in writing and inform the regional finance director or the anti-fraud focal point.