How to Allocate Salaries and Shared Costs Across Multiple Grants

Your program manager works on two funded projects and covers reception on Fridays. Your rent covers space used by everything you do. Neither cost belongs to one grant, and both have to be split before any funder report or annual return can be produced. The split is not a guess and it is not a one-time decision, because the same payroll dollar also has to land somewhere on your T3010. This guide covers how to allocate shared costs across grants, what basis to use, and how the two allocations fit together.

Why does the same salary get allocated twice?

Because your funders and your annual return ask two different questions about the same dollar, and one ledger has to answer both. Funders want cost by grant. The T3010 wants cost by type and then by function.

Your provincial grant wants to know how much of the program manager's time it paid for. Your annual return wants that salary included in total expenditures on the account-type lines, and then wants the total split across charitable activities, management and administration, fundraising and other activities.

Those are not the same allocation. A program manager funded entirely by one grant might still split across two functional categories if part of the role is administrative. A manager whose work is all charitable might split across three grants.

Build the ledger so both views come from the same transactions. A grant dimension answers the first question, and a functional allocation applied to the totals answers the second.

What can you use as an allocation basis?

Any basis that is reasonable, supportable and applied consistently. CRA requires allocations to be reasonable and applied consistently, and funders expect the same, so the test is whether you can explain and repeat it.

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Time is the strongest basis for people costs because it is observable. Everything else is a proxy, which is fine as long as the proxy relates to how the cost is actually consumed.

What does not work is allocating by what is available. Charging a cost to whichever grant still has budget left is the practice funders look for and the one that costs a charity its next agreement.

Pick the basis once per cost category, write it down, and change it only with a reason and a date.

What records support the allocation?

Timesheets or equivalent effort records for people, and a dated calculation for everything else. The allocation is only as good as what stands behind it.

Timesheets do not need to be elaborate, but they should be contemporaneous and cover all of a person's time rather than only the funded part. They should ideally be approved by someone other than the person who completed them, and must be where the agreement or your own policy requires it. A record that accounts for 100% of a week is far more credible than one that shows only the hours charged to a grant.

For non-payroll costs, keep the calculation itself, not just the result. A note that occupancy is split 40/35/25 by square footage is much stronger with the floor plan and the measurement attached.

Store all of it where a reviewer can follow it without asking you. A funder audit or a CRA query arriving two years later is not the moment to reconstruct why a percentage was chosen.

How do indirect cost caps in agreements change the entries?

They cap what you can charge to the grant, not what the activity actually costs. The difference has to go somewhere, and it is not nothing.

Many agreements allow indirect or administrative costs up to a stated percentage of direct costs. If your calculated share of shared costs exceeds the cap, only the capped amount is charged to the grant. The remainder is a real cost of delivering the program funded from unrestricted resources.

Record it that way. Charge the capped amount to the grant and the excess to unrestricted operations, so the grant report is compliant and your internal reporting still shows what the program cost.

Track the unfunded portion by program over time. It is the number that tells a board whether a grant is worth renewing, and it is hard to produce once the excess has disappeared into general overhead.

Where an agreement is silent on indirect costs, do not assume they are unrecoverable. Ask before signing.

How does the same payroll land on the T3010?

Compensation flows into your expenditure total by account type first, and is then allocated across the functional lines, regardless of which grant paid it. The funder split has no effect on the return.

That is worth being firm about. If Schedule 3 applies to your charity, it reports total compensation for the period; which grant funded a position does not change the figure. Where Schedule 6 is completed, that total transfers to line 4880 of Schedule 6. A Section D filer has no line 4880, so the transfer does not apply.

The functional allocation is where the second split happens. Lines 5000, 5010, 5020 and 5040 break the line 4950 total across charitable activities, management and administration, fundraising and other activities. CRA specifically contemplates a single salary being divided across functions, so an executive director who fundraises and runs programs is split rather than assigned whole.

Allocate according to the work actually performed, on a reasonable and consistent basis, and document the basis once rather than deciding it annually. The same timesheets that support your grant allocation can support this one, which is a good reason to capture function as well as grant on the timesheet.

When do you true up the allocation?

Monthly if you allocate on estimates, and at any point the underlying facts change. An allocation set in January and left alone until December is a forecast, not a record.

Many charities post payroll on budgeted percentages during the year for speed, then adjust to actual time at month end or quarter end. That is a reasonable approach as long as the true-up actually happens and the adjusting entries are dated and explained.

Some changes require an immediate revisit rather than waiting: a staff member moving between programs, a new grant starting, a program ending, or a move to different premises. Each one invalidates the basis that was in place.

Do the final true-up before the year-end close, not after. Adjusting grant-coded payroll after the statements are drafted means redoing both the statements and any funder report already issued.

Setting up the allocation model, the timesheet structure and the month-end routine is a one-time job that pays for itself across every grant that follows. It is the kind of thing a bookkeeping engagement should establish at the outset, alongside the fund accounting structure and the chart of accounts that sit underneath it.

What are the allocation mistakes that cost a charity money?

Charging the same hour twice, allocating to available budget, and never revisiting a percentage. All three are found in funder audits, and all three are avoidable.

Charging the same hour to two funders carries the worst consequences. It is not a bookkeeping error in a funder's eyes, and the usual consequence is repayment plus a much closer look at everything else. A timesheet that accounts for all of a person's time makes double-charging visible immediately.

Allocating to whichever grant has room is the second. It shows up as spending patterns that track budget availability rather than activity, which is exactly what a reviewer looks for.

The third is quieter and more common. A percentage set three years ago, when the staffing and the program mix were different, is no longer reasonable simply because it was reasonable once. Review the basis annually alongside the budget.

Where allocations have gone unreviewed for years, a reset is usually quicker than a defence, and ongoing bookkeeping support should be doing that review annually. The fourth mistake, less obvious, is allocating everything and directly charging nothing. Where a cost belongs entirely to one grant, charge it there. Allocation is for genuinely shared costs, and over-allocating makes every report harder to defend.

Frequently Asked Questions

Do we need timesheets if staff work on one grant only?

Some record of time is still worth keeping. Someone described as fully dedicated usually is not, once meetings and covering for colleagues are counted, and a funder will ask what supports the 100% charge. A monthly confirmation is often enough where the work genuinely is single-purpose.

Can we allocate based on our budget rather than actual time?

You can post on budgeted percentages during the year for practicality, provided you true up to actual and keep the adjusting entries. What you cannot do is report budgeted percentages to a funder as though they were actuals.

What if a funder caps administrative costs below what we actually spend?

Charge the grant the capped amount and the excess to unrestricted resources, and track that unfunded portion by program. It is a real cost of the grant and the board should see it when deciding whether to renew.

Does the grant allocation change what we report on the T3010?

No. Which grant paid a salary does not affect total compensation reported, nor how expenditures are grouped by account type. The return is allocated by function, which is a separate exercise from the funder split.

How do we allocate a shared cost when one program is seasonal?

Use a basis that reflects consumption over the period rather than an annual average, and say so. A summer program using a facility for three months should not carry a quarter of annual occupancy simply because it is one of four programs.

Who should approve the allocation basis?

Management should set it and the board or its finance committee should see it, particularly where indirect cost recovery affects program viability. Record the approval. When a funder asks why the split is what it is, a minute is a better answer than an explanation.

This article covers cost allocation across grants and its interaction with T3010 functional reporting as at September 2026. Eligible cost categories, indirect cost caps and documentation requirements are set by each grant agreement. Confirm the schedules and line numbers that apply to your charity against the version of the form in force for your fiscal period.

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