Indirect Expense Allocation at Academic Medical Centers

About the Research

Academic medical center (AMC) budget administrators allocate expenses using costing methodologies to promote fairness and efficiency. While direct costs can be assigned to the appropriate accounting unit or cost center, administrators must allocate indirect expenses or overhead according to other metrics such as square footage occupied or departmental accumulated cost.

Budget administrators are faced with the challenge of distributing these indirect expenses appropriately and risking backlash from department leaders. This research brief explores the strategies budget administrators used at three AMCs to allocate indirect expenses.

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