How should expenditure be allocated to different charitable activities?

There are a number of bases for apportionment that may be applied, such as proportion of direct costs, staff numbers, floor area or staff time. The bases for apportionment adopted by a charity should be appropriate to the cost concerned and to the charity’s particular circumstances and applied consistently. The accounting policy notes should explain the policy adopted for the apportionment of costs between activities and any estimation technique(s) used to calculate their apportionment. In attributing costs between activity categories, the following principles should be applied:

  • Where appropriate, expenditure should be allocated directly to an activity cost category
  • Items of expenditure which contribute directly to the output of more than one activity cost category, for example, the cost of a staff member whose time is divided between a fundraising activity and working on a charitable project, should be apportioned on a reasonable, justifiable and consistent basis
  • Depreciation, amortisation, impairment or losses on disposal of fixed assets should be allocated in accordance with the same principles
  • Support costs may not be attributable to single activity, but rather provide the organisational infrastructure that enables output-producing activities to take place. Such costs should therefore also be apportioned on a reasonable, justifiable and consistent basis to the activity cost categories being supported

Want to discuss further?

Joanna Pittman

Partner

Fleur Holden

Partner

More from this service area?

Related resources

-

-