For nonprofit organizations, implementing and clearly documenting a cost allocation methodology is essential. This methodology must be reflected in audited financial statement notes, internal policies and procedures, and often in communications with potential funders. If you're new to working with nonprofits, understanding how to approach cost allocation is a critical first step.
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Aug 14, 2025
Introduction
Indirect costs, sometimes referred to as "overhead," include expenses that support overall operations but cannot be readily assignable to just one program or activity. Typical examples include facility costs and administrative costs such as the salaries and benefits of administrative staff (e.g. human resources, finance staff, and executive leadership), and office supplies and insurance.
