April 2023
A significant challenge facing many nonprofit organizations involves determining how much of their resources and expenses go toward each of their projects. Nonprofits do not necessarily see returns on investment in the same way as for-profit businesses, so they must find other means for tracking the sustainability of their operations. Cost allocation is a method of categorizing expenses or grouping them together for each of an organization’s programs. This can be straightforward when it comes to costs that are directly related to specific initiatives. Other costs, such as overhead, present a challenge since they cover more general purposes for an organization. Several methods are available to help nonprofit organizations allocate these types of costs.
