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Understanding Cost Allocation

Your nonprofit work has certain knowable costs. Costs for staff, costs for property and equipment, costs for programs. Sound nonprofit finance means determining, accounting for and allocating those costs properly. Knowing how to allocate costs helps you determine where your money is going, know your true program costs and set useful fundraising goals. We help you understand the four methods of cost allocation—direct assignment, staff time, cost drivers based on volume, and estimates—and what questions to ask yourself as you go throughout the process.