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Cost allocation and apportionment

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Use this page to learn about what cost allocation and apportionment mean and how it works in practice.

Defining cost allocation

Cost allocation is about when we determine which particular costs relate to which particular project.

Defining cost apportionment

Cost apportionment is when we share our organisational running costs across our projects in a way that is fair and reasonable.

Calculating the full cost of a project

When calculating the full cost of a project there are two steps we need to take.

  1. Calculate all direct costs and allocate them in full to the relevant project.
  2. Calculate all support costs and apportion (divide up and share out) (apportion) them across our various projects.

Common apportionment methods

There is a range of apportionment methods available to us. You need to choose one carefully so that we’re only charging a fair and reasonable portion of the support costs to the project.

The most common apportionment methods are:

  • people (for example, governance, leadership and, computer costs)
  • floor space (for example, rent and heating)
  • expenditure (such as for fundraising)

When the numbers are small it’s often easier to choose one method, such as people, and use it for all types of support costs.

The principles are fairly straightforward. In practice, it’s easy to lose track of the full cost without keeping a clear record of your calculations.

You’ll also need this once you’ve secured funding and the project is up and running so you can easily keep track of your budget.

NCVO worked with Liz Pepler at Embrace Finance to create this guidance.

This page was last reviewed for accuracy on 01 December 2022

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