Direct costs and support costs

Use this page to learn about what direct costs and support costs are and how they work for single and multiple projects.

When we deliver projects, there are some costs which:

• relate directly to the delivery of the project
• some that support the general running costs of the organisation.

For example, when delivering an art therapy session the cost of the art supplies will relate to the direct delivery. The accounting fees will relate to the general running costs.

When we are small, we may run just one single project. When budgeting for a single project we include both types of costs: the direct costs of delivery and the running costs supporting the organisation.

As we grow and take on more projects, each project budget needs to include the direct delivery costs and a fair share of the organisational running costs. This way we secure the true full cost of running each project.

Direct costs are those costs that we have to meet when delivering our project. For example, if we run an art therapy session the direct costs might be the art supplies.

Direct costs are costs that we are able to attribute in full to one single project. Direct costs are allocated to projects.

Support costs are those costs that we incur in the general running of our organisation. These are often referred to as overheads, central costs or core costs.

They typically include costs such as accounting fees, rent, insurance, heat and light. Support costs are costs that relate to all of our projects and cannot be allocated to one single project.

When we run more than one project we need a way to share the support costs fairly between our projects. Support costs are divided and shared (apportioned) across projects.

Adding the direct costs and the support costs together gives you the full cost of the project.

This is important because it means when you apply for funding, you’re applying for the true cost of the project. This will help you with your organisation's wider financial planning.

Sometimes we overlook support costs and apply only for our direct costs. Sometimes we do include the support costs but we are unable to get them funded. This can make it difficult to:

• deliver the full project
• build longer-term financial sustainability.

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