Admin Allocation - 10% is a Myth
This week I am revisiting how Administrative Costs are allocated to the various programs of a nonprofit organization, and this is where the science versus art of accounting collide. Most program funders articulate a maximum percentage for administrative services typically at 10%. What can vary is what they consider as Administration versus Program Delivery. For example some will consider Information Technology as administrative costs where others consider it program delivery. Liability Insurance is another example. Some will allow 12% versus 10% but consider certain costs to be included in administration where others consider the same as program costs. Then there is accommodation costs: some are power users of office, service, and reception space, where others are not. This leads me to accounting school where we covered what are called Cost Drivers. Cost Drivers are factors which drive costs: for example square feet may drive janitorial cost where cubic feet may drive heating costs.