The Nonprofit FAQ

How can I determine my program costs easily?

Jane Garthson writes: I don't have an easy answer for your question on assigning program costs. I do suggest that you force yourself to work through the numbers. My charity (which serves people with disabilities, like yours) is trying to help more clients recover their fees from their health insurance plans. We could charge more for certain services that take much more professional and volunteer time, if we could justify these costs better. We're working on it. Another use for good figures is in fund-raising and sponsorship. We provide therapeutic riding. If we can identify the right cost for a rider for a semester, or to care for a horse for a year, we can use those amounts to find sponsors for specific horses or for needy individuals who can't afford our fees (we don't turn them away in the meantime). And we can use them as suggested amounts in direct mail; people like to know what their donation is "buying". I don't think we are including major capital, as these projects can really skew annual amounts and we have donors who will pay only for capital projects. I think your board should re-think its fee policy if you are finding fund-raising as difficult as we are. You may be giving 'charity' in cases where an insurance plan or a government program could and would pay. If you asked for a reasonable fee, you could still drop the fee for those who couldn't pay, and perhaps you would be able to serve more clients or meet more needs of existing clients. Note (5/9/00): The American Institute of Certified Public Accountants (AICPA) [http://www.aicpa.org] has published SOP 98-2 which sets new standards for the allocation of costs among functional areas ("program," "administration," and "fund-raising"). Many organizations find that familiar practices for dividing the expenses of mailings and other activities between program and fundraising are no longer permitted, with the result that reported fundraising costs appear higher than in the past. If these subjects are likely to affect the operations of a program, its managers will find it very useful to review the terms of this new standard of practice (SOP) with their accountants before undertaking new fund-raising campaigns and well ahead of the last-minute crunch to prepare the year-end financials. See also http://www.nonprofits.org/npofaq/16/01.html for a further discussion SOP 98-2. --PB Posted 2000 -- Ed.