Nonprofit Cost Analysis

Although nonprofits generally have a good understanding of their revenues, knowledge about costs can sometimes be less robust. This is particularly the case when it comes to the true, all-in costs of providing services, running programs, and otherwise operating the organization.

Cost Analysis Steps:

1. Determine Purpose & Scope
2. Gather Financial Data
3. Allocate Direct Costs
4. Allocate Indirect Costs
5. Check Your Data
6. Apply This Knowledge

Lacking this information, nonprofit executives often must make important resource-related decisions on the basis of intangibles such as intuition, the skills and knowledge of the program staff, or the preferences and inclinations of the organization’s funders. As a result, they run the risk of undermining their organization’s mission (however inadvertently) by failing to allocate resources to the most appropriate programs and services. Given the limited resources available to nonprofits (especially during financially challenging times), gaining economic clarity around costs is critical to inform key strategic decisions.

Nonprofit Cost Analysis: Introduction [on line version]
Nonprofit Cost Analysis Toolkit: Six Steps to Finding the True Costs of Programs [complete PDF version]

Author(s): Marta Garcia Abadia, Johnny Lin
Published Date: June 03, 2009