How Joint Costs for Fundraising are Allocated

Allocating joint costs for fundraising in a nonprofit organization involves distributing shared expenses incurred in fundraising efforts across different programs or activities that benefit from those efforts. These joint costs include expenses related to fundraising campaigns, advertising, and other activities aimed at soliciting donations. The goal is to allocate these costs fairly and accurately among the various programs that benefit from the fundraising efforts.

The allocation of joint costs for fundraising is a critical process for nonprofit organizations, as it ensures that the financial impact of fundraising activities is properly reflected in the organization’s financial statements and reports. Here’s how the allocation process for joint costs related to fundraising is typically carried out:

  1. Identifying Joint Costs: Joint costs include expenses that serve both fundraising activities and other programs or activities. These expenses might include direct mail campaigns, telemarketing efforts, fundraising event promotions, and related administrative costs.
  2. Defining Allocation Basis: Nonprofits need to determine a reasonable and justifiable basis for allocating these joint costs. Common allocation methods used for fundraising costs include:
    • Direct Revenues: Allocating costs based on the portion of total revenues generated by each program or activity.
    • Direct Expenses: Allocating costs based on the expenses directly related to each program or activity.
    • Functional Allocation: Allocating costs based on the specific functions or activities that benefit from the joint costs.
  3. Calculating Allocation Percentages: Using the chosen allocation basis, nonprofits calculate the allocation percentages for each program. For fundraising costs, this could involve determining the portion of fundraising revenue or expenses attributed to each program.
  4. Allocating Costs: The total joint fundraising costs are then allocated to each program based on its allocation percentage. Programs that benefit more from fundraising efforts receive a larger share of the allocated costs.
  5. Disclosure and Reporting: Nonprofits are required to disclose information about the allocation of joint fundraising costs in their financial statements and accompanying notes. This disclosure includes details about the allocation method used, the allocation percentages assigned to each program, and the total joint fundraising costs incurred.
  6. Transparency and Communication: Nonprofits should communicate how they allocate joint fundraising costs to their stakeholders, such as donors and supporters. This transparency helps donors understand how their contributions are being used and demonstrates responsible financial stewardship.

It’s important for nonprofits to adhere to relevant accounting standards, such as those provided by the Generally Accepted Accounting Principles (GAAP) or other applicable regulations, when allocating joint fundraising costs. The chosen allocation method should be consistently applied to ensure accurate and comparable financial reporting.

Accurate and transparent allocation of joint fundraising costs helps nonprofits provide a clear and accurate representation of their financial activities, allowing stakeholders to understand how funds are utilized to support the organization’s mission and programs.

Caroline Grimm

Caroline Grimm is an accounting educator and a small business enthusiast. She holds Masters and Bachelor degrees in Business Administration. She is the author of 13 books and the creator of Accounting How To YouTube channel and blog. For more information visit:

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