Overhead (support/admin), fundraising and governance costs: separated, reasonable and transparent (SORP-aligned)
Assesses whether the charity defines and applies SORP-aligned cost categories (charitable activities, fundraising, support/admin and governance), allocates shared costs on a consistent basis, and keeps overhead at reasonable levels. Transparent methodology and context build donor trust and ensure efficient resource use. The criterion also assesses whether communications avoid simplistic “low overhead” claims and instead explain how appropriate investment in controls, safeguarding, and systems protects amānah and improves impact.
| Metric | Overhead ratios (Total vs Delivery-Adjusted) and fundraising efficiency |
|---|---|
| Target | RAG thresholds approved annually. Amber: >2pp movement YoY or >2pp above peer median. Red: >3pp above peer upper quartile or cost-to-raise-£1 deterioration >10%. Triggers management RCA. |
| Frequency | Quarterly internal; annual public |
| Method | (1) Support/admin ratio (total) = support costs ÷ total expenditure. (2) Support/admin ratio (delivery-adjusted) = support costs ÷ (total expenditure minus pass-through/agency flows and grants payable). Include depreciation in relevant function. Exclude exceptional items but disclose underlying ratio. Reconcile to SOFA. |
| Unit | Percentage; £ per £ raised |
Level 1: Initial/Ad-hoc
Administrative and program costs are not formally separated. Spending is ad-hoc with no policy to guide cost allocation.
Level 2: Developing
A basic, informal separation of administrative and program costs exists, primarily for internal accounting. There is no defined policy, and overhead is high or unexplained.
Level 3: Established
A formal, documented cost allocation policy is in place and applied internally. The administrative cost ratio is calculated and monitored, with basic separation of restricted fund costs.
Level 4: Advanced
The administrative cost ratio is regularly reviewed by leadership, benchmarked against a defined peer set, and publicly disclosed with justification in annual reports (including s162A statement).
Level 5: Optimizing
The organization demonstrates leadership in stewardship with independent review of allocations, three-year trend reporting, segmented disclosure (unrestricted vs total), and clear zakat/restricted fund policies. Cost ratios are transparently reported and used to build exceptional donor trust.
Organisation Types
By Organisation Size
| Size | Applicability | Notes |
|---|---|---|
| Micro | exempt | Receipts and payments accounting is sufficient; formal SORP alignment, cost allocation policies, and audited SOFAs are disproportionate. |
| Small | partial | Should track basic admin costs for transparency, but exempt from formal SORP accruals accounting and audited financial statements. |
| Medium | partial | SORP compliance is mandatory above £250k, but formal audited statements and complex cost allocation policies scale depending on exact income. |
| Large | full | |
| Major | full |
Applicable When
- Organization is legally constituted
Not Applicable When
- - The organisation has no material support/admin, governance, or fundraising costs (e.g., <£5k or <5% of total expenditure) and only passes through funds under agency arrangements; otherwise applicable.
- If solely a fiscal intermediary, disclose gross vs agent treatment and present both gross and net ratios internally.
Discussion (1)
📋 **Version updated: 1.0.0 → 2.9.7** **Changes:** Updated islamic_references from mizan-297.json
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