TS-FS-11
Trust & Stewardship
Financial Stewardship
CORE
Compliance
v2.9.7
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.
Assessment Questions
- How does the organization formally define and differentiate between administrative, fundraising, and program costs?
- Is there a documented cost allocation policy, and how is its consistent application ensured across all departments?
- What was the organization's administrative cost ratio (both total and delivery-adjusted) for the last fiscal year?
- How does the organization's leadership ensure that administrative costs are reasonable and benchmarked against a defined peer set?
- In what ways are the organization's policies on administrative costs and its actual cost ratios communicated to donors and the public?
- What shared cost drivers are used (FTE, time, floor area, transactions), and when were they last reviewed by the board?
- How are fundraising costs tracked and disclosed (including cost-to-raise-£1), and are Charities Act s162A fundraising statements included in the Trustees’ Annual Report?
- How are restricted funds (e.g., zakat) treated in overhead allocation? Show the donor journey evidencing explicit consent and the ‘āmil calculation note.
- Have there been material changes to the cost allocation methodology in the last 3 years, and how were they explained to stakeholders?
- How are pass-through grants/agency arrangements treated in ratio calculations, and is principal vs agent status documented?
Evidence Requirements
- Documented cost allocation policy and methodology.
- Audited financial statements (SOFA) and notes including the analysis of expenditure by activity, support/admin cost allocation, and separate identification of governance costs (per SORP).
- Allocation model workbook (or system report) showing cost pools, drivers, calculations, and a reconciliation to the audited SOFA totals.
- Annual allocation review paper (drivers, reasonableness testing) signed off by management and approved by finance committee.
- Annual reports or dedicated sections on the organization's website that disclose and explain the administrative cost ratio.
- Board or finance committee meeting minutes showing discussion and review of administrative costs and efficiency measures.
- Internal budget documents that demonstrate the application of the cost allocation policy.
- Accounting policies note describing the cost allocation methodology and any material changes.
- Samples of fundraising materials and Trustees’ Annual Report fundraising statements demonstrating transparency on costs (per Charities Act 2011 s162A and Code of Fundraising Practice).
- Benchmarking pack vs peers (e.g., NCVO Almanac/CFG data) with VfM action plan.
- Sample of coding-at-source training/guidance for budget holders.
Scoring Guidelines
| Level | Rating | Description |
|---|---|---|
| 5 | 5/5 | SORP-aligned categorisation; documented and disclosed methodology; three-year trend of overhead ratios; independent review (audit/IE/internal audit) of allocations; cost-to-raise-£1 tracked; restricted funds policy applied (e.g., zakat) and disclosed; benchmarking vs peers with VfM actions. |
| 4 | 4/5 | SORP-aligned policy in use; ratios reported publicly with context; board benchmarks and investigates variances; s162A fundraising statement included in TAR. |
| 3 | 3/5 | Policy exists and applied internally; ratios monitored; limited benchmarking or public context; basic separation of restricted fund costs. |
| 2 | 2/5 | Partial categorisation; unclear allocation drivers; high/unexplained overhead; no public disclosure. |
| 1 | 1/5 | No separation or severely excessive/unjustified overhead; no policy. |
Discussion (1)
Administrator
2026-03-07 11:07:49.527985
📋 **Version updated: 1.0.0 → 2.9.7** **Changes:** Updated islamic_references from mizan-297.json
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