How do I work out what a project really costs, including overheads?

England and Wales: This page sets out the approach in full. Scotland: the same approach, with no difference — the SORP’s cost allocation module is UK-wide, and the two facts this page cites are identical for Scotland. Northern Ireland: the same approach, with no difference, for the same reason.

Full cost recovery on one basis, in bids and accounts

The treasurer decides the apportionment basis once and writes it down. Then the same figures go in funding bids and in the accounts. The approach is the same in England and Wales, Scotland and Northern Ireland, because the SORP’s cost allocation module is UK-wide. It does not change with the regulator: the Charity Commission, OSCR or the Charity Commission for Northern Ireland.

The most common failure here is not choosing a bad basis. It is choosing two different ones for two different readers. This page assumes the annual budget is set; if not, build your first annual budget first.

The funding bid is usually written by whoever leads fundraising. The accounts are prepared by finance, often months later.

The two may share out the same premises or finance costs in different ways. Then the figures cannot be reconciled if a funder or an examiner ever asks. And the accounts’ own note of the allocation basis is wrong as soon as it stops matching what was charged out.

Full cost recovery means recovering a fair share of the charity’s support and governance costs from each activity that draws on them. Those costs include premises, finance, HR and leadership time. Full cost recovery covers more than the direct costs of running a project.

Under the SORP, governance costs are one kind of support cost, but the notes to the accounts show their total separately. They should not be apportioned the same way as other support costs by default.

Support costs are the costs of functions that help the charity do its work, such as finance, HR and IT. They are usually shared across activities on some measure of use. Governance costs (running the board, statutory compliance, the annual accounts themselves) exist whatever activities the charity runs.

A charity should be able to explain why its basis treats the two differently. It should not assume one formula fits both.

The smallest SORP tier and the cost allocation module

The smallest SORP tier can take the cost allocation module out of the accounts, but not out of the funding question. The SORP‘s cost allocation module is one of only a few modules where a charity’s tier changes what is required.

The smallest tier is charities with gross income at or below £500,000. A charity in that tier can elect the natural classification basis for its statement of financial activities. If it does, it does not have to apply the cost allocation module to its accounts at all.

That exemption is real, but it is not new: the previous SORP offered the same choice, and the 2026 SORP explains it in more detail. It makes the accounts simpler. It does not change what a funder will accept. Full cost recovery is as necessary as ever for funding, whatever accounting treatment applies.

A funder who reads a bid does not care which SORP module the charity’s year-end accounts use. The step still applies to each charity that bids for project funding. At the smallest tier it may not drive the format of the accounts themselves.

What makes an apportionment basis defensible?

A basis is defensible if you can justify it and apply it the same way each time. There is no single correct apportionment method. Common choices are:

• premises costs, by floor area occupied by each activity
• finance and governance costs, by direct staff time recorded against each activity
• IT costs, by headcount

Whichever you choose, write down the reasons in the accounting policies note, not just the resulting numbers. Anyone who later checks the accounts against a funding bid can then see the basis itself, not only its output.

Where does the recovery rate go next?

The rate worked out here goes to two places: the funding bid and the accounts. Putting it into a bid is covered in build the project budget. Working out which funders will and will not accept an overhead contribution is covered in calculate the project’s full cost, including core costs.

In the accounts, the rate feeds into Build your Statement of Financial Activities. There the same apportionment appears again, on the same basis, in the accounts themselves.

With the basis written down, the next step is to determine which accounts to prepare at the year end.

Common mistake: using one apportionment basis for bids and a different one in the accounts

Fundraising writes the bid and finance writes the accounts, often months apart. The two cannot be reconciled if a funder asks. And the accounts’ own note of the allocation basis becomes wrong.

Worked example

Saltmarsh Trust apportions its premises costs across three activities by the floor area each one occupies. It apportions its finance and governance costs by direct staff time recorded against each activity.

Both bases are set out in the accounting policies note in its accounts, in the same terms as in its funding bids. The result is a recovery rate that stands up to a funder’s checks. It also matches, line for line, what the published accounts show.