When Is It Appropriate to Make an Overhead Charge to a Ministry Project?

Q. When a ministry raises funds for a project—let’s say a building fund or a campus expansion fund—is it appropriate to make an overhead charge to the project? In other words, is it appropriate for a ministry to allocate a portion of the funds raised for the project to cover general and administrative costs and any costs related to raising the resources with the total raised less the overhead allocation used for the project?

A. Yes, overhead assessments are often applied by a ministry to restricted donations. The rate of the assessment is commonly expressed in terms of a percentage. The overhead rate charged might be the overall overhead rate for the ministry based on the yearend financial report. Or, the overhead rate could be calculated based on the specific indirect costs for the project. Disclosure of administrative assessments to donors is generally not required by law. The disclosure of an overhead assessment policy demonstrates maximum transparency. If an overhead charge is assessed, the fundraising solicitations and any other communications with donors should not leave the donor with the impression that no overhead charge will be made against the gift.


This text is provided with the understanding that ECFA is not rendering legal, accounting, or other professional advice or service. Professional advice on specific issues should be sought from an accountant, lawyer, or other professional.