Procedure for Indirect Administrative Costs
The NGO will set aside a portion of its overall budget to cover indirect administrative costs in order to guarantee financial sustainability and transparency. These expenditures include things like utilities, office rent, pay for administrative staff, IT assistance, and basic office goods that help the business run. These costs are necessary for the organization’s operation and compliance even though they are not directly related to any one project.
Depending on the project’s nature and the criteria of the funding source, indirect expenses will be computed as a certain proportion of the overall direct project costs, usually between 5% and 15%. The percentage must be authorized by management and applied uniformly to all projects. Any departure from the regular rate needs to be justified in writing and approved by the senior leadership and finance department.
Every month, all indirect costs must be reviewed, allocated, and entered into the accounting system by the finance department. To make sure that internal financial policies and donor agreements are being followed, these expenses will be examined throughout donor reporting procedures and internal audits. To preserve accountability and guarantee donor trust, all charges categorized as indirect costs must be supported by appropriate documentation and explanation.
Author : Mohamed Yasin
