Expenditure is recognised once there is a legal or constructive obligation committing the charity to the expenditure, it is probable that settlement will be required, and the amount can be measured reliably.
All expenditure is accounted for on an accruals basis and includes attributable VAT which cannot be recovered.
Types of Expenditure
Costs of Raising Funds
These comprise the costs associated with attracting voluntary income and the costs of trading activities undertaken to raise funds. This includes fundraising campaigns, marketing, and the costs of any trading subsidiaries.
Expenditure on Charitable Activities
These include all costs directly related to the delivery of the charity’s objectives and services, together with an appropriate allocation of support costs.
Support Costs
Support costs represent indirect costs necessary to facilitate charitable activities but which do not themselves directly relate to those activities. These include governance costs, finance, HR, IT, and office administration.
Support costs are allocated to activities on a basis consistent with the use of resources.
Governance Costs
Governance costs include those incurred in the governance of the charity’s assets and are primarily associated with constitutional and statutory requirements. These include audit fees, legal advice for trustees, and costs of trustee meetings.
Grants Payable
Grants payable are recognised in the period when the charity has a present obligation (legal or constructive) as a result of a past event, it is probable that a transfer of economic benefits will be required, and the amount can be reliably estimated.