3 Note on cost allocation
The value of the contribution made by whoever is financing the activity will often be
relatively easy to calculate – for example, where the activity is funded completely by
one or more sources then the value of the contribution is known.
If the analysis relates to part of an organisation then it may be more difficult to
calculate the investment being made. It is important to get this right so that the cost
of producing social value is not understated. This is similar to full cost recovery in
grant applications. Unless you identify the full cost of your activities (not just the grant
funding, for example), you will not get an accurate ratio.
For example: in an organisation with two departments, where the analysis only relates
to one department, it will be necessary to start by calculating how much the department
costs. Most of the costs will be known and could be obtained from the accounts. The
problem arises if the organisation buys things that are used by both departments (such
as electricity or the organisation’s manager). It will be necessary to allocate these costs to
the department and then identify who provided the inputs (the investment that covered
the costs). This may need some proportioning between sources of finance. It may be
helpful to involve your accountant, if you have one, at this point.
Even when you are analysing the social return arising from, say, a grant, you will need
to take care that the activity does not depend on other contributions from elsewhere in
the organisation that are not being funded through the grant.
The steps are:
A. Identify costs for goods and services that are required for the activity you
are analysing.
B. Identify and allocate the costs of goods and services that are shared by
different departments.
C. Identify the sources of income for these goods and services.
D. If necessary, identify proportions of income from different sources.
Resour Resour
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 A guide to Social Return on Investment
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