Joint costs and joint activities: How much fundraising expense should I report?

A few weeks ago, I talked with you about functional expense allocations – lets take this issue to the next level and jump into joint cost allocations and joint activities.

What is a joint activity?  It is an activity that is in part fund-raising and has elements of one or more functions, such as program, management and general, membership development, or any other functional category used by the entity. 

When fundraising functions are combined with other functions in one activity, certain criteria must be met in order for all of the expenses to not default to fund-raising.  If, specific purpose, audience, and content criteria are met, costs of joint activities identifiable with a particular function should be charged to that function, and joint costs of joint activities should be allocated between fund-raising and the appropriate function.  If any one of the purpose, audience, or content criteria are not met, all costs of the joint activity should be charged to fund-raising, even those that are otherwise identifiable with another function.    (FASB ASC 958-720-45-29, formerly SOP 98-2)

I want to provide you several resources which I found helpful to understand joint cost allocation better, as well as the FASB decision tree related to the 3 assessment criteria.  If you don’t have time to read more articles today, my top two takeaways are:

1) In the joint activity, make sure there is a call to action to accomplish an organization’s mission besides making a contribution, and 

2) There is a presumption the audience criterion is not met if the audience includes prior donors or is based on their likelihood to contribute. 

To read more, I recommend these two articles:

Top 5 mistakes to avoid when allocating joint costs

Non-profit accounting basics: Joint Cost Allocation

FASB ASC 958-720-55-2 illustrates a decision tree to walk through whether the three criteria are met:


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