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Report
17 November 2022

Overhead cost allocation in the humanitarian sector: Appendix 1

Mapping of INGOs and UN agencies

appendix 1

An updated version of this mapping is available

Go to the updated mapping

INGOs

Organisation	Is there a policy for providing overhead costs to L/NNGOs?	Current practice
CAFOD	Yes	CAFOD use the term ‘overhead charge’ and do not use the definitions set out in the first component of the MWIC protocol. For donor-funded projects, CAFOD shares 50% of the allowable ICR with partners. Where there is more than one partner, it is divided proportionate to each partner’s budget. For CAFOD-funded projects, CAFOD aims to cover the appropriate level of core organisational costs for partners. The rate is based on need, negotiated on the country level, and generally does not exceed 7%. In both cases, overhead funding is given as an unrestricted contribution to the partner’s core costs and does not need to be reported against.
Christian Aid	Yes	Christian Aid’s definition of indirect costs is aligned with the cost classification definitions of the MWIC protocol. For donor-funded projects, Christian Aid shares 50% of the allowable ICR with partners. Where there is more than one partner or a consortium, the ICR split is negotiated on a case-by-case basis. For Christian Aid-funded projects (such as internal emergency funds) and Disasters Emergency Committee (DEC) funds, the practice is to offer 10% overhead costs. In both cases, overhead funding is given as an unrestricted contribution to the partner’s core costs and does not need to be reported against.
Kindernothilfe (KNH)	Yes, in practice	KNH provides up to 10% of direct project budgets as overheads for partners. This is part of KNH’s mandatory requirements for budgets, rather than a specific written policy. This is given as an unrestricted contribution to the partner’s core costs. The exact rate is agreed upon with each individual partner. An overhead budget breaking down the planned costs is required if the overhead contributions from KNH (from various projects) exceed a certain amount (> EUR 25,000). Partners must submit (locally) audited financial statements that include the overhead costs. However, overheads are not the focus of in-house verification beyond an overall comparison of budget and actuals.
Save the Children	Not specifically, but part of its localisation policy	Save the Children are currently developing a definition of ‘overheads’ in line with the cost classification component of the MWIC protocol. Save the Children’s overarching localisation policy states that the organisation will strive to provide around 10% additional resourcing beyond project direct costs; composed of 7% indirect costs and 3% capacity strengthening and adjusted based on context and donor conditions. However, the overhead sharing is not currently standard practice, nor is it tracked internally. When ICR is provided, the rate depends on donor policy or partner’s established ICR policy. When provided, ICR is given as an unrestricted contribution to partner core costs. It can be subject to audit depending on donor requirements.
Cordaid	No, under development	Cordaid shares ICR with partners for its humanitarian programming with the rates decided on a case-by-case basis. This is not an official, organisation-wide policy and only concerns the humanitarian team, though it does occur within other projects at times.
Concern	No, under development	Concern’s definition of indirect costs is aligned with the cost classification definitions in the MWIC protocol. Concern does not currently have a policy or guidelines on ICR sharing and it does not generally occur as a result. Concern is currently finalising its Global Partnership Strategy and has made the issue of sharing overhead costs and related indicators with partners a key priority.
CRS	No, under development	CRS does not have a policy or guidelines on ICR sharing but will often supplement local partner organisations using its private funds if the partner is not eligible to receive a share of ICR from a specific donor. CRS is currently developing a policy on ICR for local organisations from public and private funds that will include guidance on ICR sharing. CRS does allocate resources to support local organisations in developing their own ICR policies so they can access ICR direct from donors.
NRC	No	NRC does not have a policy or guidelines on ICR sharing. Current NRC regulations do not allow for overheads to be provided to partners as a lumpsum, although it does cover some overhead-type costs through partners’ direct budgets. When partnering through a consortium, NRC’s standard rule is that all members should receive lumpsum admin compensation at the same rate as that paid by the donor (unless this contradicts specific donor regulations). NRC uses the cost classification definitions in the MWIC protocol though not in relation to downstream partnership management.
Oxfam	No, under development	The Oxfam confederation does not have a global policy on ICR sharing. Oxfam affiliates have different cost-recovery mechanisms and vary in their approaches to ICR sharing, with some country offices more progressive than others. Oxfam GB is among those who have agreed to share ICR in principle and are piloting this policy.
DRC	No, under development	DRC does not currently have any policies or guidelines on ICR sharing. While some country offices break the mould, overheads don’t tend to be shared or provided to partners, except in cases where the donor specifically allocates additional overhead to sub-granted partners. In those (rare) cases, the funding given is unrestricted, though it may need to be reported on and spent during the project period. Auditing depends on donor regulations. DRC is currently in the process of developing a policy around ICR for partners. DRC does not use the definitions of indirect costs set out in the first component of the MWIC protocol.
IRC	No, under development	IRC’s indirect cost recovery policy for partners includes a commitment to recovering all partner costs. However, the policy contains requirements that sometimes prevent partners lacking a NICRA or equivalent from accessing indirect cost coverage. In most cases, IRC works with those partners to charge ostensibly ‘indirect’ costs as direct project costs. This policy is currently under review, with IRC aiming for more effective and equitable ICR sharing.
Trócaire	Draft policy under review	Trócaire has developed a draft policy on ICR sharing which is currently under review. Current practice is that Trócaire does not share ICR. However, certain country offices have taken more innovative approaches. For example, Myanmar and Sierra Leone have shared ICR with partners in the past. Trócaire’s new partnership and localisation strategy (https://www.trocaire.org/documents/partnership-and-localisation-strategy-2021-2025/) includes a commitment to 'more equitable sharing of indirect and core costs' along with an indicator that an organisational policy on ICR sharing will be developed in 2022.
Start Fund	No, under development	The Start Fund allows both national and international recipients to claim up to 10% ICR on project grants. For recipients that sub-contract to partners, the organisation recommends that ICR be equitably shared according to the level of work and risk each partner shoulders in delivering the programme. However, this is not mandatory and does not have to be reported back to the Fund.

UN agencies

Organisation	Is there a policy for providing overhead costs to L/NNGOs?	Current practice
IOM	Yes	IOM provides overhead-related expenses for international and national partners provided that they are in line with the established policies of the partner or in the absence of a policy, as 'required for the successful implementation of the project to cover administrative support or management costs that are linked to the activities, but not otherwise covered by the budget.' Overheads may not exceed the thresholds specified within the funding donor agreement, which is usually 7%. IOM assesses all partners using the same criteria, and the rates may differ in line with the partners’ internal policies. The overhead is typically charged on the partner’s total direct costs to cover the indirect costs linked to project implementation. IOM does not audit or verify the overhead reported by partners as a rule, except to check for duplicates in cost charges or where due diligence exercises identify a lack of related controls. IOM employs the definition of ‘indirect costs’ listed in the UNSDG Business Innovations Group Principles for Costing and Pricing Services.
UNHCR	Yes	UNHCR provides 4% indirect costs for local and national partners and 7% for international partners. Indirect costs are charged based on the partner’s reported overall eligible programmatic expenditure. It is provided as an unrestricted contribution to partner core costs and does not need to be reported against. UNHCR uses the cost classification definitions set out in the MWIC protocol.
UN Women	Yes	UN Women provides overheads for local and national partners. The rate depends on the agreement with the donors and does not usually exceed 8%. Overhead funding is provided as an unrestricted contribution to partner core costs i.e., operating expenses, overhead costs and general costs connected to the normal functioning of an organisation/business. These include costs for support staff, office space and equipment that cannot be considered direct costs. This funding is subject to an annual independent partners’ audit which includes verification of all expenditures. UN Women’s definition of indirect costs is aligned with the cost classification definitions set out in the MWIC protocol.
UNFPA	Yes	UNFPA covers all costs directly related to the activities on its workplans. It also provides partners with a 0-12% ‘support cost’ rate to cover their overheads. This rate is negotiated with partners and is meant to take projected direct programme costs into account. For UNFPA partners who sub-contract to a local or national partner, an overhead can also be charged based on the first-level recipient’s overhead policies. Overhead ‘support cost’ funding is paid based on total expenditures. UNFPA does not restrict what the partners uses the funds for, nor does UNFPA require our partners to report on how they were used.
FAO	No	FAO does not provide overhead or indirect costs to any of its civil society partners, including local and national partners. However, when direct costs incurred in connection with implementation of the project cannot be easily quantified, FAO accepts that a portion be charged as a percentage of total operating costs (these are known as ‘support costs’). This is based on an assessment of the fiduciary risks of working with a partner organisation. This percentage cannot exceed the overhead rate that FAO receives, is provided as a lumpsum and is not audited. However, it is only applicable to costs associated with the direct implementation of the project.
WHO	No	WHO does not provide overheads or indirect costs to L/NNGOs as a rule. Unrestricted indirect costs of around 5-7% are allowed in certain cases; where this is not the case, partners may reflect their overheads as a direct cost. These should never exceed 10%. WHO is finalising a Localisation Strategy in 2022 for its World Health Emergencies Programmes with overheads expected to be included within this framework.
UNICEF	No	UNICEF does not provide overheads for local and national partners who are expected to cover all their costs through the direct programme cost categories. Conversely, INGOs can claim 7%.
OCHA CBPF	Yes	OCHA refers to overheads as ‘Programme Support Costs’ and defines them as costs incurred by the implementing partner that cannot be unequivocally traced to specific activities, projects, or programmes. Overheads are charged at a maximum of 7% of the partner’s approved direct expenditure and are the same for international and national fund recipients. The corresponding funding amount does not need to be itemised in the project budget. As per the stipulations of the CBPF Grant Agreement, the grantee must ensure that any PSC is fairly distributed among any sub-grantees, in a manner that is proportionate to the project budget and activities undertaken by each party.

Red Cross Red Crescent

Organisation	Is there a policy for providing overhead costs to L/NNGOs?	Current practice
IFRC	No	IFRC does not have the concept of indirect costs for downstream partners (i.e., National Red Cross and Red Crescent Societies). All funding passed on to partners is considered a direct cost and the ‘indirect cost’ that IFRC recovers from donors is not shared. Partners can claim all costs relevant to the implementation of the project as direct costs, including administrative budget lines necessary for project implementation. Conversely, funding for specific non-project-related expenditures is not provided.