How to Allocate Staff Salaries Across Program Services and Management and General Expense
Dividing staff costs between direct mission work (program) and administrative overhead (management and general) based on time allocation.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Program Services: Education | Expense (+) | 8,000.00 | - |
| Management & General Expense | Expense (+) | 2,000.00 | - |
| Wages Payable | Liability (+) | - | 10,000.00 |
💡 Accountant's Note
Donors look at the 'Program Expense Ratio.' This entry ensures costs are accurately attributed to the mission vs. management.
Practitioner & Systems Framework
💻 ERP Architecture
Base the salary allocation on time sheets or a documented time-allocation estimate reviewed and approved by management at least quarterly. Maintain a functional allocation table in the ERP linking each employee's role to the percentage split across program, management, and fundraising. Update splits when roles or grant scopes change. The program expense ratio (program costs ÷ total costs) is critical for donors — most expect 70%+.
⚠️ Audit Flags
Auditors test the allocation methodology against time sheets or activity records. Arbitrary splits not based on actual time use are a finding. Allocating administrative staff (accountants, HR) to program just to inflate the program ratio is a red flag. The allocation must be reasonable, documented, and consistently applied.
📄 Required Documentation
Time sheet or time allocation survey per employee, functional allocation table by role, quarterly management sign-off on allocation percentages, statement of functional expenses, and program expense ratio analysis.
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Expert Analysis by Qusai Ahmad
General Accountant Supervisor & IFRS Specialist
Specialized in SAP GUI automation and Middle Eastern tax compliance. Building digital tools for the next generation of finance leaders.