Program economics.

What to track per program.

• Direct program costs — staff, materials, direct services.
• Allocated overhead — the share of organizational support each program uses.
• Revenue attribution — restricted grants, fee-for-service, allocated unrestricted.
• Net contribution — what’s the gap between cost and dedicated revenue?
• Program outcomes — the mission side of the ledger.

The sustainability question.

A program can lose money on a per-unit basis and still be the right thing to run. The question isn’t whether each program is “profitable” — it’s whether the organization as a whole can sustain the mix. If too many programs depend on unrestricted dollars that don’t exist, something has to change.

Why program economics matter.

Most nonprofits know their organizational P&L. Far fewer know their program-level P&L. Without that view, leaders can’t see which programs are sustainable, which are subsidized, and which would generate surplus at scale. Strategic decisions — whether to grow a program, sunset one, or fund-raise specifically for a gap — require program-level economics.

What goes into a program P&L.

• Direct revenue. Grants, contracts, fees, and contributions designated for the program.
• Direct costs. Program staff salaries and benefits, direct supplies, contracted services, occupancy for program-only space.
• Allocated costs. Shared occupancy, administrative time, technology, leadership overhead — allocated by a defensible method.
• Net result. Surplus or subsidy, by program, for each year.

The allocation method matters. Simple methods (% of staff time, % of revenue, % of program direct costs) are usually defensible. Complicated methods often hide rather than clarify.

What you’ll likely find.

When organizations look at program economics for the first time, the patterns are predictable:

• One or two programs cover their full cost — sometimes generate surplus.
• Most programs run at a partial subsidy — they cover direct costs but not full allocated cost.
• One or two programs run at a meaningful subsidy — they consume significantly more than they bring in.

This is not necessarily a problem. Subsidized programs may be the most mission-critical work. But knowing the subsidy lets the organization make conscious decisions rather than discover the gap when general operating money runs short.

Decisions that program economics inform.

• Which programs to invest in growth vs maintain at current scale.
• Which programs need targeted fundraising to close the funding gap.
• Which programs to partner on rather than run directly.
• Which programs to sunset if mission alignment is no longer strong enough to justify the subsidy.
• How to price fee-based programs to recover cost rather than perpetually subsidize.

Questions EDs and boards ask.

Should every program break even? No. The point of program economics is not to demand break-even from every program. It’s to make subsidies visible and intentional.

How often should we update program P&Ls? Quarterly, at minimum. Annually with the budget. Reforecast mid-year if a major variance appears.

What if our funders push back on indirect cost allocation? Document the method. Be transparent. Some funders are catching up to the reality of true cost; others aren’t. The conversation is worth having.