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Calculating Program Costs

To do a cost-benefit or cost-effectiveness analysis, organizations must first accurately calculate the total cost of running a program. This information is important to monitor even if a program is not planning to perform a cost-benefit analysis. (For example, it would be important for programs to be aware if the average cost per participant is increasing over time and why.)

Calculations of program costs should include both financial and economic costs.

Financial costs are monetary expenditures for resources required to implement the program. This type of cost is typically found in the organization's budget, and should be based on fair market prices. Examples of financial costs include:

• Salaries for project personnel
• Supplies
• Program administration (usually based on the percentage of an organization's administrative costs dedicated to a particular program)
• Physical space and utilities (also based on a percentage of the organization's total costs)
• Travel
• Participants' out-of-pocket expenses

Economic costs (or opportunity costs) are the value of forgone benefit because resources are not available for their next best use. These should also be based on market value. For prevention programs, these might include:

• Volunteer hours
• Donated space
• In-kind donations

Be careful not to overlook resources that are difficult to measure or value, resources used in small amounts, or resources already purchased. Costs to evaluate the program are typically not included in the calculation of program costs, unless it is considered essential to future program implementation.

** Adapted from: Corso, P.S. (2003). Cost-effectiveness analysis for the multi-site evaluation. Washington, DC: National Center for Injury Prevention and Control, Centers for Disease Control and Prevention.

Selected Resources A Guide to Calculating the Cost of Quality Early Care and Education (PDF - 1180 KB) Stebbins & Langford (2006) Helps policymakers, community leaders, and program developers create accurate estimates of the cost of high-quality early care and education systems, and includes information on creating a strategic financing plan, developing an advisory group, and using the cost estimate. Estimating Child Welfare Service Costs: Methods Developed for the Evaluation of Family Preservation and Reunification Programs Office of the Assistant Secretary for Planning and Evaluation, U.S. Department of Health and Human Services (2002) Presents a methodology for conducting a cost study of family preservation services. While designed for family preservation, it can be adapted for other cost analyses or for ongoing budgetary and cost analysis efforts in child welfare programs. Framing an Economic Evaluation: A Self-Study Course With Exercises and Case-Study Questions Centers for Disease Control and Prevention (HHS) (2003) View Abstract This federally funded self-study course book explains different forms of economic evaluations, including cost analysis, cost-benefit analysis, cost-utility analysis, and cost-effectiveness analysis, and offers strategies for framing an economic evaluation study.

Updated on February 2, 2010