Free guide
Financial vs Economic Costs: What Donors and Ministries Expect
The difference between financial and economic costs, when each is needed, and how to value donated goods, volunteer time, shared resources and capital.
PDFUpdated 30 September 2026Costing
What's inside
- Clear definitions of financial and economic costs
- Which one budgets, proposals, scale-up plans and economic evaluations need
- How to value donated goods, volunteer time, free space and seconded staff
- Capital costs in each view
- A reporting table you can reuse
Key points
- 01Financial costs are cash outlays; economic costs value every resource used, paid for or not.
- 02Budgets usually need financial costs; economic evaluations and sustainability plans usually need economic costs.
- 03Donated and volunteer inputs are free to the programme but not to society.
- 04Report both, side by side, and say which one each figure is.
Frequently asked questions
Which should I report to a donor?
Report what the donor asks for, which is usually financial cost for budgets and expenditure reports. For sustainability or scale-up discussions, economic costs show what the programme would cost if donated inputs had to be paid for.
How do I value volunteer time?
Commonly at the wage of a paid worker doing similar work, or at a relevant local wage. State the assumption and test it in sensitivity analysis.
Are economic costs always higher than financial costs?
Usually, because they include resources that were not paid for. They can be lower in some cases, for example when a programme pays above the market price for an input.
Need this done properly?
This guide explains the method. If you would rather have the analysis done for you — with local data, independent quality control and a report you can defend — we can help.
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Tell us about the decision you need to support. We will propose a scope, timeline and price.