Step 2: Identify and Categorize Costs

To understand the cost of a rural community health program, it helps to use an "ingredients" approach. This is also known as micro-costing or activity-based costing. This means breaking the program into its basic parts, such as staff time, space, materials, technology, transportation, and other resources. Looking at each of these parts helps build a clear picture of what it takes to run the program.

It is not possible to conduct ROI analysis without an accurate measurement of program costs. These cost estimates are also valuable on their own because they help inform future program expansion or replication and show how much of an organization's resources are being used for this work.

Pick a Time Period

Rural program leaders should pick a specific time period, such as one year of program activity. If possible, it can help to look at costs both before and after the program. Our example, the Healthy Heart Education Program will focus on one year of activity.

Collect Information about Costs

Collecting cost information usually requires gathering data from many sources. Useful information can be found in funding applications, progress reports, budgets, and other program documents. Rural program leaders should also talk with staff and partners to better understand resources used, especially for activities that are not well documented. No single person will have all the information, so it may be necessary to contact multiple individuals or organizations to collect the information needed.

Sort Costs by Categories

Once data is collected, rural program leaders can sort costs into different categories. Here are some common categories to think about:

• Labor costs such as employees, contract labor, and volunteers
• Supplies or equipment, such as software, office items, travel, food, training fees, and participant incentives
• Facility costs
• Transportation or other capital costs

To identify program costs, it can be helpful to split a program into its components or activities, such as outreach, case management, and clinical care. This makes it easier to identify the costs associated with each category and to determine where resources are directed.

Also, in rural communities, where staff resources are limited, people may perform many different duties. They may be paid for some activities while volunteering their time for others. These in-kind contributions should be counted as costs. Volunteer time is not just a free benefit. It represents an opportunity cost, as someone's volunteer hours could otherwise be spent on paid work or other activities.

Create a Worksheet

To keep information organized, a table or worksheet can be helpful.

Programs may need to assign costs using standard pricing tools, such as salary schedules. To compare costs across different years, values should be adjusted to a common base year.

If a resource lasts for several years, such as a vehicle, technology, or equipment, its cost can be spread out over its useful life to estimate the annual cost.

Rural program leaders should also note any assumptions. For example, a program may assume that volunteer time is valued at the average hourly wage, or that a donated meeting space would otherwise cost $500 per month to rent. Documenting these assumptions allows future analyses to apply the same methods and update estimates consistently. This helps ensure that future ROI calculations remain consistent as new data becomes available.

Example

The Healthy Hearts Education Program has identified the following cost categories and costs:

• Labor:
  • Program coordinator (0.5 FTE)
  • Nurses providing education sessions
  • Administrative support
  • Volunteer time from community members
• Supplies and materials:
  • Educational materials
  • Blood pressure cuffs for demonstrations
  • Printing
  • Refreshments
• Facilities:
  • Most space donated by community-based organizations (counted as in‑kind costs)
• Transportation:
  • Mileage for staff traveling to remote sites

All costs, including volunteer time, are valued using standard wage rates.

The total annual program cost: $275,000

This figure becomes the denominator for the ROI calculation.

Resources to Learn More

Community Development in Rural Health Toolkit
Website
See the Assessment Tools & Templates section for the Asset Inventory Tool for Rural Health Communities, used to identify assets and organize these assets into physical, human, and institutional categories, which can be helpful for planning for ROI.
Organization: National Organization of State Offices of Rural Health

Implementing Activity-Based Costing (ABC)
Document
Provides a practical roadmap for designing and implementing an Activity-Based Costing (ABC) system. The guide walks organizations through identifying activities, assigning costs to cost pools, collecting data, and using results to improve decision-making.
Authors: Cokins, G., Lawson, R.
Organization: Institute of Management Accountants (IMA)
Date: 1/2/2014