diff --git a/app/models/deliverable.rb b/app/models/deliverable.rb
index 0921c25..b1d403b 100644
--- a/app/models/deliverable.rb
+++ b/app/models/deliverable.rb
@@ -31,7 +31,8 @@ class Deliverable < ActiveRecord::Base
   delegate "open?", :to => :contract, :prefix => true, :allow_nil => true
   delegate "closed?", :to => :contract, :prefix => true, :allow_nil => true
   delegate "locked?", :to => :contract, :prefix => true, :allow_nil => true
-
+  delegate :project, :to => :contract, :allow_nil => true
+  
   # Callbacks
   before_destroy :block_on_locked_contracts
   before_destroy :block_on_closed_contracts
diff --git a/app/models/overhead_budget.rb b/app/models/overhead_budget.rb
index ebc13b4..518c549 100644
--- a/app/models/overhead_budget.rb
+++ b/app/models/overhead_budget.rb
@@ -3,8 +3,10 @@ class OverheadBudget < ActiveRecord::Base
 
   # Associations
   belongs_to :deliverable
+  belongs_to :time_entry_activity
 
   # Validations
+  validates_presence_of :time_entry_activity_id
 
   # Accessors
   include DollarizedAttribute
diff --git a/app/views/deliverables/_finance_form.html.erb b/app/views/deliverables/_finance_form.html.erb
index 654f80e..98839d1 100644
--- a/app/views/deliverables/_finance_form.html.erb
+++ b/app/views/deliverables/_finance_form.html.erb
@@ -41,7 +41,8 @@
         <%= overhead_budget.hidden_field(:month) %>
       <tr>
         <td>
-          <%= release(3, "Select field for the Time Entry Activity in a td") %>
+          <%= overhead_budget.label(:time_entry_activity_id, :class => "hidden") %>
+          <%= overhead_budget.select(:time_entry_activity_id, options_from_collection_for_select(@project.non_billable_activities, :id, :name, overhead_budget.object.time_entry_activity_id), {:include_blank => false}, {:class => 'financial'}) %>
         </td>
         <td>
           <p class="inline-hints"><%= overhead_budget.label(:hours, l(:text_short_hours)) %></p>
diff --git a/db/migrate/021_add_time_entry_activity_id_to_overhead_budgets.rb b/db/migrate/021_add_time_entry_activity_id_to_overhead_budgets.rb
new file mode 100644
index 0000000..66ea53c
--- /dev/null
+++ b/db/migrate/021_add_time_entry_activity_id_to_overhead_budgets.rb
@@ -0,0 +1,10 @@
+class AddTimeEntryActivityIdToOverheadBudgets < ActiveRecord::Migration
+  def self.up
+    add_column :overhead_budgets, :time_entry_activity_id, :integer
+    add_index :overhead_budgets, :time_entry_activity_id
+  end
+
+  def self.down
+    remove_column :overhead_budgets, :time_entry_activity_id
+  end
+end
diff --git a/lib/redmine_contracts/budget_plugin_migration.rb b/lib/redmine_contracts/budget_plugin_migration.rb
index 6625e51..db055c7 100644
--- a/lib/redmine_contracts/budget_plugin_migration.rb
+++ b/lib/redmine_contracts/budget_plugin_migration.rb
@@ -171,7 +171,8 @@ module RedmineContracts
         
         deliverable.overhead_budgets << OverheadBudget.new(:deliverable => deliverable,
                                                            :budget => old_deliverable['overhead'],
-                                                           :hours => hours.to_f.round(2))
+                                                           :hours => hours.to_f.round(2),
+                                                           :time_entry_activity => first_non_billable_activity(deliverable.project))
       elsif old_deliverable['overhead_percent'].present?
         overhead = total * (old_deliverable['overhead_percent'].to_f / 100)
         if @overhead_rate != 0
@@ -182,7 +183,8 @@ module RedmineContracts
           
         deliverable.overhead_budgets << OverheadBudget.new(:deliverable => deliverable,
                                                            :budget => overhead,
-                                                           :hours => hours.to_f.round(2))
+                                                           :hours => hours.to_f.round(2),
+                                                           :time_entry_activity => first_non_billable_activity(deliverable.project))
 
       end
     end
@@ -233,5 +235,9 @@ module RedmineContracts
     def self.first_billable_activity(project)
       project.billable_activities.first || TimeEntryActivity.first
     end
+
+    def self.first_non_billable_activity(project)
+      project.non_billable_activities.first || TimeEntryActivity.first
+    end
   end
 end
diff --git a/lib/redmine_contracts/patches/project_patch.rb b/lib/redmine_contracts/patches/project_patch.rb
index f42a3b3..ae5293b 100644
--- a/lib/redmine_contracts/patches/project_patch.rb
+++ b/lib/redmine_contracts/patches/project_patch.rb
@@ -21,6 +21,12 @@ module RedmineContracts
             activity.billable?
           end.first
         end
+
+        def non_billable_activities
+          activities.partition do |activity|
+            activity.billable?
+          end.second
+        end
       end
     end
   end
diff --git a/test/integration/deliverables_new_test.rb b/test/integration/deliverables_new_test.rb
index 3792029..37dae03 100644
--- a/test/integration/deliverables_new_test.rb
+++ b/test/integration/deliverables_new_test.rb
@@ -238,6 +238,7 @@ class DeliverablesNewTest < ActionController::IntegrationTest
     end
 
     within("#deliverable-overhead") do
+      select @non_billable_activity.name, :from => 'Activity'
       fill_in "hrs", :with => '10'
       fill_in "$", :with => '$1,000'
     end
@@ -266,6 +267,7 @@ class DeliverablesNewTest < ActionController::IntegrationTest
     @overhead_budget = @deliverable.overhead_budgets.first
     assert_equal 10, @overhead_budget.hours
     assert_equal 1000.0, @overhead_budget.budget
+    assert_equal @non_billable_activity, @overhead_budget.time_entry_activity
 
     assert_equal 1, @deliverable.fixed_budgets.count
     @fixed_budget = @deliverable.fixed_budgets.first
diff --git a/test/unit/overhead_budget_test.rb b/test/unit/overhead_budget_test.rb
index 38a3a31..79722b9 100644
--- a/test/unit/overhead_budget_test.rb
+++ b/test/unit/overhead_budget_test.rb
@@ -2,6 +2,9 @@ require File.dirname(__FILE__) + '/../test_helper'
 
 class OverheadBudgetTest < ActiveSupport::TestCase
   should_belong_to :deliverable
+  should_belong_to :time_entry_activity
+
+  should_validate_presence_of :time_entry_activity_id
 
   context "#budget=" do
     should "strip dollar signs when writing" do