Using Full Cost Recovery to Set Our Budget

1
Using Full Cost Recovery to Set Our Budget

• Sally Pickering GAVCA

2
Decide objectives

• Agree a Business Plan of what you want to do,
  what it will cost to do it and then find the
  money to pay for this
• rather than
• seeing how much money we have, and deciding what
  to spend it on.

3
Identify projects and name them

• Group all the activities of your organisation
  into projects, according to funding streams,
  staff posts or or different areas of work
• This exercise really helps you think about what
  your organisation is actually doing.
• Smaller organisations may not have separate
  projects.

4
What about all the other stuff we do?

• These are the areas that often get forgotten and
  arent fully costed, and are your Governance and
  Management activities.
• Time spent on these tasks need to be included in
  your Overheads.

5
What are your costs?

• Make a list of all the possible areas of expense
  that you might have.
• Keep the names of each budget area as close to
  the names required by funders as possible, to
  make reporting easier.

6
Project Costs versus Overhead Costs

• All expenses are either
• Project costs wouldnt be incurred if that area
  of work was not done OR
• Overheads (core costs) would be incurred
  whether or not that area of work was done.
• Its up to you to decide what you allocate to
  overheads, but aim is to keep overheads as low as
  possible.

7
Calculate your Overheads

• Accommodation Costs
• heat, light, water
• rent, rates
• cleaning, maintenance, repairs
• Management Costs salaries of
• part or all of manager
• ICT support
• finance officer
• administrator

8

• Administration Costs (office costs)
• publicity
• telephones
• subscriptions
• insurance
• Governance Costs
• monitoring and evaluation
• Policy development
• Trustees costs
• organisational development, Staff meetings
• AGM
• Who does this work and how much time does it
  take?

9
Calculate project costs

• Start with staffing costs and allocate staff to
  each project depending on proportion of their
  time spent on this area of work
• Include on costs such as pension, payroll,
  training, NI, any incremental payrises
• Add in any costs specific to this project eg.
  room hire, printing, volunteer expenses etc.
• Dont forget contingencies / reserves

10
Check it all adds up

• Make sure that time allocated to overheads and
  projects adds up to the actual hours each member
  of staff works.
• Make sure total expenses for organisation add up
  to what you would expect (compare to last year)

11
Allocate Overheads to Projects

• Several ways to do this
• Split equally across all projects
• Split proportionate to the project budget
• Split proportionate to the staff time in each
  project
• Or..?
• It doesnt matter how you do this as long as
  your are consistent and can justify your logic.

12
Allocate your income

• Allocate any restricted income into the project
  where is has to be spent
• If you still have a core grant, be clear what
  funder is expecting to pay for with this.
• If its for governance overheads, need to split
  income across projects proportionate to split of
  overheads..
• Use any unrestricted income to fill gaps

13
Gaps in Your Budget

• Now that True cost of each project is clear, you
  may find that income doesnt cover all the costs.
  
• Either
• Go back to funders and negotiate more money
• Go back to funders and negotiate less service
  delivery
• Raise more money!

14
If there really isnt enough money.

• Its clear which area of work is under-funded
  and therefore which area of work must be cut.
• The deficit in one project budget wont affect
  other work in other projects.

15
Further Support

• Contact Susan Urch at GAVCA
• Spreadsheet templates available on request from
  Sally at GAVCA