Full Cost Recovery
Full Cost Recovery is the method of allocating the 'true' costs to a project inluding both direct & indirect Costs.
The Big Lottery Fund & Future builders are just two funders who support this method & allow charities to include it in their bids.
Without full cost recovery you are effectively subsidising your services which can cause problems for long term sustainability.
What ACEVO has to say:-
Historically, third sector organisations have struggled to secure funding for their overhead costs, leading to underinvestment in management and leadership, internal and external infrastructure, strategic development and governance. This difficulty has been exacerbated by a trend on the part of the sector's funders towards funding the direct costs of projects rather than overheads or "core funding". Failure to secure funding for overhead costs makes important services, including public services, and the organisations that deliver them, unsustainable. Both government and the sector's representatives have agreed on a solution: Full Cost Recovery (FCR).
Under FCR, organisations and their funders ensure that the price of contracts and grants reflects the full costs of delivery, including the legitimate portion of overhead costs. This commitment poses challenges for both organisations and their funders.
- Third sector organisations must cost their projects and services on an accurate, defensible and sustainable basis.
- Government must ensure that all public bodies fund services sustainably, by permitting the inclusion in prices of the relevant portion of overheads, and ensure that prices are determined on a realistic basis.
HM Treasury first endorsed the principle of Full Cost Recovery in its 2002 cross cutting review, "The role of the voluntary sector in service delivery". The review stated that "Funders should recognise that it is legitimate for providers to include the relevant element of overheads in their cost estimates for providing a given service under service agreement or contract."
The review stated that the deadline for statutory funders to implement Full Cost Recovery was April 2006.
All departments will incorporate the review's funding recommendations fully into their procurement policies by ensuring that the price for contracts reflects the full cost of the service, including the legitimate portion of overhead costs by April 2006."
