Women’s Resource Centre Women’s Commissioning Support Unit Finance for joint projects and consortia Kathleen Moss Chartered Management Accountant www.wrc.org.uk

What we’re going to do Different types of joint working Due diligence Activity Based Costing Full cost recovery Budgeting/monitoring expenditure

Different types of joint working Secondment Sharing back office functions Lead partner with sub-contracts JANE – Joint Activity, Not an Entity (HMRC implications) Partnership Joint venture company: Jointly owned charity Jointly owned trading company or CIC Partnership Lead partner with subcontracts – subcontracts should reflect the t&cs that the lead partner contract holds with funder Or equal partners May be liable for all liabilities JANE – possible vat issues if reimbursing for work done

Due diligence Reasonable investigation into an organisation Why is the organisation looking for partnership? Published accounts Reserves Management accounts Forecast/future income Stability/sustainability Reliance on funders/funding streams Ethos of organisation Moral of staff Is there an IT disaster recovery plan

Due diligence – finance example Last Year Fixed Asset £ 25,266 Creditors £(117,423) Debtors £ 6,149 Restricted funds £ 42,014 Bank £269,402 Unrestricted fund £141,380 Current Year Forecast Restricted Inc £223,018 Restricted Exp £265,032 Earned Inc £ 53,351 Unrest Exp £108,282 Donations £ 5,453 Total Exp £373,314 Interest £ 1,000 Deficit £ 90,492 Next year budget Restricted Inc £120,000 Restricted Exp £120,000 Unrestr Inc £ 90,000 Unrest Exp £ 49,318

Due diligence – finance example possible questions Why is there a deficit in current year? Is it planned? Is there a strategy around it? Will the reserves cover the deficit? Will the reserves cover running costs for future year? Is the income from more than one source? Implications of not receiving some or all of the income? Is the restricted income confirmed, is the expenditure related to it definite, can it be scaled back? What is the forecast cash position at end of year and end of future year? How definite is the £90,000 unrestricted income, it is quite a lot more than previous year? Would the fixed assets sell for £25k?

Due diligence – other questions might include Background information: usually available from their website such as history, services they provide and who they work with. Trustees and how the charity is governed – some information available from Charity Commission website, such as filing record. Financial position, looking back through several years’ accounts, but also by discussion. Questions you might ask include: Do actual figures reflect budgets or are there large variances? Do they recover their overheads on funded work? Do they have financial KPI’s (key performance indicators) Do they own property, lease it, have mortgages? Are there any liabilities that are not on the balance sheet? Organisation chart and people – how are they structured, who is responsible for management decisions. Experience of similar service delivery

Activity based costing (ABC) Recognises relationship between costs, activities and products More accurate costing of service or product Uses cost drivers (event or factor that causes an activity to be performed) to attach activity costs to outputs Alternative approach to arbitrary allocation or apportionment of overhead costs Helps us to think about cost allocation in clearer way 8

ABC Costs Customer, product or service specific costs Activity specific costs Non-specific costs Some costs might relate to specific products or customers and not be related to activity Other costs may have no reasonable direct relationship to activities eg office move 9

ABC - cost driver: Reports Funder A Income £50,000 Service delivery £42,500 Overhead 15% £ 7,500 Report requirement: 4 reports per yr Each cycle takes 3 days to prepare CEO time £220 per day £220*4*3 £ 2,640 Contribution £ 4,860 Funder B Income £45,000 Service delivery £39,375 Overhead 12.5% £ 5,625 Report requirement: 1 report per yr Each cycle takes 2 days to prepare CEO time £220 per day £220*1*2 £ 440 Contribution £ 5,185 CEO time: £43,000+NIC+pension - £49,097 Workable days 260 – 25 Holidays – 8 BH– 4 CPD/other - 223 days £49,097/223 = £220 per day Could also include other costs in CEO time – desk/share of rent/building costs/share of other overhead see FCR

Full cost recovery If you are not recovering the full costs of a project you are creating a deficit for your organisation. Charging the full cost of project incurred by the organisation All direct project costs Project’s share of organisational overheads Explain how overheads proportion calculated Can use ABC

Full cost recovery

Budgeting Project budget for each partner Project budget whole project Quantified plan of action for forthcoming accounting period. Project budget for each partner Project budget whole project Organisational budget All costs and income Joint costs Partner costs Write out notes on calculations THIS SLIDE COVERS: What stage are you doing your budget at? When applying for funding or when funding is in place What adjustments need to be done between these two points For example if you did not get the full amount of funding applied for – how do you reconcile this before starting the project? KEY POINTS TO COVER: Exercise: on the left hand side put all the budget lines that this project might have If you have those costs over 12 months then you can break them down over each quarter Input these into the projected costs columns Not all costs will be spread evenly over the 4 quarters – such as start-up costs When you review the budget every quarter – put the amount spent in the actual column

Monitoring expenditure Minimise and understand over and under spends Review project budget for each partner Review project budget whole project Measure actual expenditure against budget Review variances Needs to be regular and timely THIS SLIDE COVERS: What stage are you doing your budget at? When applying for funding or when funding is in place What adjustments need to be done between these two points For example if you did not get the full amount of funding applied for – how do you reconcile this before starting the project? KEY POINTS TO COVER: Exercise: on the left hand side put all the budget lines that this project might have If you have those costs over 12 months then you can break them down over each quarter Input these into the projected costs columns Not all costs will be spread evenly over the 4 quarters – such as start-up costs When you review the budget every quarter – put the amount spent in the actual column

Further information Charity Commission: NCVO: Sayer Vincent: WCVA: Choosing to collaborate: helping you succeed https://www.gov.uk/government/publications/choosing-to-collaborate-how-to-succeed Collaborative working and mergers (RS4) https://www.gov.uk/government/publications/collaborative-working-and-mergers-rs4 Strength in numbers (RS24) https://www.gov.uk/government/publications/strength-in-numbers-rs24 Work with other charities https://www.gov.uk/guidance/work-with-other-charities NCVO: Collaborative working https://knowhownonprofit.org/organisation/collaboration Sayer Vincent: http://www.sayervincent.co.uk/wp-content/uploads/2015/07/CollaborativeWorkingMadeSimple-SayerVincent-July2015.pdf WCVA: http://www.wcva.org.uk/media/2017262/full-cost-recovery-a_guide_and_toolkit.pdf CA Plus Community Accounting – offer free toolkits and guidance http://www.caplus.org.uk 15

Finance for joint projects and consortia Thank You and Evaluation Forms! KEY POINTS TO COVER: EVALUATION FORMS