1. www.communityaccounting.co.uk Full cost recovery - a funders’ perspective 1. The basics John O’Brien Community Accounting Plus

2. www.communityaccounting.co.uk Three questions to start off… 1. Who is paying for you to be here now? 2. How much does it cost your organisation (per hour) for you to be here today? 3. What things ‘contribute’ to this cost?

3. www.communityaccounting.co.uk Overview FCR is about the ‘right’ amount of money not simply ‘more’ money It’s about activities – links to changes in charity accounting and funding arrangements If not FCR, what else is there? It’s not just about grants and fees, it’s also about good management

4. www.communityaccounting.co.uk Some jargon Direct costs – costs that clearly relate to a specific activity Support costs (overheads, shared, core etc) – costs that do NOT relate to a specific activity Fixed costs – these don’t change if you do one more thing Variable costs – these DO change if you do one more thing

5. www.communityaccounting.co.uk Examples of Support Costs in CA Plus Staff supervision, training, subscriptions Senior staff reviewing the files, their own training, supervision, etc The equipment used such as IT, phones etc (what about depreciation?) Committee meetings The heating The audit fee The redecoration of the office every 5 years

6. www.communityaccounting.co.uk Marginal and Average costs This is crucial and at the heart of this issue Marginal cost is the cost of doing one more thing Average cost is the cost of doing each thing. An example …..

7. www.communityaccounting.co.uk Today ProjectABCTotal Costs direct10 30 shared44412 14 42 Grants14 42 Net result0000

8. www.communityaccounting.co.uk A new project ProjectABCDTotal Costs direct10 40 shared44412 14 1052 Grants14 1052 Net result00000

9. www.communityaccounting.co.uk Project B comes to an end ProjectABCDTotal Costs direct100 30 shared404412 140 42 Grants140 1038 Net result000(4)

10. www.communityaccounting.co.uk What should your groups do?… 1. identify all different activities 2. Allocate any ‘direct’ costs to each activity. This might include the salary costs of the particular staff involved, the travel costs, specific materials, specific audit costs, etc

11. www.communityaccounting.co.uk 3. Think about what generates or causes the costs in each activity. (For many voluntary organisations it will be primarily the employment of staff, but you can get more complicated if you want) 4. Allocate the ‘support’ costs, between the activities. You can break these down into sections. This involves a choice…

12. www.communityaccounting.co.uk Allocating the support costs between activities Per person In proportion to time spent on the activity In proportion to direct costs, floor space, funding, salary costs etc The point is… –Be reasonable –Be consistent –Think about what generates the costs

13. www.communityaccounting.co.uk Is this all real? There are lots of assumptions in all this As with any budget or plan, it is a guess. A funder would need a reasonably understanding of accounts to know if the choices made by the group are reasonable and consistent. As ever, the focus should be on achieving outputs or even outcomes! It is of course, very important for the groups themselves.

14. www.communityaccounting.co.uk And finally If in doubt, call it £40 an hour