A involve 2012 staying in control-workshop-budgeting-full-cost-recovery
1. Involve Conference 2012 - Workshop A
Staying in Control
Building
blocks and
controls for
effective financial
management
Full Cost
Recovery
2. The Building Blocks
for effective financial management
Controls Accounting
Planning Monitoring
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3. Management Controls
The purpose of a control is to minimise
risks:
Failure to achieve objectives
Poor use or loss of funds & assets
Low staff morale
Public loss of confidence
Resource: “Management Controls” Checklist
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4. Accounting & Monitoring
Chart of Accounts
Easy to monitor budgets
Accurate record keeping
Timely financial reports
Excel – Sage – QuickBooks
Resource: www.mango.org.uk/Guide/QuickBooksmanual
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5. Financial Planning
“If you don’t know where you are
going, then you are sure to end up
somewhere else”
Mark Twain
“Failing to plan is planning to fail”
Chinese Proverb
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6. The Planning Process ?
1. What are 2. What activities
the objectives to achieve these
of the project? objectives?
7. Is this 3. What resources
realistic and & how much time
sustainable? to perform these
activities?
6. How do we
check progress
and update 4. What will
5. Where will these
plans? the funds resources
come from? cost?
7. “Full Cost Recovery”
How do we calculate the full
cost of a project?
How do we finance these
costs?
What are the consequences if
full costs are not recovered ?
8. “Full Cost Recovery”
Prepare plan
List capital / set up costs
List revenue direct costs
Identify overhead costs
Decide on basis of apportionment of
…..overhead costs between projects
Do the Maths! ……not this time!
10. “Allocation of overheads to
projects” - building up the full cost
FUNDRAISING
GOVERNANCE
& STRATEGY
ADMINISTRATION
“Healthy Eating”
PREMISES
Direct costs
11. Sharing the overheads between Projects
DAYS IN USE
FLOOR AREA
USERS
EXPENDITURE STAFF
X
Marginal
Costs ?
12. FUNDRAISING
GOVERNANCE
& STRATEGY
ADMINISTRATION
Premises
PREMISES Direct costs
16. “The full cost of the Project
includes a proportionate share of the overheads”
Fundraising
FUNDRAISING
Governance
GOVERNANCE & STRATEGY
ADMINISTRATION
Admin.
PREMISES
Premises
Direct costs
17. Recovering the Cost . . . .
Prepare budget & cash flow projections
Include “donated” costs & services in
….costings - use for “matched funding”?
Are beneficiaries to contribute?
Negotiate with Donors
18. Issues with Overheads
Do managers know true cost when negotiating
with donors or bidding for service contracts?
“10% to cover overheads” usually not realistic.
Increases or reduction in activity/projects may
result in a disproportionate increased cost in
overheads for each project.
Resources: www.ncvo-vol.org.uk/advice-support/funding-finance
www.biglotteryfund.org.uk/full_cost_recovery
19. Who is financing your
…project’s unrecovered costs?
Ring-fence any restricted funds
received for other current or future
projects
Build up supporter base to finance
potentially “unrecoverable” overheads
Build up adequate reserves to finance
funding fluctuations
Editor's Notes
“If we do not know what “full costs “ are it is doubtful that we shall be able to persuade anyone to contribute towards financing them.“Full cost recovery means securing funding for all of the costs involved in running a project ie direct costs and a proportionate share of overheads”.Resources:National Council for Voluntary Organisations “failing to recover overheads” www.ncvo-vol.org.uk
Full Cost includes a “proportionate share” of the organisation’s overheads.
So do case study in small groups. NO MATHS!. After this we’ll think about how to find finance to cover the full cost of the project.Notes re Case Study answer:ASK first – Capital costs? Then Direct costs?As time is short –hand out model answer.Go thru capital/set up costsThen study Direct, esp – Salary &other costs; mileage. Then for overheads – go on to next PP slides to explain overheads
Divide overheads into 4 categories:Premises – Admin-Governance and Fundraising
A “Proportionate share”If only one Project – simple – you could claim everything! Floor area Hours in use No. of Users No. of staff Proportion of total expenditureDo not use “marginal” costing for new …project but avoid double funding!
If ONLY 1 PROJECT very simple – all costs to the ProjectIf several, then this is the method…Premises-Certain costs are direct! Utilities for exampleOther costs split between Admin; governance(maybe) and fundraisng
Admin –some direct to programmes; rest for Governance and Fundraising (you don’t have admin just because you enjoy it!)
Governance – again governance and meetings of the trustees to discuss strategy has to be borne by the programmes – or by supporters of charity?
Fundraising some direct; a proportion of general fund raising is part of the cost of the organisation. Each program should pay its share….?ASK: Do you agree??????IN THE MODEL ANSWER:
Fundraising some direct; a proportion of general fund raising is part of the cost of the organisation. Each program should pay its share….?ASK: Do you agree??????
“Full cost recovery means securing funding for all of the costs involved in running a project ie direct costs and a proportionate share of overheads”.SO –now we know the full cost; how are we going to recover it? (ask question BEFORE putting up slide)Donated costs and services – could include professional services, gifts; also the use of your organisation’s assets- USE THIS INFO as part of “Matched” Funding! Course participants. Are they to pay? – Beneficiaries – either direct (pupils) OR ? Indirect (local council/school)Donors – some do; some don’t? some will some won’t.3. Donor - Concerns about levels of overheads and lack of transparency CVO – may present only direct costs to donors, or do not know what the costs are, or see overheads as “spearate, requiring separate funding”
If we know the cost – we can be a little more assertive in our discussions with donors. Build up a strategic approach to bidding for service contracts.When a project starts – a new member of staff taken on? But cannot charge all to new project? Help –reason why you need reserves. If project stops – overheads weigh too heavily on remaining projects ?staff redundancies?“If funding insufficient you have a choice – either do not do the work, or fund the difference from another source”Resources:National Council for Voluntary Organisations “failing to recover overheads”
Ensure that your project overheads are not being financed by/ using up other funds received for restricted purposes
