Full cost recovery

The Finance Hub provides useful information about full cost recovery:

Full Cost Recovery (FCR) means your organisation recoups the total costs of delivering a service, including a share of the organisation’s overheads. Working out the full cost of delivering a service is essential. Voluntary and community organisations, both big and small, are increasingly providing services on behalf of central government, primary care trusts and local councils. FCR is crucial if these services, and the organisations delivering them, are to be sustainable.

Working out the cost of providing one service is relatively easy. But when your organisation starts providing several different services, calculating the costs for each one becomes more complex, and it is likely that core costs can’t easily be allocated to any one activity.

These costs – referred to as core costs, central costs and overheads – include things like heat and light, office rent, phone bills and stationary as well as management and staff time. They all need to be fully costed, and a fair proportion added to the direct costs of running the service. This represents the total cost of delivery.

Your organisation must:

• make sure that you understand all the overhead costs your organisation has; and
• develop systems that are transparent and logical to allocate these costs to particular work you undertake

Top tips

• start with costs that are easy to identify, such as wages and materials. Then tackle those costs – like stationery and phone bills – that are shared
• to work out shared overheads, draw a small table noting key factors, such as number of people, office space used and worker time
• don’t forget ongoing yearly costs, such as equipment wearing out and staff needing cover for maternity or paternity leave
• voluntary and community organisations need to consider walking away or refusing contracts that are under-funded. As well as compromising the sustainability of the organisation, under-resourced services run contrary to the best interests of service users. They can also breach charity regulations

Useful links

Acevo – Full cost recovery

NAO report Office of the Third Sector - Implementation of full cost recovery [pdf 224kb]

Finance Hub – Full cost recovery

Cash-online – Full cost recovery

Sample Big Lottery FCR spreadsheet and salary spreadsheet

New Philanthropy Capital - Full cost recovery

A step-by-step guide to Full cost recovery from fit4funding.

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