Full Cost Recovery is a term often used in the VCSE sector, but what does it mean exactly?
- The National Lottery set out the following in their Community Fund guidance here. “Full cost recovery describes an approach to funding that means securing funding for all the costs involved in running a project. This means that you can request funding for direct project costs and for a proportionate share of your organisation’s overheads”.
- The business service provider, SAGE, offer a more technical, calculation based explanation,
- Charity Digital offer a resource-based approach.
- From a commissioning / grantmaker perspective, it is worth reflecting on the NAO successful commissioning toolkit guidance:
“Funders and commissioners have an interest in meeting their fair share of a provider’s central administrative costs because that will help to ensure that the provider can manage its activities and finances properly, and will contribute to the organisation’s sustainability.
This means that your programme must finance its ‘fair share’ of all providers’ administrative costs. This principle is known as ‘full cost recovery’. How this principle is applied differs between procurement and grantmaking. In addition, if the provider is a charity, you must not expect it to subsidise the cost of your programme from donations that it receives.”
- LinkedIn have written an article including a simple toolkit for full cost recovery for charities which includes a downloadable spreadsheet from The National Lottery to help with calculating FCR.
- It is also worth being aware of the limitations of full cost recovery offered by NCVO - “It’s important to remember even when we do recover the full costs of our projects, we’re not guaranteeing our future financial sustainability. Full cost recovery is a fantastic step on the way to financial sustainability, but it’ll only ever recover the costs that we have had to meet, it won’t provide us with further income to use for future activity.”
Finally, if you are not sure about full cost recovery or if you can adopt a FCR approach to your grant applications, always check with the funder and / or reach out to us at CVS Bedfordshire. It is always important to be transparent and clear in your budget calculations for grant applications … but don’t be afraid to include full cost recovery unless funder guidance does not allow.
Full Cost Recovery resources
Sage - https://www.sage.com/en-gb/blog/full-cost-recovery-why-non-profit-organisations-need-it/
Charity Digital - https://charitydigital.org.uk/topics/topics/why-charities-need-full-cost-recovery-9017
NAO - https://www.nao.org.uk/successful-commissioning/delivering-to-users/full-cost-recovery-fcr/