a involve 2012 staying in control-workshop-budgeting-full-cost-recovery

Staying in Control

Building blocks and controls for effective financial management

Involve Conference 2012 - Workshop A

Full Cost Recovery

2

The Building Blocks for effective financial management

Planning

Controls Accounting

Monitoring

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

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

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

1. What are the objectives of the project?

The Planning Process ?

4. What will these

resources cost?

7. Is this realistic and sustainable?

3. What resources & how much time to perform these

activities?

2. What activities to achieve these

objectives?

5. Where will the funds

come from?

6. How do we check progress

and update plans?

“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 ?

“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!

Case Study - Leafy Lane

“Allocation of overheads to projects” - building up the full cost

PREMISES

ADMINISTRATION

GOVERNANCE & STRATEGY

FUNDRAISING

“Healthy Eating”

Direct costs

Sharing the overheads between Projects

FLOOR AREA

DAYS IN USE

USERS

STAFFEXPENDITURE

Marginal Costs ?X

PREMISES

ADMINISTRATION

GOVERNANCE & STRATEGY

FUNDRAISING

Premises

Direct costs

PREMISES

ADMINISTRATION

GOVERNANCE & STRATEGY

FUNDRAISING

Admin.

Premises

Direct costs

PREMISES

ADMINISTRATION

GOVERNANCE & STRATEGY

FUNDRAISING

Governance

Admin.

Premises

Direct costs

PREMISES

ADMINISTRATION

GOVERNANCE & STRATEGY

FUNDRAISINGFundraising

Governance

Admin.

Premises

Direct costs

“The full cost of the Projectincludes a proportionate share of the overheads”

PREMISES

ADMINISTRATION

GOVERNANCE & STRATEGY

FUNDRAISING

Fundraising

Governance

Admin.

Premises

Direct costs

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

Issues with Overheads

Resources: www.ncvo-vol.org.uk/advice-support/funding-finance www.biglotteryfund.org.uk/full_cost_recovery

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.

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