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