Full Cost Recovery

As the funding environment has changed for voluntary and community organisation towards project specific rather than organisational funding there is a tendency for organisations to omit key areas of cost from funding bids, contract tenders and commissioning bids that are not directly related to project delivery.

This can erode levels of cash reserves/surpluses and squeeze areas of work (like central administration, Human Resources, networking or strategic planning) that are important to long term sustainability of the organisation because they affect things like the quality of service or treatment of employees.

Full cost recovery should therefore be applied to prevent this in the financial management and planning of organisations and any asset development and transfer projects they are promoting. Full cost recovery means “recovering or funding the full costs of a project or service. In addition to the costs directly associated with the project, such as staff and equipment, projects will also draw on the rest of the organisation. For example, adequate finance, human resources, management, and IT systems, are also integral components of any project or service…The full cost of any project therefore includes an element of each type of overhead cost, which should be allocated on a comprehensive, robust, and defensible basis." (ACEVO 2009).