What is full cost recovery?

There are broadly speaking two types of costs associated with delivering projects within an organisation. Direct costs and Overhead costs.

• Direct costs are easily identified as part of the project as they are incurred as a direct result of delivering a project. Direct costs are those costs that are needed to produce the output of the project or service itself. For example:
  • Salaries of people working directly on the project
  • Their travel and subsistence
  • Materials or other costs easily identifiable to the project
• Overhead costs are those costs needed to manage and support projects and the organisation itself. These costs are sometimes also referred to as indirect, core or “back office” costs and are often shared or split amongst various activities or departments within an organisation.

The principle behind full cost recovery is simple. Full cost recovery means recovering the total costs of a project including the relevant proportion of your organisations overhead costs.

Each project you undertake has costs directly associated with it, such as the cost of staff or equipment. It will also draw on the rest of an organisation’s resources. For example, it might occupy some of a Funding Advisor’s time or have an impact on some central functions, such as finance or training.

Although it is possible to identify direct costs and overhead costs separately, full cost recovery works on the premise that both direct costs and a relevant portion of overheads are integral to the support and delivery of a project.

Therefore, the full cost of each of your projects includes both the direct costs and a portion of your back office overhead costs.

Why is full cost recovery so important?

If you are not recovering the full costs of a project you are creating a deficit for your organisation. This deficit has to be met through additional fundraising or through other means. So if you are not achieving full cost recovery you are jeopardising the  sustainability of your organisation and hence the services you provide.

Download

• Fundraising Toolkit - Full Cost Recovery

Contact

Linda Candita, Jane Owen or Mark Smith on 01234 354366 for any help you understanding Full Cost Recovery when submitting a funding application.