Covering your organisation's core costs - tips from our VCSE Adviser Guy Dobson

Our VCSE Advice Officer Guy Dobson recently ran a session on "Covering Your Organisation's Core Costs"  at a meeting of GRCC's Cotswold VCS Network.  Below is his summary of the tips and advice that he presented there.

If you are involved in the financial management of your Voluntary and Community Sector (VCS) organisation then you will be acutely aware of the importance of generating income to cover your core costs without dipping into your precious reserves, writes Guy Dobson.   

Your core costs can be thought of as the financial 'burn rate' if your organisation was just standing still, not delivering any projects.

VCSE Advisor Guy Dobson

Accumulating unrestricted funding to spend on core staff salaries, insurance, overheads and general management is one of the greatest challenges facing fundraisers.  It's really vital to keep this issue at the forefront of the minds of VCSE organisations AND funders if we are to have any hope of creating a viable and sustainable voluntary sector.

For Community Interest Companies (CICs) and charities that have a limited company subsidiary, trading can be a vital way to generate unrestricted funds to cover overhead costs.   But if your organisation is a Charitable Incorporated Organisation (CIO) or some other type of organisation with an inability to trade, how can it recover all the costs involved in keeping itself going? 

The answer is to allocate a slice of your core costs into the budget of all project-led funding applications, using a principle called "Full Cost Recovery".  This means securing funding for ALL of the costs involved in running a project.  On the basis of Full Cost Recovery,  you can request funding both for direct project costs, and for a proportionate share of your organisation's overheads.

But how should you calculate what a fair share of your organisation's core costs would be for any particular project?

There are three commonly used methods:

  1. Headcount - the project's share of core costs is based on the number of staff working directly on the project, divided by the total number of staff in the organisation.
  2. Floor space – calculations are based on the floor space that is taken up by the project, as a fraction of the organisation's total floor space.
  3. Expenditure –  the project's share of core costs is based on the total expenditure of the project, divided by the total expenditure of the organisation.

It's vital to be transparent about how you calculate the apportionment of your core costs,  and to keep a record of all your calculations.  Be careful not to double-fund on some elements!  For example, if you have already received from elsewhere three years' funding for the office manager within your organisation,  this salary should be excluded from the core cost calculations for this three year period.

There is more guidance on this topic on the National Lottery website here, and there's a useful list of funders who are open to covering core costs through their grant schemes on the Charity Excellence Framework website here.

Guy Dobson is a member of our Community Development Team.  You can contact him via    Find out more about the help our Community Development Team can offer Voluntary and Community Sector Organisations here on the GRCC website.