5 April 2006

Problems achieving full-cost recovery hit the news again

The problems faced by charities in recovering the full costs of delivering contracts for public service have once again been in the news.

In a front page article in its 22 March issue, ThirdSector reports on a charity which is suing an NHS trust for the full cost of its service. The Praxis Care Group provides residential care for adults with learning disabilities and is suing the Sperrin Lakeland Trust, which serves Omagh and Fermanagh.

Former Charity Commissioner, Julia Unwin, has also claimed that the voluntary sector’s asset base is being eroded by undertaking loss-making contracts for public service delivery. At a recent Charity Commission conference on charities and public services, she pointed to data in the NCVO Almanac 2006 which shows that the charities’ asset value has dropped between 2003 and 2004, attributing it to charities “raiding their reserves in order to meet the cost of contracts”.

New Philanthropy Capital’s work with acevo on full cost recovery created the first universally applicable and widely-accepted way for the VCS to calculate full costs. It wrote Funding our future II - Understand and allocate costs (acevo, 2002), which was followed by Full cost recovery: A guide and toolkit on cost allocation (NPC and acevo) in 2004. The toolkit has been purchased by more than 3,000 organisations and influenced the design of the new Statement of Recommended Practice (SORP 2005).

< back to news archive index