The Charity Finance Directors’ Group (CFDG) has launched a major new report entitled Know Your Cost Base Know Your Charity. The publication provides a robust framework within which charities can consider their costs and cost drivers as well as special considerations such as VAT, reserves policy, transfer of risk etc.

This CFDG report, in association with haysmacintyre, aims to raise awareness of the importance of understanding a charity’s cost base and its implications for both funding and broader financial management.  A good understanding of a charity’s cost base is essential for sound financial management. The behaviour of a charity’s costs affects the budget, the annual accounts and particular project work, either to estimate for potential work or to report to funders.  Chris Harris, Director of Finance and Resources at Action for Blind People and chair of the working group who developed this report said: “The charities sector is growing and becoming increasingly professional in many areas of activity. Those responsible for financial matters have to keep pace and make sure their charity stays successful and sustainable. This report is essential reading for those that want a briefing on the main points.”

CFDG commissioned this report based on the results of a member survey into full cost recovery in 2006 which found that many funders still fail to fund an appropriate proportion of overheads. This burden then falls on “free reserves” or additional fundraising to meet the deficit. In addition, there are other challenges that charities face in delivering public services such as imposed pricing budgets, short term contracts etc all which demonstrate the need for charities to properly understand their cost base.

In the foreword to the report, John Stoker, Compact Commissioner, said: “ The more a charity understands its cost base and can properly allocate costs, the better it is able to negotiate effectively with a funder about having an appropriate proportion of its overheads funded.”

Richard Weaver, Charities Partner at haysmacintyre and main author of Know Your Cost Base Know Your Charity said: “the control over finances in any organisation is a key measure of success. The charity sector is evolving at a rapid pace and ensuring that those involved in charity financial matters are equipped for the challenges ahead and understand their business is critical. This report is an aid to understanding, not only for finance staff but also for trustees, chief executives, managers and others with responsibility for a charity’s finances.”  Richard will be discussing this report in more detail in an afternoon plenary session at the CFDG Annual Conference on 22 May.

Click here to access an introduction to the report. Full copies can be obtained by contacting ernese.skinner@cfdg.org.uk

Notes
1. The Charity Finance Directors' Group was set up in 1987 and is an umbrella group that specialises in helping charities to manage their finance-related functions. 

2. CFDG’s circa 1,300 members are responsible for the finances of charities with a wide variety of income levels. Between them our members manage some £11.3 billion in charity income per year.

3. Copies of the introduction to this report are available on the CFDG website, or by contacting ernese.skinner@cfdg.org.uk or by telephone on 020 7785 6426. Copies of the full report are available for £10.

4. haysmacintyre, Chartered Accountants and tax advisers, provides high quality auditing and assurance, business and personal taxation, corporate finance, financial planning and other business support services.