What should we include in the budget?

In short, include what you need to make the project happen. Make sure you include any additional costs to the organisation that a project may create. The following information sheets provide the basics of setting up financial systems and budgets:

How much do we ask for?

Ask for what you need. This may sound obvious but there is always a temptation to cut out or reduce costs to make the bid cheaper. Whilst you should try and offer good value for money you must ensure that the project is viable for the amount of money you are asking for.

If you say to a funder that you can deliver a project for £10,000 you need to be able to deliver it for this amount. If it costs you more because it has taken more staff hours or there were costs that you did not consider or include in the budget, then you still need to meet these costs from somewhere.

When you are looking to meet this shortfall one of two things tends to happen. Either staff are expected to deliver too much for the hours they are working, which can affect morale and quality of service. Or you start using your reserves to pay for additional costs. Neither of these options is sustainable either financially or from a staff welfare point of view.

What is full cost recovery?

In simple terms it means recovering the total costs of a project, service or activity, including a relevant part of overhead costs.

Every project, service or activity has costs directly associated with it, for example staff time, vehicles or equipment (direct costs). It will also require resources from the rest of the organisation. For instance, it might include some of a manager or trustee's time and also impact on support functions such as finance or personnel (overhead costs).

Organisations must seek to secure funding or income to 'recover' a proportion (or part) of overhead costs, as well as the direct costs of a project. Every organisation needs to recover its full costs, or it cannot pay staff, rent office space, offer new activities or plan for future development and delivery of its services.

The following guides provide further information on full cost recovery:

Who do we tell how we have spent the money?

Most funders will ask for some kind of progress update or report. Even if they do not it is good practice to contact the funder and let them know the difference the funding has made to your organisation and its service users.

Can we change what we spend the money on?

In most cases the funding will be given for a specific activity or purpose, i.e. restricted funding. Some funders may give money that is unrestricted, in which case it can be used for any activity that furthers an organisation's mission or objectives. If you want to spend money on something that you did not originally ask for check with the funder first before you spend it. They may allow you to spend the money elsewhere, especially if it is related to the original need. Do not be tempted to spend it without the funder's permission, they may ask for the money back!

What is SORP? Does it apply to us?

A SORP is a Statement of Recommended Practice. SORPs provide recommendations for accounting and reporting. In particular, how accounting standards should be applied in the context of certain sectors and how to account for specific transactions. The Charity Commission provides templates and guidance on compliance with SORPs which vary according to your organisation's level of income.