Budgeting

A charity’s budget is an estimate of future income and expenditure. 

Budgets help trustees control income and expenditure, monitor the charity’s financial performance and make future plans. Trustees should monitor budgets on a regular basis by comparing planned and actual income and expenditure. Regular budget reports should help trustees understand the charity’s financial position.

‘Full cost recovery’ budgeting is a method used by charities to calculate the full costs of individual projects, activities or services that are delivered by the charity. 

‘Full cost’ means all the costs associated with an activity including direct costs (eg the costs of sessional workers) and overhead costs (eg a fair contribution to the administration and rental costs of the charity’s premises).

Using a full cost recovery approach can help trustees better understand the ‘true’ cost of each activity and the funds required to sustain it.

A number of guides exist to help trustees understanding budgeting and the full cost recovery approach.