Charities have always struggled to fund the costs of overheads like leadership, infrastructure, strategy management and governance. The reason is straightforward — donors naturally want their full donations to go to their chosen causes.
However, if they paused for thought, many might think twice before donating to a charity with no management or financial controls, governance, leadership or visible record of success.
There are costs associated with such overheads — and these should certainly be managed as efficiently and effectively as possible. But definitely not absent. So, rather than play down these costs, charities should instead make them clear to donors — and even make a virtue of them.
Full-cost recovery is an approach to allocating these overheads to specific projects. It enables charities to explain the resulting full costs of projects to donors.