Funding our Future II: Understand and allocate costs
By Martin Brookes; 181 pages; published by the Association of Chief Executives of Voluntary Organisations (ACEVO)
The question of how to fund overhead or core costs has long been a challenge
for nonprofit organizations. Often funders are reluctant to cover these costs,
leaving nonprofits struggling to keep the lights on, while still trying to
deliver quality services to their clients and stakeholders. To bring this
problem to the attention of governments and other funders, the UK-based Association
of Chief Executives of Voluntary Organisations (ACEVO) published a report
in 1999, entitled Funding our Future: Who pays core costs? The report
highlighted the reality of core costs and helped change attitudes surrounding
the issue, but a common framework for calculating and allocating core costs
was still needed. ACEVO's follow-up, Funding our Future II, offers
just that.
This manual is a tool to help nonprofits calculate, review, and understand
their overhead costs. This, in turn, enables them to justify those costs to
funders and to be more open and accountable about their finances. The first
few chapters serve as an introduction to core cost and the principles of cost
allocation. Then the book offers a step-by-step guide to using the ACEVO template
for allocating costs. Finally, there are six detailed case studies to illustrate
how the template could be used by a variety of nonprofit organizations. Aside
from assisting organizations to properly allocate their costs, this manual
is also intended to help them exercise effective cost control. It does not,
however, try to suggest appropriate levels of cost. That is something that
each organization must decide for itself.
Although the currency referred to is in pounds rather than dollars, most of
the principles and concepts outlined in this book are not UK-specific. However,
it is targeted at nonprofit professionals who are familiar with accounting
and finance. Still, the clear explanations and detailed examples should make
this guide accessible to almost anyone who would like to gain a better understanding
of cost allocation and its importance in the sector.
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