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Part 4 of 7 · Restricted fund tracker series ~5 min read

Sharing costs on a basis you can show

A cost that belongs wholly to one grant is easy. The difficulty is everything shared: a worker whose week runs across three projects, a building every project uses, a finance person who serves them all. The SORP expects restricted funds to carry a reasonable allocation of support costs, and every funder expects to see how the share was worked out.

Key takeaways

  • A percentage is a result. A basis is hours, square metres or headcount, with the numbers kept.
  • Each kind of shared cost gets the basis that actually drives it.
  • The agreement decides whether overheads may be charged, and up to what cap.
  • What a grant will not carry stays on unrestricted funds, as a recorded choice.
  • Recompute each split from the period’s own numbers. A formula from two years ago is a guess.

Three kinds of shared cost, three bases

Staff, premises and finance costs allocated to grants on different basesThree boxes on the left feed one box on the right. Staff time, split by the hours on the timesheets, labelled hours. Premises, split by the floor area each project uses, labelled square metres. Finance and admin, split by headcount on each project, labelled headcount. All three converge on Share per grant, holding the basis, its numbers and the period, which feeds a box labelled Capped by the grant, where the remainder stays unrestricted. A note says each basis drives its cost and is recomputed every period, and the cap is applied after the share is worked out, never instead of it.Staff timesplit by the hourson the timesheetshoursPremisessplit by the floorarea each project usessquare metresFinance and adminsplit by headcounton each projectheadcountShare per grantthe basis, its numbers,the periodCapped by the grantthe remainder staysunrestrictedEach basis drives its cost and is recomputed every period. The cap is applied after the share is worked out, never instead of it.
Fig 1. Three bases for three kinds of cost, each ending in a share that the grant’s own terms then limit.
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A percentage is not a basis

The project worker in this charity was split 40, 35 and 25 per cent across the advice, food hub and youth grants. Those were the proportions written into the three bids when the post was created, and they went into a spreadsheet formula that nobody had revisited since. They were a budget. They were never a record of where the hours went.

The worker had kept timesheets throughout, because two of the funders asked for them. Across the year they recorded 1,586 project hours: 826 on advice, 489 on the food hub and 271 on the youth project. That is roughly 52, 31 and 17 per cent, and applied to £28,640 of salary and on-costs the difference is real money.

The same salary, split two ways

A shared worker's cost allocated by bid percentages and by timesheet hoursTwo stacked vertical bars, each totalling twenty-eight thousand six hundred and forty pounds. The first, labelled Bid percentages, is split into eleven thousand four hundred and fifty-six pounds for the advice grant, ten thousand and twenty-four pounds for the food hub grant and seven thousand one hundred and sixty pounds for the youth grant. The second, labelled Timesheet hours, is split into fourteen thousand nine hundred and sixteen pounds for advice, eight thousand eight hundred and thirty pounds for the food hub and four thousand eight hundred and ninety-four pounds for youth. A note says it is the same sum, the same person and the same year, and that the youth grant carried two thousand two hundred and sixty-six pounds of this salary that its own share of the timesheets never recorded.£0£10000£20000£30000£40000~£28640Bid percentages~£28640Timesheet hoursAdvice grantFood hub grantYouth grantSame £28,640, same person, same year. The youth grant carried £2,266 of this salary that its own share of the timesheets never recorded.
Fig 2. One worker’s £28,640 of salary and on-costs, split by the bid percentages and then by the hours actually recorded. The total never changes; the grants it lands on do.

Where £2,266 of the overspend came from

Of the £14,860 by which the youth grant was overspent, £2,266 was never the youth project’s cost at all. It was advice work, charged to youth by a formula. The advice grant was carrying £3,460 less of this salary than its hours justified, and the food hub £1,194 more. Re-running the split on hours does not make the overspend disappear. It makes £12,594 of it real and £2,266 of it a coding error, which are two different conversations with two different funders.

The funder decides what the grant may carry

Working out a share is accounting. Whether a particular grant will pay for it is a term of the agreement. Some agreements pay a share of premises and management costs on a stated basis, some cap overheads at a percentage of direct costs, and some will not pay for them at all. The rules from part two carry that term, and the allocation applies it after the share has been calculated.

The order matters. If the cap is applied first, the share gets chosen to fit the cap and the basis becomes a story told afterwards. If the share is calculated first and then capped, the difference stays visible: this is what the youth project’s use of the building cost, this is what its funder will pay, and this is the part the charity is choosing to fund itself. That last figure is often the most useful number in the next bid, because it is the case for full cost recovery made with the charity’s own data.

Premises and finance

The rent went the same way. It had been split equally across the projects in the building, although the food hub, which uses the hall and the storeroom, occupies roughly three times the floor area of the advice rooms. Floor area is a better basis for premises because it is what drives the cost, and it changes rarely enough to measure once and measure again when a room changes use.

Finance and administration are the least precise and the most argued about. Headcount by project is simple and defensible; transaction volume is arguably closer to what consumes a finance person’s week. Either can be reasonable if it is applied consistently and stored with its numbers. What is not reasonable is choosing between them grant by grant, according to which gives the larger share.

What an allocation record holds

  • Pool. The cost being shared — one salary, the rent, the finance function — for one period.
  • Basis. hours | floor_area | headcount | transactions.
  • Numbers. Each fund’s figure and the total, such as 271 of 1,586 hours.
  • Source. The timesheets, the floor plan or the staff list they came from.
  • Share. The calculated amount for each fund, before any cap.
  • Charged. The amount after the grant’s cap, and the remainder left unrestricted.

The next post is where all of this gets tested: the end of a grant period, a fund that has gone below zero, and a report a funder will read line by line.

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