Costs of running an NGO

NGOs operate in many different ways, and often find that government funding does not cover all their operating costs.

The following list includes examples of typical core items groups must fund. For the group to be viable in the long term, all these costs must be met.

The list is adapted from Who Pays for Core Costs? – a report published by the Association of Chief Executives of National Voluntary Organisations (UK).

Type of cost	Importance	Importance relative to stages of development
Chief executive/ executive director/ senior manager	Required for all organisations	Required at all stages
Financial management	Required for all organisations	Required at all stages
Telephone, fax, postage, email	Required for all organisations	Required at all stages
Associated premises costs – heat, light	Required for all organisations	Sometimes minimal in early stages of an organisation’s life – but usually becomes important
Insurance, including Board indemnity policy	Required for all organisations	Insurance should only be considered when all precautions have been taken to minimise conceivable risks. It is not a substitute for risk management
Premises management	Required for all organisations	Required at all stages
Fundraising	Required for all organisations	A greater percentage of the work may be done in the organisation’s development stages
Project management	Required for all organisations	Required at all stages
Monitoring and evaluation	Required for all organisations	Required at all stages
Quality assurance	Required for all organisations	Required at all stages
Travel and subsistence	Required for all organisations	Required at all stages
Governance and organisational development	Required for all organisations	Required at all stages
Reimbursing volunteer expenses	Required for all organisations	Required at all stages
Accountancy and audit	Required for all organisations	Required at all stages
Secretarial support	Required for all organisations	Required at all stages
Corporate planning	Required for all organisations	Required at all stages
Premises – rent and/or mortgage	Required in nearly all organisations	Sometimes minimal in early stages of an organisation’s life – but usually becomes important
Equipment – information technology, printing, photocopying etc	Required in all organisations but likely to increase as new activities are taken on	Particular investment in periods of growth
Associated staff costs	Required in all organisations employing staff	As soon as staff are employed, superannuation issues emerge
Staff training and supervision, including volunteers	Required in all organisations engaging paid or unpaid staff	Required at all stages
Volunteer training and supervision, including volunteers	Required in all organisations that involve volunteers	Required at all stages
Personnel functions (including staff training, Accident Compensation Corporation costs and staff operating costs, eg travel)	Required in all organisations employing staff	Required at all stages
Website	Increasingly important for many organisations	Should not be rushed at early stages – should follow robust consultation about strategic directions
Membership – support of the membership structure	Particular relevance for membership organisations	Required at all stages

Full cost recovery (FCR) means recovering or funding the full costs of a project or service. In addition to the costs directly associated with the project, such as staff and equipment, projects will also draw on the rest of the organisation. For example, adequate finance, human resources, management, and IT systems, are also integral components of any project or service.

The full cost of any project therefore includes an element of each type of overhead cost, which should be allocated on a comprehensive, robust, and defensible basis.

In the United Kingdom, the Association of Chief Executives of National Voluntary Organisations (ACEVO) has done extensive work in this area over a ten year period, and has developed a a Full Cost Recovery Toolkit and FCR Business Planner to help third sector organisations cost their projects and services on an accurate, defensible and sustainable basis.