The real cost of delivering services

Charities have to walk a fine line between services being available to those that need them and their own ability to fund their delivery. And with inflation rising, this could quickly become an issue and stretch reserves.

Grants have become harder to source and some people are reluctant to fund a charity providing a service that they feel the government, (and ultimately the taxpayer), should be paying for. This has been highlighted recently with the provision of care support.

Many of these services are provided by profit making companies but they are increasingly being supported by charities and social enterprises.

Charities need to look at the full cost of the services they provide and demonstrate this to the users of their services. What is the true, full cost and how will it increase over the next few months/years? This consists of looking at staff costs including salary, employers National Insurance, pension, travel, training, equipment, PPE, holiday and sickness cover and the management cost of running the service.

These services do not run themselves and all of these elements need to be included. It is fair to say that public understanding and education of this position needs enhancing and charities should be transparent in communications of how much of funds that are being raised through donations goes to support a shortfall in Government contract funding.

From a wider viewpoint, there also needs to be an element of contingency costs included (PPE use during the pandemic had to be increased and prices increased very quickly). Currently, there are skilled labour shortages and employment costs are increasing just to retain existing staff.

When looking at management costs you also need to factor in premises costs, insurance, staffing, computer costs and equipment. Taking all these costs into account, charities must ask themselves are they charging the correct amount for their valued services? If the answer is no, recognition that reserves can only last for so long should be at the forefront of the board’s mind and be included in the Risk Register. Also, are reserves underpinned by a strong and robust reserves policy, which if based on a certain number of months expenditure – are the full costs being appropriately included? Don’t find you have to cease a necessary service because you have run out of money.

For advice and support for your charity, contact our team today.