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The growing imperative for better cost recovery
The international NGO sector is facing a general trend towards an increasing proportion of income being derived from restricted or institutional sources. As a consequence there are sector wide moves towards making unrestricted funds go further.
The biggest risk to NGOs in maximising their scope for cost recovery is in existing unrestricted income streams.
Organisations that currently demonstrate the most effective cost recovery processes are those who have high proportions of restricted income and for whom cost recovery is key to their financial sustainability.
Some NGOs have not faced that degree of pressure because of their strength in generating unrestricted income. In many cases, the balance of NGOs' income mix is changing and the pressure to optimise the use of restricted income is growing. Consequently, it is fast becoming an issue of great focus at the governance level within NGOs.
How can Mango help?
Mango can support NGOs to deliver the following benefits around cost recovery:
- Improved decision-making in the budgeting process through a better understanding of total costs to deliver projects
- Greater consistency in developing project budgets at country/regional/head office level
- Greater consistency in charging costs of a project to restricted donor grants and contracts
- Enhanced ability to generate more unrestricted income through negotiation and application of indirect cost recovery against restricted income grants
- Enhanced ability to reduce the amount/proportion of unrestricted funding required to be spent on programme support costs and head office functions
- Adapted systems and processes to charge the full costs of projects to restricted income grants, thereby ensuring that organisations use their increasingly scarce unrestricted funds more strategically