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Unit costs

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Care in the Community has highlighted the importance of the voluntary sector. At the same time, funders are becoming more concerned about value for money. Many charities are being asked to analyse their unit costs.

Funders believe that they can then “fairly” compare one charity with another or with a private sector supplier. It is easy for a funder to ask “What is the unit cost?”, but it can be quite difficult for a small charity with many services to calculate. Small charities are often much more complex than small businesses of a similar size. A community organisation will frequently be providing many different services from a tight budget.

The Tadshal example

The example we use (download the PDF to see the spreadsheet) shows how one charity analysed its unit costs. The Tadshal Community Association provides a wide range of services for refugees who have come to London in the last few years, fleeing a horrific civil war in their country. Many members of this community – adults and children alike – are still traumatised from the bombing of their villages, torture, rape and starvation. People disabled by the war live very isolated lives, unable to speak English and experiencing repeated memories of their terror, while living in lonely bedsits scattered across London.

The Community Association employs one member of staff (the co-ordinator) and has a large number of volunteers. It provides the following services:

  • Advice and advocacy
  • Counselling
  • Health access and welfare visits
  • Supplementary school
  • Youth club
  • Lunch club
  • Outings and events
  • Commercial translations

The co-ordinator has kept a time sheet for the past month and from this she reckons that she uses her time on a weekly basis as follows:

  • Advice/advocacy 7 hours
  • Counselling 1 hour
  • Home/welfare visits 5 hours
  • Supplementary school 3 hours
  • Youth activities 1 hour
  • Lunch club 3 hours
  • Outings/events 1 hour
  • Commercial translation 4 hours

Sub-total 25 hours

  • General Administration 6 hours
  • Fund raising 2 hours
  • Charities Act administration 2 hours

Total 35 hours

The first eight items listed are “outputs” – that is, the charity’s clients receive a service. Each of these can be called a “cost centre” because you allocate costs to them. The last three headings are general services that are used by each cost centre during the year.

General administration relates to running the services but is not easily related to a specific service. This includes opening the post and dealing with the answering machine. Fundraising and Charities Act administration both relate to the Charities Act regulations. Charities should now record the costs associated with fundraising and the managing and administering of the charity: things like writing management committee minutes and attending committee meetings and the AGM. These costs are shown in the last two columns of the table.

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Last updated: Mon, Mar 31 2008 - 04:34:51 PM

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