Grant applications
Full cost recovery for charity grants: how to budget for overheads
Work out a charity project's full cost, allocate overheads fairly and explain your grant request with a worked example and budget checklist.
Full cost recovery means funding a project's direct costs plus a fair share of the organisation's overheads. That is the approach set out in the National Lottery Community Fund's explanation. For a charity grant application, calculate both parts, then check what your chosen programme allows. A complete budget shows what delivery really costs; it does not guarantee that a funder will pay every line.
Separate direct project costs from shared costs
Direct costs belong specifically to the project: for example, its session leader, materials or dedicated equipment. Overheads support more than one activity, such as shared premises or central administration. The Community Fund distinguishes these two groups and says that, if your project is your organisation's only work, you can request its costs as direct costs rather than calculate a separate overhead share.
Start with two lists headed “only for this project” and “shared with other work”. Put a short explanation beside any uncertain item. For a mentoring project, for instance, distinguish the time spent delivering mentoring from the time spent running the organisation. This makes the budget easier to discuss with a funder before you complete its form.
Check the programme before choosing a percentage
NCVO's budget guidance advises applicants to check whether a grant permits core costs and to show them clearly. Do not assume a percentage used in an earlier bid applies to this one. Read the current cost rules and record any cap, excluded item or required calculation method. If a cap is mentioned, check what it is a percentage of.
Keep the full project cost separate from the amount requested. In your working budget, add columns for total cost, this grant request, confirmed other funding and the remaining gap. Label pending applications as pending. You can then see whether an apparently affordable request leaves your organisation with costs it has not planned to cover.
Choose an allocation that reflects how the project uses resources
The Community Fund's project overheads guide (PDF, sections 7.3–7.5) describes allocation methods including staff time and premises use. It explains that different overheads can need different methods. A room allocation might use area and time; an administration allocation might use project staff hours where those fairly reflect the support needed. Its direct-expenditure method has conditions, so do not automatically spread every shared bill in proportion to project budgets.
Write down the resource being shared, the period covered, the project's use, total use across the organisation and your reason for choosing that measure. Use matching periods: a six-month project needs a six-month calculation, or an explicit adjustment from annual figures. Keep the underlying rota, floor plan or forecast with the calculation so someone else can follow it.
Worked example: a six-month community workshop project
These invented figures demonstrate the arithmetic, not typical prices or an available grant. Assume the programme accepts the costs and methods below. All shared cost totals cover the same six months as the project.
- Workshop delivery and materials: £8,000 in direct costs.
- Shared room costs: £6,000. The project uses 120 of 600 booked hours in the same room, giving a 20% share: £1,200.
- Shared administration: £4,000. A support-time forecast assigns 15% to this project: £600.
- Full project cost: £8,000 + £1,200 + £600 = £9,800.
If £2,000 is already confirmed towards those costs, the remaining funding gap is £7,800. That is a starting point for the request, subject to the programme's rules. If it excludes the £600 administration share, the cost still exists: identify another permitted source, revise the delivery plan or reconsider the application. Do not remove it from your internal budget just to make the totals appear balanced.
Give the funder a calculation it can follow
An explanation for the example could read: “We request £1,200 towards shared room costs. The six-month room budget is £6,000; this project accounts for 120 of the 600 booked hours. The attached schedule shows the sessions included.” Replace each figure and assumption with your own evidence.
Before submitting, check that each expense appears once, that contributions from different funders reconcile to the budget, and that quotes or forecasts support your estimates. NCVO suggests using quotes or comparable project budgets to estimate costs and organising the figures in the categories the application asks for. Keep a dated copy of the budget you submit.
For the rest of the proposal, use our grant application checklist. If the programme cannot support a workable budget, revisit your shortlist with our guide to finding charity grants. In OpenGrant, the Charity / VCSE and Grant filters narrow the search; check overhead eligibility on each funder's own page.