“A strong, thriving voluntary sector cannot live hand to mouth”, said sector minister Fiona Mactaggart today, as she urged greater adoption of the principle of full cost recovery.

Mactaggart was speaking at the launch of a new guide to the topic, published by the charity chief executives' group Acevo and New Philanthropy Capital, a charity that seeks to develop charitable giving. The guide, Full Cost Recovery: A guide and toolkit on cost allocation, has been released to coincide with Compact Week, which starts today.

It updates Acevo’s publication Funding our Future II, and is designed to help groups cost their projects accurately and transparently in negotiating with funders. It is hoped it will encourage charities to charge funders for the full cost of delivering services, including a contribution to their overhead costs.

According to Acevo, while the Government has clearly endorsed the principle of full cost recovery, other funders have proved more reluctant, with local statutory bodies often drawing “an artificial distinction” between delivery costs, and those associated with overheads and infrastructure.

“Full cost recovery will only be effective when local agencies catch up,” said Acevo chief executive Stephen Bubb at the guide’s launch. “We call on the government to publish a timetable and firm targets for local change. We should receive fair prices for the work we do for local government.”

This week will also see a new draft of the Compact Funding Code, which promotes full cost recovery, presented to ministers. The new code, drawn up by NCVO's Compact Working Group, argues that the national code should be used as a default where local codes have not yet been developed.