[holding answer 20 October 2006]: The relevant target, as set out in the 2002 cross-cutting review into the role of the third sector in public service delivery is:
“Funders should recognise that it is legitimate for providers to include the relevant element of overheads in their cost estimates for providing a given service under service agreement or contract”.
The associated recommended action was that by April 2006, all Departments and agencies should recognise that it is legitimate for organisations to include relevant elements of overheads when seeking funding or bidding for contracts. Her Majesty’s Treasury’s Invest to Save programme now reflects full cost recovery in its bidding rounds; the Department of Health’s third sector commissioning taskforce report emphasises the importance of reflecting the full cost of services in grants and contracts, and as set out in the Local Government White Paper, the Department of Communities and Local Government is working with local authorities to ensure relevant Compact principles (including full cost recovery) are reflected in local government finance codes.
The principle of full cost recovery and funding of legitimate overheads is reinforced in “Improving Financial Relationship with the third sector: Guidance to Funders and Purchasers” published jointly by Her Majesty’s Treasury, the Cabinet Office, The Office for Government Commerce and the National Audit Office on 15 May 2006.
We recognise there is further to go in ensuring that full cost recovery is fully implemented in practice. Further details of the Government’s work in this area will be set out in the Office of the Third Sector’s Public Service Delivery Action Plan later this year. In addition, the independent Commissioner for the Compact will champion implementation of the Compact principles at all levels, national, regional and local, including those relating to sound funding and procurement practice.