How do I record funds administration expenses?

I have a client who receives funding to manage certain projects. They have to report back to the funding body all expenses associated with the project - no problem. They are also allowed to charge a percentage, dependent on the type of activity, as an administration charge. The allowed administration charge is included in the funds received. The admin charges have to be included in the report as an expense. How do I record these charges in the client's books using Reckon Accountant Premier. They tried to enter a bill for the amounts and do a journal entry accounts payable/funds income but this inflates the income by the expense amount.

Is there a way to report an internal expense?

Janos

Comments

Charley

Grant reporting is lots of fun. Classes classes classes

Best way to see Admin expenses is first a journal; debit expense Admin Fees (Grant Class) credit Income Admin fee Income (Class Admin)

Then all expenses for the Admin gets classed as Admin.

Most Funding bodies only want to see the Admin Fee expense that you take how it is spent is then an internal issue

If you need me to run through Grant reporting for you call me 0266834083

Kevin Silberberg

An alternative approach which does not use Classes would require the creation of a Current Liability account, "Grant Liability". When the Grant funds are received and banked, the journal required would be:

Debit Bank Grant Funds received
Credit Grant Liability

An Administration Expense charged to the Project would be managed by a journal:

Credit Administration Fee Income
Debit Grant Liability

When a Bill in relation to the Project is received, enter the Bill against the Supplier and select the Grant Liability account (rather than an expense account).

If there are multiple grants for different Projects, set up a Grant Liability account for each Grant using different names for each so as to be able to identify each.

Acquittal of the Grant funds would require a report on the Grant Liability account. When the Project has been completed, the balance in the Grant Liability account will be zero. Depending on the terms and conditions of the Grant, if there are unspent funds at the end of the financial year, you may need to apply for a Carry Forward into the next financial year.

Zappy

You can accomplish all of this through sales receipts. Why are you fiddling around with journals? All you need to do is point the item at the appropriate general ledger account.

Janos

Thanks Kevin and Kevin.
I like the journal entries description because I can clearly follow what accounts are effected and how it will apply to the project.
Using sales receipts would be simpler for the client's bookkeeper to follow and while the initial setup would be more fiddly, once set up it would be consistent
Many thanks,
Janos

Charley

Janos; I'm not sure about the sales receipts, they tend to create a false income and also want to bring themselves into the BAS.

Using a Liability account for Grant funds will work but considering the amount of grants that you probably get a P&L by Class will work better for you. If you were to need individual transactions (which is what the liability account will only do) then all you need to do is pick up a P&L detail by class.

My advice is if you do this well then you should have nothing in P&L Unclassified.