Grants and contracts made simple

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Grants and contracts made simple

• Charity Accountants Conference
• Noelia Serrano
• Thandi Mtetwa
• September 2009

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Agenda

• Types of agreement
• Classification of funding
• Unrestricted
• Restricted
• Recognition of income
• Presentation in the accounts
• VAT and other tax issues

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Types of agreement

• Contracts
• Consideration
• Legally binding
• Subject to contract law
• Grants
• Gift, freely given
• Donors discretion
• Subject to trust law
• Service level agreements
• Could be a grant or contract

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Classification of funding

• Unrestricted
• To further charitable objects
• Contracts
• Can make a surplus
• Restricted
• Purpose of grant/donation restricted by donor
• Narrower than charitys objects
• Unspent funds have to be offered back

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Accounting issues

• Recognition of income
• Tests for recognising all income
• Entitlement
• Certainty
• Measurement
• Passing the recognition test for
• Grants
• Contracts

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Accounting issues

• Presentation in the accounts
• Voluntary income
• Incoming resources from charitable activities

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VAT and other tax issues

• Grants
• Usually outside the scope of VAT
• No VAT recoverable on purchases
• Contracts
• Usually business activity
• Maybe VATable or exempt
• Can recover VAT on purchases if VATable
• Is it primary purpose?

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Decisions
Grants Contracts

• Existing service seeking funding
• Indication of likely areas to benefit
• Third party funds what beneficiaries receive
• Grant is donation with timing, amount and
  frequency at discretion of donor

• Commissioned service
• Specifies services to be provided
• Direct link between service provided and
  recipient
• Binding agreement

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Sayer Vincent contact details

• Noelia Serrano/Thandi Mtetwa
• noelia_at_sayervincent.co.uk
• thandiwe_at_sayervincent.co.uk
• 020 7841 6360
• Related publications
• Pricing made simple
• www.sayervincent.co.uk

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