Grants and contracts made simple Fleur Holden and

Agenda • Types of agreement • Classification of funding • Unrestricted • Restricted •

Types of agreement • Contracts • Consideration • Legally binding • Subject to contract

Classification of funding • Unrestricted • To further charitable objects • Contracts • Can

Accounting issues 1 • Recognition of income • Tests for recognising all income •

Accounting issues 2 • Presentation in the accounts • Income from grants and donations

VAT and other tax issues • Grants • Usually outside the scope of VAT

Decisions Grants Contracts • Existing service seeking funding • Indication of likely areas to

Useful contact details & resources Fleur Holden fleur. holden@sayervincent. co. uk Ross Palmer ross.

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Grants and contracts made simple Fleur Holden and Ross Palmer 16 September 2016

Agenda • Types of agreement • Classification of funding • Unrestricted • Restricted • Recognition of income • Presentation in the accounts • VAT and other tax issues 2

Types of agreement • Contracts • Consideration • Legally binding • Subject to contract law • Grants • Gift, freely given • Donor’s discretion • Subject to trust law • Service level agreements • Could be a grant or contract 3

Classification of funding • Unrestricted • To further charitable objects • Contracts • Can make a surplus • Restricted • Purpose of grant/donation restricted by donor • Narrower than charity’s objects • Unspent funds have to be offered back 4

Accounting issues 1 • Recognition of income • Tests for recognising all income • Entitlement • Probable • Measurement • Passing the recognition test for: • Grants • Contracts 5

Accounting issues 2 • Presentation in the accounts • Income from grants and donations • Income from charitable activities 6

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? 7

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 8

Useful contact details & resources Fleur Holden fleur. holden@sayervincent. co. uk Ross Palmer ross. palmer@sayervincent. co. uk Tel: 020 7841 6360 • Related publications • Pricing made simple, Grants and Contracts made simple http: //www. sayervincent. co. uk/resources/made-simple-guides/ • Charities & Public Service Delivery https: //www. gov. uk/government/publications/charities-and-publicservice-delivery-an-introduction-cc 37 9