COA for grant business

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#1
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I have a new client, one doing an activity I have never handled and didn't know existed until I met her. I'm wondering if anyone else has had a client like this one and if so, would you be able to provide a sample chart of accounts, for starters?

This is a husband and wife. He does scientific research and is paid through grants. There are organizations who handle all of the accounting functions for these researchers and evidently charge a significant amount to do so, then they pay the researcher with a W-2 from their own organization. The researcher can not have access or control over the grant funds, therefore they enlist the aid of the intermediary. The wife has set up an LLC so she will be the intermediary and funds will be channeled through her company, she will pay husband a salary from her LLC. This arrangement is allowed.

I'm just setting up the business in QB and I'm working on the COA now. Do I set up the COA to reflect the grant expenses as well as the general administrative expenses of the LLC? If anyone has suggestions or can provide some direction for this, I would be appreciative.
 

#2
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I'm also not clear how to recognize the income. The LLC, it appears, will be holding the funds for the researcher to be dispersed as necessary, including as payroll. The wife has not elected to be taxed as an S corp, so as a SP, she will not have a payroll to herself. Maybe the LLC will need to write a check to her as consulting fees. The main grantor for these funds is NASA and so far I've found a few instructional items via Google searches, but the basic bookkeeping is bothering me. And there's the issue of GE Taxes for our state. Would I hold the grant funds in a holding account to be dispersed? Then a check can be cut from Research Holding Account to LLC Checking account that would recognize LLC income. Could I use classes on the Balance Sheet in a holding account so reports can be printed relative to a specific grant? The researcher's wages needs to be booked so payroll reports can be prepared, but it should reflect the grant. Any help or suggestions would be so helpful.
 

#3
Joan TB  
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The only thing I would say is that this could possibly be a recipe for disaster. Accounting for grants can be very tricky and EACH grant can be very specific about the charges they allow or don't allow. Probably why the organizations who handle the grant accounting charge so much.

Is the wife a qualified bookkeeper? If not, are they relying on you to do all the entries correctly? My only slight exposure to accounting for grants is that there is a lot of detail in allocating charges to the correct spot. Coupled with your questions, I would hesitate to advise this proposal. LOTS of room for mistakes. You will probably not be able to charge enough for your time spent researching how each grant works. I consider myself a very good accountant, but personally, I wouldn't touch it - unless you plan to devote a lot of your practice to it and get very good at it.
 

#4
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Aloha Joan, thank you for your input. At this point, the client needs help setting up the chart of accounts and preparing payroll. When we met and downloaded information about the NASA grants, we discussed the fact that she needs to be very aware of all of the grant requirements and how to complete various forms and the need to be in compliance. At that point, I suggested to her there was probably a very good reason for the intermediary and what they charge. She still felt committed to being able to handle it herself. We discussed the need for a good and effective chart of accounts. That's all I'm committed to right now, and helping to set up payroll.

The more I read about the grants, the less likely I am to want to become involved with the actual work. QB can work, but it will take some training and focus on her part to utilize the class structure so she can provide accurate reporting with some degree of ease when needed. You are right about getting involved with a good deal of research. Most of what I've found is presented as small books (i.e. nothing less than 50 or 60 pages long) and it generates more questions than answers. I think that if the COA is solid and functional, she will have a better shot at being successful at this and less likely to make a catastrophic mistake.
 

#5
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Yes, but in a roundabout way. End result should still be similar, and Quickbooks was used.

I work with some non-profits and am familiar with others. One ended up being the fiscal manager for a start-up 501(c)(3), so none of the grants received could be used by the fiscal manager but still had to be accounted for in their own books. I did not personally handle it until the fiscal management agreement ceased--it was handled incorrectly by people that did not ask the appropriate questions. I later dealt with the aftermath, and the start-up incurred a lot more accounting fees to later segregate accounting from the fiscal manager.

Regardless, with that said, the COA is of utmost important as you already concluded. What is second most important is job costing to grants--statement of activities is controlled through job costing and COA, balance sheet activity is managed by COA and class. Third most important is class. While class is very flexible, job costing becomes required when class has to be reserved for tracking a different aspect of each transaction. In your case, your client may be able to utilize classes instead of jobs as long as this is not a non-profit that also needs to track program vs. support activities (which I reserve to be tracked by class), and without having a COA that is redundant.

I worked with another entity that decided to track all of this through their COA. They would issue long format financials, and then more consolidated based on each grant. It was asinine, overly burdensome, and reporting was nothing but a headache.

Governmental grants can be a nightmare. I have worked with them on the accounting side, and do not care to ever again unless the responsible entity is highly qualified.
 


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