A company uses management accounting to know its margins.
A French association (loi 1901) mostly uses it to report: to funders who grant it subsidies, to the tax authorities if it runs a commercial activity, and to the public who donate.
The principles are the same as for a business: see our guide Management accounting in France. This article focuses on what is specific to associations.
Why an association needs management accounting
- Justify each grant: show that the costs claimed match the funded action.
- Track each project or action, with its budget, funding and actual costs.
- Isolate a commercial activity for tax purposes.
- Report on the use of donations when the association raises funds from the public.
- Value volunteer work and in-kind donations by project, when significant.
- Prepare budgets and future grant applications from actual costs.
Justifying grants
A grant allocated to a specific action is justified to the funder, usually through a financial report (compte rendu financier). It shows that the costs incurred match the purpose of the grant, and is generally due within six months after the end of the financial year.
The official form asks in particular for:
- actual costs and income of the action, compared with the forecast budget;
- the rules used to allocate indirect costs to the action, for example a share of rent or salaries.
This is exactly what project-based management accounting produces: without it, these figures must be rebuilt afterwards, with a risk of gaps with the accounts.
Each funding agreement sets its own rules: report format, eligible costs, documents to keep, deadlines. In every case, the costs claimed must be traceable in the accounts and documented. Read your agreement before choosing your analytical dimension.
Isolating a commercial activity
An association may carry out commercial activities (sales, paid services) without losing its non-profit status, under conditions. When these activities can be separated from the main activity and the non-profit activity remains clearly predominant, they can be isolated in a commercial sector: only that sector is then subject to business taxes.
A tax exemption also covers small commercial income, below a threshold revised every year.
In every case, the income and costs of each sector must be shown, including the share of shared costs: a direct use of management accounting. The same question arises for VAT, when some activities are taxable and others are not.
Reporting on donations collected from the public
An association that raises funds from the public above a donation threshold set by decree (€153,000) must prepare an annual statement of the use of resources collected from the public. French nonprofit accounting rules then require an income statement by origin and destination in the notes to the annual accounts.
It classifies income by origin (donations, grants, sales…) and costs by destination: social missions, fundraising costs, operating costs. It therefore requires each cost, shared costs included, to be allocated.
Valuing volunteer work and in-kind donations
Volunteer work, free use of premises and in-kind donations are voluntary contributions in kind. The accounting rules require information about them. When they can be identified and valued reliably, they are recorded and shown at the bottom of the income statement, without changing the result.
Linked to each project, they show funders the real cost of an action and the weight of volunteer commitment.
Key notions for associations
One dimension by project or action. This is usually the most useful dimension: each grant, each agreement, each action has its own value. As for a business, it is better to start with a single dimension.
Shared costs. Salaries of people working on several projects, rent, insurance, accounting: their allocation must follow written rules, stable and justifiable, for example time spent or floor space used. These are the rules funders and auditors examine.
Time spent. For employees shared between several actions, regular time records are often the only solid basis for allocation.
What it requires from the association
- Track every expense and income item in a file, with the project or action concerned.
- Provide complete and accurate information: if a single item is missing or wrong, the document cannot be recorded until it is completed.
- Keep time records for staff shared between several projects.
- Record volunteer work and in-kind donations by project, if you value them.
- Ask your payroll provider for payroll entries split by project, or the data to split them.
- Send information as you go, so that financial reports are ready on time.
As for a business, management accounting is largely manual: automated entry tools cannot allocate an entry to a project. Bookkeeping time increases sharply: it can double, and go beyond. A lighter approach through sub-accounts is slightly less time-consuming when projects are few.
How we help
We support associations on a tailored basis and, if you wish, add management accounting:
- choice of the dimension (project, action, sector) and allocation rules with you;
- accounting set-up and a tracking file template;
- checks of allocations during the year;
- project tables for your financial reports and grant applications.
Clear expectations from the start: which funders, which agreements, which reports, how often. We agree on this together in a meeting, then send you a quote.
A delicate estimate. Quoting for management accounting is delicate: the time required depends on many factors that are hard to know in advance. The association’s officers must therefore have a clear idea of what they expect, and be available to make this estimate, and then the set-up, easier. See associations
Estimate your budget now, for your situation: estimate my budget
Frequently asked questions
Must a French association keep management accounts?
Not as such. But justifying an allocated grant, isolating a commercial sector or preparing an income statement by origin and destination requires costs to be allocated by action or sector: management accounting is the most reliable way to do it.
Is a spreadsheet enough to justify a grant?
Often, if the agreement allows it and the spreadsheet is reconciled with the accounts: the costs claimed must be traceable and documented. Some funders ask for project-specific accounting: read your agreement.
How should the salary of someone working on several projects be allocated?
By the time actually spent on each project, based on regular time records. It is the fairest key and the easiest to justify to funders.
Must volunteer work be valued?
Information on voluntary contributions in kind is mandatory. Recording them requires reliable identification and valuation; they then appear at the bottom of the income statement, without changing the result.
When is an income statement by origin and destination required?
When the association raises funds from the public above the donation threshold set by decree, which requires an annual statement of the use of resources. The income statement by origin and destination then appears in the notes to the annual accounts.
How much does it cost?
It is a tailored service: bookkeeping time increases sharply, and can double or go beyond, depending on the number of projects, funders and reports. Quoting is delicate: clear expectations and your availability make the estimate, and then the set-up, easier. Ask for a quote: we assess the solution best suited to your association, your obligations and your objectives. Book a meeting