How to describe a "management fee"?

Community Zone
#1

If an organisation - for a variety of reasons (and not the focus on this topic) - has a “management fee” for their work/project, how would they best describe this? Is it a transaction of type “Expenditure”?:

Outgoing funds that are spent on goods and services for the activity. The recipients of expenditures fall outside of IATI traceability standards.

Does that description / code cover a “management fee” type scenario?

Any examples out there?

#2

Can’t think of an example, but this is definitely expenditure and if you want to be completely accurate you could use a transaction-level aid type “G01” - " Administrative costs not included elsewhere"

#3

Thanks @bill_anderson

#4

Stever, you’re talking about the organization paying a management fee to their implementing partner, for instance? So, perhaps they have an agremeent that Org A will deliver activities for a total of $400,000 and they agree to pay Org A an additional $25,000 as management fee? Yes, that does sound like an expenditure.

Or is the publishing organisation receiving a management fee, as your initial question seems to imply? (“has a management fee for their project”) In that case it’s incoming funds, isn’t it?

#5

Thanks @YohannaLoucheur

The use case I was exploring was towards the second scenario:

  • Org A publishes
  • Org A act as the “fund manager” for a programme, directed by Donor B
  • Org A receives funds from Donor B,
  • Org A then disburse funds to multiple Implementing Orgs , who operate under this programme

The “management fee” for Org A is related to managing this process/programme, This could be described as IF (or E, as @bill_anderson describes) - either would be better than not describing it, and requiring people to quantify the differences in values…

#6

Thanks for the clarification Steven

I don’t think this should be reported as an expenditure - it’s certainly not “an outlay of funds” by Org A, whichever way you look at it. It’s an expenditure for the upstream publisher/funder (Org B), and incoming funds for this one (Org A).

If they want to report it as a separate line of incoming funds, why not, but I’m not sure of the value of doing it. In any chain of funder-implementer(s)-beneficiary, the total disbursements/expenditures at one stage won’t equal the incoming funds, since part of the funds will be used for admin costs (used in the broadest sense - offices, staff, phone lines etc).

#7

Thanks @stevieflow for the question and @YohannaLoucheur for your comments above. Given the scenario that is described it looks as though three different options for how this could be handled have been identified?

  1. Don’t include any reference to the fee at all
  2. The donor (Org B) could just publish it as an expense (referencing the Fund Manager Org A) as the recipient and as @bill_anderson describes
  3. The donor (Org B) could include the fee in a disbursement to Org A. Org A defines the Incoming Funds but also include an Expenditure transaction (to themselves) to account for the ‘internal spend’ of the management fee

I think of the three options, option 2 would be the one that I would prefer as I think it is the one that most closely describes what actually happens in the real world? However, other thoughts and comments are always welcome?