Salary Top-Up Beyond Donor Allocation – Accounting and Audit Compliance

Fund Accounting
1

Our organisation is registered under the Societies Registration Act and maintains separate bank accounts for each funded project as per funder and audit requirements.

In one such project, the donor has fixed a specific salary amount (say ₹X) for a particular position. However, the amount is considerably below the current market rate.

We would like to pay an additional top-up amount to the same employee from our own general funds or another donor project, using a different bank account (not the restricted project account).

This means the employee would receive two salary transfers from two different bank accounts of the same organisation for the same month, one from the donor-funded project account (₹X), and another from our general account (₹Y).

Our questions are:

  1. How should this arrangement be reflected in our accounts to maintain transparency and compliance?

  2. Will it affect our audit or raise compliance concerns?

  3. What is the best-practice accounting treatment for such “top-up” or supplementary payments, should it be shown as part of the same salary head, or as an organisational contribution outside the project budget?

Any insights or examples from similar situations would be highly appreciated.

2

Cost sharing for HR cost to multiple funding sources is common.

  1. Maintain salary register clearly reflecting cost sharing for donor audit and transparency
  2. Charge salary share from respective donors/organic funds and account for expense and payments in your accounts accordingly.
  3. There will be no compliance/audit issues. The statutory payments for respective share may also be charged to respective streams.
  4. It is not top up, it is simply the amount as per the appointment terms which has to be paid.

Hope it clarifies

CS Sharad Bhargava