Showing a funder what a funded post really cost
How a non-profit can show a funder the full cost of a grant-funded post, from the wages journal and payroll reports to payslips and the budget line.
By Achekam · · 5 min read · For Non-profit businesses in South Africa, Nigeria, Kenya
The grant pays for a programme officer. The budget has a line for the post, the funder's report template has a column for it, and at the end of the quarter someone has to fill in what the post actually cost. The salary on the contract is the easy part. The employer's contributions, the month the officer took unpaid leave, the increase in the second year: those are the parts that turn a simple report into a week of reconstruction.
Funders ask for this because salaries are usually the largest line in a grant budget, and the line where costs are easiest to inflate. A clear answer, backed by records the funder can test, builds the trust that gets a grant renewed.
This article shows how to build that answer from your payroll in Achekam.
What a funder means by the cost of a post
Before gathering figures, read the grant agreement's definition. Funders do not all mean the same thing.
- Gross pay only. Some fund the salary on the contract and nothing else. Employer costs fall on your other funds.
- Full cost of employment. Others fund gross pay plus the employer's statutory contributions and any benefits you pay, such as an employer pension contribution.
- Capped or shared. Some pay an agreed share of a post that also works on other programmes, or cap their contribution.
Employer contributions differ by country, and rates change, so check them at the time of writing with the relevant authority. In Kenya, for example, the employer matches the employee's NSSF contribution and pays its own share of the Affordable Housing Levy. In Nigeria, the employer pays its own pension contribution on top of the employee's and a contribution to the NSITF based on total payroll. In South Africa, your accountant will confirm which employer contributions apply to your organisation.
The employee's own deductions, such as income tax withheld, are part of gross pay. They are not an extra cost to the grant, and they should not be added twice.
The wages journal: where the cost enters the books
Every approved pay run is posted to your organisation's own ledger as a wages journal, with the amounts owed to the tax authority and the funds recorded as liabilities. A run is approved by someone other than the person who prepared it, nobody can approve a run that pays themselves, and an approved run is never recalculated.
Those rules matter to a funder. They mean the payroll cost in your ledger is the cost that two people agreed, fixed at the moment of approval. If a funder's verifier asks how they can be sure a salary was not altered after the fact, that is your answer.
Reading the wages journal for a month shows the payroll cost booked and, as liabilities, what is owed to each authority and fund. Paying those liabilities on time is part of the story too: a funder who pays employer contributions will reasonably expect them to reach the authorities.
Payroll reports by month and department
Payroll reports show cost, headcount and staff movements by month and by department. This is the most direct way to isolate a funded post.
Where your departments follow your programmes, a funded officer sits in the programme's department, and the department report for the grant period shows that post's cost month by month. Staff movements show when someone joined or left, which explains a month with a partial salary, and headcount confirms how many people the grant actually supported.
Export the report for the funder's reporting period and keep it with the grant papers. If the funder's period does not match calendar months, take the months that fall inside it and note any month split across two periods.
Payslips as the evidence for each month
Payslips are PDFs carrying your organisation's logo and details. They can be downloaded or e-mailed one per person, and an employer setting sends them automatically when a run is approved, with a delivery log. E-mailing needs an e-mail service configured on the server.
A verifier who samples a few months will usually ask for the payslips behind them. They show gross pay, deductions and net pay for a named person and month, which ties the payroll report to an individual. Before sending them, think about privacy: share only the payslips for the funded post and the months asked for, tell the staff member what is being shared and why, and send them through a channel you control rather than a forwarded e-mail chain.
Comparing the cost with the grant budget line
The final step is to set what the post cost against what the funder budgeted.
You can set a budget per account and period and compare it with actual figures from the ledger. If payroll posts all salaries to general salary accounts, the funded post's cost is mixed in with everyone else's. Two ways to separate it:
- A reallocation journal. Each month, once the run is approved, post a manual journal moving the funded post's cost, taken from the department report, from the general salary account into a salary account for the grant. Note the report and month in the journal's description.
- Budget against that account. Load the grant's salary budget against the grant's salary account, period by period, and compare budget with actual.
Management accounts then show an income statement for any period you choose, beside the period before, and can be exported as PDF or CSV for the funder pack. For the wider picture of a grant's spending, see tracking grant spending against the budget, and for how to lay out the accounts themselves, keeping restricted funds apart in your chart of accounts.
A funder pack checklist
For each reporting period, file together:
- the clause in the agreement defining what the grant pays for;
- the payroll report by department for the months in the period;
- the payslips for those months, if asked for;
- the wages journals and your reallocation journals;
- the budget comparison for the grant's salary account;
- a short note explaining anything unusual, such as a vacancy or unpaid leave.
On that last point, a month of unpaid leave changes the cost of a post; unpaid leave when funding pauses covers how to handle it.
The IFRS Foundation's summary of IAS 19 Employee Benefits explains how employee benefits, including contributions to defined contribution plans, are accounted for, which is a useful reference when a funder asks what counts as an employment cost.
Start with your largest funded post: pull last month's department report and payslip, and see whether you could answer the funder's question in an hour.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
