The Remaining Issues

There are three issues that we can deal with relatively quickly and which will complete this introduction to the accounts of non-profit making organisations.

Life Membership Fees

Many clubs and societies have life membership schemes where we can pay a relatively large amount at the beginning and then never pay any more membership fees... ever. Take a look at a few clubs and societies and see how many of them do that.

The accounting problem with life membership is to solve the problem - how long is life? Ah, the eternal question!

In some cases, life membership could just be a year or two, for example, if someone pays their membership fee and then, sadly, dies after a short time. On the other hand, the 18 year old who becomes a life member of a wildlife society could be an active member for 60 or 70 years or even more.

The solution to the problem is that the organisation has to set a policy on how long life will be. That is, the club will agree that all life membership fees are to be spread over 10, 15 or 30 years and then each year this calculation is done:

Jack Smith signs up for life membership from 1 January 2004 by paying £150. The club's life membership term is 20 years so each year £7.50 (£150 ÷ 20 years) will be charged to the IEA for Jack. Life membership works a bit like depreciation, doesn't it?

Watch out for tricky questions here because life membership fees will change. Old members die and new members join so there will be changes to the life membership account to take care of. In an exam, all of these issues will be set out for you.

For You To Do 12

From the information supplied, carry out the following tasks:

a. Based only on the information you see below calculate what you think should be the amount to be shown in the end of year IEA for Life Membership fees for the Duncanstone Horticultural Society.

Membership profile	Number	Average age	Duration of life membership (years)
Male	48	51	25
Female	100	42	35

Respondents saying they would become life members
male	25%
female	35%

Life membership fee = £95

b. Having seen the calculations in part a, the committee decided that life membership fees should be spread over 10 years for all life members. Calculate the revised amount to be shown in the IEA if all life members' fees are spread over 10 years.

c. The Society has undertaken more detailed research into the life membership issue and presents you with the following additional information.

	Number	Duration of life membership (years)
Couples	40	25
Singles	30
Breakdown of singles
Male	30%	25
Female	70%	35
Life membership fee
Couple	125
Single	95

As a result of this additional information, calculate the amounts to charge to the IEA providing the life membership fees are spread over:

expected duration of life membership
10 years

Extension: Now consider offering life membership to couples or singles. If they took out life membership would members do so as a couple/family or as an individual?

Now take a look at the solution...

Joining Up Fees

Lots of non-profit making organisations have joining up fees and they might be a bookkeeping problem too. The solution to this problem is really the same as the life membership problem - the organisation itself decides what to do with its joining up fees. Here are two suggestions:

Questions relating to joining up fees aren't difficult, so let's go straight to...

For You To Do 13

RocURBaby Music Club, which has a financial year ending on 31 December, charges a signing on fee for all new members in addition to its annual fees.

For new members signing on in 2004 only and assuming that the club's policy is to spread the signing on fee over three years, show the entries for the signing on fees in the IEA for the club.
Note: Signing on fees are charged to the IEA in full for each year of membership and it doesn't matter at what stage of their first year they join. So, even if they joined on 1 January or 12 November or even 31 December, their first year signing on fee is charged in full for that year.
For all new members signing on from 2004 to 2006 show the entries for each of the three years for the signing on fees in the IEA for the Club.

Year	Number of new members signing on	Signing on fee (£)
2004	30	50
2005	33	55
2006	36	70

Now take a look at the solution...

Projecting the Fees Needed

How does a non-profit making organisation know how much its fees should be? That is, how does the Flora and Fauna Society know that it should have an annual fee of £15 or £500?

The World Wide Fund For Nature UK (WWF) has several layers of membership, for example:

Members at £2 per month
Companions at £5 per month
Benefactor at £10 per month, and
Any other amount that you would like to pay

The Great Yarmouth Gilbert & Sullivan Society has two levels of membership:

Singing Member - £15
Patron - £13

Patrons receive a complementary ticket to the May show, priority booking for further tickets and regular updates from the Society, including information about concerts and social events.

How about the Norsey Wood Society of Billericay?

Standard - £3 per household
Senior Citizen - £1 per household

If you live outside Billericay, please add £1.00 towards the postage and packing of the newsletter (sorry UK only!).

Membership entitles you to free entrance to Society meetings and talks and to four informative newsletters per year.

Average cost per member = total costs ÷ total membership

The society can then either charge that amount or add something on to cover inflation, things they hadn't thought about and unexpected costs such as the need for a new item of equipment.

Worked Example

A 200 Club needs to work out how much to charge per ticket. Imagine that your local church has decided to have a 200 Club. The 200 Club aims to sign up 200 people a year who will pay exactly the same amount as each other. Every month some names are drawn out of a hat and these people are paid an agreed amount of money by way of a prize. At the end of the year the 200 Club aims to donate its surplus to the church.

All we know so far is how many members the 200 Club wants. What we don't know includes:

Imagine that we have talked to the treasurer of the 200 Club and he/she has provided us with the following additional information. St Birinus Church 200 Club needs to decide how much to charge for membership on the basis of one of the following two suggestions:

Non-Profit Making Organisations