Fees - Once More Into the Fray
Entering members' fees continues to create confusion for club treasurers. Although we have written other columns on this subject, I am going to try, once more, to shed some light on this difficult topic. We are talking, here, about fee assessments against members, which will be entered in the member section of bivio accounting. Fee assessments do not buy units, but are added to the contributing member's tax basis. As a result, any member's fee assessment, results in an increase in value for all members of the club. A fee assessment may be against on single member for a penalty, such as a late fee, or it may be a general assessment against all members in an attempt to distribute the burden for certain administrative expenses equally.
Let's take the latter case first. Suppose that a club wishes to purchase some software to analyze stocks. The members decide that this expense should be borne equally by all members of the club. To do this, the club assesses a fee of $20 against each member, and then issues a check for the $200 expense. After this has been posted, it can be seen that each member paid in $20, and each member is worth the exact same amount as before the fee and expense were posted, thus showing that the economic burden of this expense has been borne equally by each member. Note that there is nothing wrong with the club deciding that this expense should be borne by the members in the ratio of each member's ownership. In that case, members' payments, not fees would be used.
Now, take the case of a late fee being charged to a member. To record this penalty, use member fees to enter the contribution. The offending member's basis will be increased, all members' values will be increased, and no taxable income will be recorded.
Suppose, also, that a member makes a regular payment of $50, but the bank returns the check because there were insufficient funds in the account. In addition, the bank charges the club $27 for the inconvenience of bouncing the check. After the member has deposited more money in his/her personal account, the check should be redeposited. No entry need be made for this part of the transaction, since the member has already been credited for the payment. Alternatively, the treasurer could enter a negative payment on the original payment date in the amount of the bounced check, and then enter a new payment on the date the check is resubmitted to the bank. That covers the bounced check, but we still must deal with the $27 charge by the bank. In this case, we should collect the $27 from the offending partner, and enter it as a fee. The receipt of this fee will cause every member's value to increase. No income will be reported as a result of the receipt of this amount. The bank charge of $27 should be entered as a cash transaction, and will result in an expense to the club, to be shared by all members. So, the members' values are increased by virtue of the receipt of the fee from the member, and are decreased as a result of recording the bank charge.
Another use of fees is to record the charge the NAIC makes to a club for each of its members. For instance, a club of 10 people might pay NAIC $180 for the annual charge, consisting of $40 for the club and $14 for each member. Many clubs would assess each member a fee of $14, which would spread the economic burden for that charge equally among the members.
I hope that this column will shed some light on the fees question. Other columns on the subject are:
    Fees and Administrative Expenses
    Payments vs fees
There is also the matter of withdrawal fees, when a member leaves. Withdrawal fees are a different subject altogether. They are not entered under Members|Fees, but are shown on the withdrawal form when a member leaves. These fees are merely deducted from the amount that otherwise would be paid to the departing partner.
I can always hope that this is the definitive statement on fees, and I will never be called upon again to talk on the subject, but somehow .....................
Rip West
Ridgway, CO