Capitalisation of Fees for REFCUS Grant Spend

Can I ask whether anyone capitalises internal fees for the administration of capital grants eg to businesses for improvements on their buildings to regenerate an area or for Disabled Facilities Grants.

Under the capital guidance, employees’ activities can be capitalised where they contribute directly to bringing an asset "to a location and into a condition so that it is capable of operating as intended", but I can't see how this holds true where there is no enhancement of an asset on the authority's balance sheet.

I would welcome any views?
  • Hi

    REFCUS is revenue expenditure funded by capital under statute. You are not creating an asset you are using capital resources to fund revenue expenditure because statute allows you to. The fees that you ask about are revenue expenditure and, if they are an appropriate charge in respect of the provision of DFGs, then they can be funded from capital resources. Does this make sense? Does anyone think differently?


  • The relevant regulation (which allows capitalisation as REFCUS is worded as follows:

    "...the giving of a loan, grant or other financial assistance to any person, whether for use by that person or by a third party, towards expenditure which would, if incurred by the authority, be capital expenditure"

    DFGs themselves can therefore be capitalised (subject to the conditions in the regulation, which would I think usually - if not always - be met)but I can't see any scenario in which internal fees could be capitalised.
  • Refucs is revenue expenditure funded by capital where we are using capital resources to fund the expenditure. The employees activities are charged to DFG as they bring an asset to the client.

  • Some are seeing an argument to capitalise internal fees in issuing the grant and others aren't. Is there anyone from Cipfa that could comment? Thanks in Advance.
  • I agree with John Everson. Internal fees are not contributing directly to the development of an asset. They are administering financial support. The capitalisation of fees should be such that they contribute directly to the development of the asset. Ignoring the funding issue, if the administrator wasn't there, the costs of development wouldn't change.
  • Whilst I agree that administration of DFG's is a revenue expense and cannot be capitalised. We retain up to 4% of the DFG grant in revenue to cover these costs. This is a local agreement within our County. Agree with Richard's response.
  • Hi - I agree that the internal fees are probably not eligible for capitalisation / refcus. Whilst we've included directly attributable professional fees such as surveyors, planning etc. this is only where closely related to bringing the asset into use. I think its unlikely that grant admin could be argued as contributing directly and should be a revenue overhead. Maybe ask your auditors for their view, they might be more generous than ours!
  • If the auditors are worrying about capitalised admin fees in the context of DFG spend, they clearly don't understand the materiality concept. The argument that they are bringing the asset into use is a valid one in my view.