FundCount Blog

Marco's beautiful dacha outside of Moscow

2010-04-26T09:12:00.000-07:00

With spring now in the air, I am trying to imagine what Marco's dacha must look like outside of Moscow. In my imagination his dacha looks something like this (in the video above). Marco is a very hard working man and so I just hope he and his wife have a nice place to go to on the weekends.

And I hope he also invites Vitaly and Maxim to join him sometimes at the dacha, because they are very hard working people too.

And if you think this is too much dacha for Marco and his family and friends, just remember for a minute how hard they all work there at FundCount headquarters to provide us with the great support we've all gotten used to. The FundCount people start work at 11am local time. Then they work straight for 14 hours all the way until 1 o'clock in the morning next day. And remember, these people have families back at home. And so if you think this is too much dacha, just think again.

In truth, Marco probably doesn't have a dacha. ..But maybe someday he will! After all that hard work, heck, he deserves a dacha.

More on dacha's here: http://en.wikipedia.org/wiki/Dacha

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And in case you're wondering if I have a dacha too, well yes, in fact I do. ..I'm just fixing it up a little...

New method for accrued dividends

2007-07-17T08:49:00.001-07:00

The latest version of the FundCount software helps automate the dividend accrual and settlement process. Now, instead of having to do general ledger entries to handle the accruals and settlements, FundCount asks you to assign an "Accrued dividends account" for any brokerage account holding dividend paying stocks.

Then when it comes time to enter the dividend into the database (Securities>>Corporate Actions Long>>Cash distribution), you select the security, then select the account that holds the security, then enter payment date and ex-dividend date, and now the software will automatically accrue the dividend at the ex-dividend date and settle the cash payment at the payment date.

The fact that the software automatically handles the cash settlement means that there will for the first time be entries in the database that cannot be edited via "Edit transaction" in the View/Edit/Delete All Transactions window. The only way to edit the cash settlements is to go back to the original entry for the dividend and adjust the payment date. FundCount handles the actual cash settlement entry on its own now.

Version 2.10.76

2007-07-16T21:29:00.000-07:00

I recently upgraded to version 2.10.76. Incredibly I was still using version 2.6.40, but I really loved that version because it was so stable and there were absolutely no problems with it.

I am still testing version 2.10.76, and will make a full report later. Right now, though, I am having problems creating PDF files. When I create a "Performance and Capital Summary" report, I cannot make a PDF file of the report. When I click the "To PDF" button, FundCount brings up the "Calculating. Please wait..." notice and I sit there for minute after minute while the software "calculates." My guess is that the software is hanging on this function and is not getting anywhere. Twice now I have had to shut down my computer simply to interrupt FundCount which is stuck.

I will mention this to the guys in Moscow tomorrow, though, and since they are so quick at fixing problems, I'm sure it will be fixed very soon.

Marco Thomas and his dangerous commute home from work

2007-07-13T12:09:00.001-07:00

Sometimes I feel sorry for my very hard working friend, Marco Thomas, at FundCount, because after a very long day at work he then has to face a difficult drive home to his wife. Here is a video clip of what Marco faces each time he drives home through this freeway tunnel in Moscow.

Do not accrue management fees unless you are crazy

2006-07-12T16:57:00.000-07:00

In our fund we take the management fees out of the partners' capital accounts. By this I mean we do not take the 1% management fee in the form of an allocation to the General Partner. We take the management fee all the way out of the fund.

This I think is the way most funds should operate.

To drill down into a bit more detail, we actually charge the LP's capital accounts 0.25% at the beginning of each quarter. In technical terms this means we charge our management fee "quarterly in advance."

None of this has anything to do with "accruing" management fees. That's a different subject. I wanted to get everything setup first before diving into that discussion.

When you charge management fees in FundCount (i.e. when you do the management fee transaction in the database), you have the option to select "Accrued" or "Final Charge" for the type.

Now, when we first started doing the actual management fee transaction in FundCount we stupidly selected the "Accrued" option. (Again, you have two choices, 1. Accrued or 2. Final charge.)

If you select "Accrued" you are going to create a major headache for yourself when it's time to do the audit and when it's time to do the tax returns.

FundCount does not recognize accrued management fees as a deductible expense on the tax forms it generates. It only recognizes "final charge" management fees as a deductible expense for the given tax year.

Therefore, save yourself a major headache and don't ever accrue management fees. Only do that if you are crazy (and really want to go nuts at tax time).

Be sure to manually confirm FundCount's return calculations

2006-04-04T13:56:00.000-07:00

I was motoring along in FundCount version 2.6.28, printing the first quarter partners' statements for 2006.

During the printing process, a figure caught my eye.
It was the "Gross return" figure and it didn't look right.

I whipped up an Excel spreadsheet to double check the calculation and sure enough the FundCount reporting was in error.

The lesson here is that it is very important that you double check FundCount's work on the Performance and Capital Summaries. There is zero guarantee that the return numbers are correct in any given version.

This happens occasionally as updated versions of the FundCount software get pushed out into production.

You would think that I would get upset about it, but then I remember how much money I am saving by not using Advent!

FundCount has some little quirks to it. The return reporting errors are something I have just learned to live with. Also, the FundCount people are very responsive in fixing the software errors. Just call them up and you'll get their attention pretty quick.

All in all, checking FundCount's work is a small price to pay for this wonderfully inexpensive software.

Editor's Note ...
This problem has subsequently been fixed.

"Accrual method" vs. "Final charge" for management fees

2005-12-16T14:43:00.000-08:00

There is a category of profit/loss items that are distributed proportionately among the partners according to what are called their "allocation percentages". Examples of these proportionately shared P/L items are realized gains & losses, unrealized gains & losses, dividends & interest received or accrued, and margin interest paid.

There is another category of expense-type items that are NOT shared proportionately by the partners; rather they are selectively distributed. The primary example of these selectively borne items is the assessment of the management fee levied by the general partner. Affiliated persons of the general partner are often not assessed a management fee (because of tax considerations beyond the scope of this document).

Charges that are borne by some partners but not others cannot be treated as P/L items in the same fashion as e.g. unrealized gains (which by construction will be distributed proportionately). Instead, these selective charges are treated as direct debits to the equity capital account of each partner who bears them.

In debiting a partner's capital account for a management fee, two accounting methods can be employed.

The first method is known as the "accrual method". In the accrual method, a partner's capital account is debited for management fees due, and a "management fee payable" account is credited. However, the partner's allocation percentage (which controls the partner's allocation of proportionately distributed profits & losses) remains unchanged when the management fee is accrued. If we think of the allocation percentage as the sole asset owned by the partner, then by analogy the accrual method is like a mini-recap: assets remain unchanged, but debt/equity increases. The paying partner retains the rights to the P&L... a tiny bit of leverage.

The second method is known as the "final charge". In the final charge method a partner's management fee payable account is debited, and the allocation percentage is reduced by that amount. Continuing the analogy above, part of the partner's assets are sold to pay off the management fee liability, and the partner no longer has those assets working for him; the profit/loss on that piece is forfeited and is redistributed among the other partners.

These two methods - the accrual method and the final charge - are not mutually exclusive. They are employed in tandem. The management fees are accrued each period (break period or quarter or what have you) according to the accrual method. With the passage of time, the allocation percentages of partners who pay management fees deviate more & more from the equity of the underlying capital account... they owe more & more. Every so often, the leverage is wiped out (i.e. the allocation percentage is "trued down" to equal the capital percentage) by taking a final charge.

For our own uses we decided to accrue the management fee every quarter, and take a final charge to allocations every year.

FundCount is frankly the best software available for the job

2005-11-02T08:16:00.000-08:00

If you are contacting me to hear what I have to say about FundCount (i.e. if you are contacting me for a recommendation), let me be real clear: I believe FundCount is the best software value out there to manage the partnership accounting for an investment partnership that invests in stocks and bonds.

If you ever see me complaining about FundCount on this blog, I'm doing so as a critic who already believes in the package and would simply like to see it get even better through time.

Sometimes commissions are included in the security price when a trade is made

2005-10-18T15:22:00.000-07:00

Sometimes we have trades that are booked onto our brokerage statement that have the commissions included in the price of the security (i.e. the commission amount is not reported as a separate figure).

[Note: For an example of why this happens, consult my Interactive Brokers blog, specifically this post.]

As I understand it, this will not cause a problem. Commissions on trades are added to the cost basis of a given security position. Not breaking the commissions out into a separate figure will evidently not cause a problem in the tax reporting for the partnership. A qualified tax accountant should be consulted on this for your own accounting books and procedures.

FundCount software is in constant development

2005-10-14T16:46:00.000-07:00

If I have a complaint with the FundCount software (and I have hardly any complaints), it is this one... The developers are constantly adding new features to the software which in turn changes the useability in significant ways.

While almost all software is changed and upgrade on a yearly basis, the FundCount software is changed and ugraded on a more or less ad hoc basis.

This leads to some useability problems, I think.

More on this later after I come up with some specific examples.

Account 302 - Undistributed gains/losses ... Time to run an audit

2005-10-14T12:42:00.000-07:00

If you're looking at the Balance Sheet for your fund in FundCount and you see an amount sitting there in the 302 account, you know it's time to run an audit (i.e. "Tools" >> "Audit").

I ran into this situation when I was working to close out the books for a particular month.

The little notice at the bottom right hand side of the screen that tells you when you have an unaudited period from a certain date should not be relied on as the only indicator of when you need to run an audit. You should run an audit anytime you have been using the software in any way and are about to start producing reports.

Dividend accruals and tax characteristics

2005-10-13T17:11:00.000-07:00

In my opinion, any fund that uses the FundCount software should have in place a set of written policies that outline the procedures for booking dividends into their fund (or partnership).

Below is the working set of procedures I use for our fund (GCP).
Remember, this is simply a statement of our policies. It may or may not be helpful to you in your use of the FundCount accounting software.

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Unless I hear otherwise from a qualified accountant in dividend accounting matters, the accounting procedures for dividends for GCP will be as follows.

The tax characteristics of dividends must be declared when the dividends are entered into the accounting books for GCP (i.e. into the FundCount accounting software). These tax characteristics must be stated whether or not the dividend is being accrued or booked in cash.

Tax characteristics include but are not limited to the following:

1. Qualified dividend
2. Non-qualified dividend
3. Short term capital gain distribution
4. Long term capital gain distribution
5. Return of capital
6. Miscellaneous income

Regarding accrued dividends:

All accrued dividends will be accrued into a “Dividends Receivable” asset account.

If the tax characteristics of the dividends are understood at the time the accrual is made, the appropriate tax characteristics will be applied to the dividend at the time the accrual entry is made onto GCP’s books.

If the tax characteristics of the dividends are not understood at the time the accrual is made, the tax characteristic will be set to “Non-qualified dividend” until the correct determination is made.

When the cash payment from the dividend issuer is formally received into GCP's prime brokerage account, a general ledger entry will be made in the accounting software to transfer the corresponding cash amount from the “Dividends Receivable” account to the prime brokerage account on the books of GCP.

Please note: It is not possible to perform a general ledger transaction at the end of the year to change the tax characteristics of a given dividend. All changes to the tax characteristics of a dividend must be performed on the actual accrual entry of the dividend into the “Dividends Receivable” account. This means that at the end of the year, either I or someone here will go back and adjust the tax characteristics of any accrual (and also non-accrual) dividend entries that require correction regarding their tax characteristics. These changes will be made on the books at the exact date locations where they are originally entered on the books.

Also please note: It is entirely possible that a single dividend receipt or accrual transaction will need to be broken into two or more transactions at a later time. This will occur, for example, when a dividend original booked as “Non-qualifying” is subsequently discovered to have several subdivided tax characteristics. Since the tax characteristics need to be set at the moment of entry into GCP's books, it is entirely possible that a new transaction (or transactions) will be added on a retroactive basis at any time during the fiscal year before the fiscal year is formally closed out for tax accounting purposes. Unless I hear otherwise from a certified accountant, this should not be viewed as problematic. The overall cash receipt balances will not change. Only the tax treatment of those cash receipts will change.

No API creation scheduled at this time

2005-09-12T16:30:00.000-07:00

FundCount is not planning on creating an API at this time. While I believe they would like to do it, they have too many other things on their plate to take care of first. So, folks, do not plan on being able to call FundCount procedures from your VBA applications any time soon. This could take a while.

Refresh method changed on Home

2005-09-12T15:57:00.000-07:00

As of today I have upgraded to the latest version (Version 2.4.0). On the "Home" page for the software (after the database itself opens), I notice that the "Refresh" link has disappeared. Apparently now all you have to do is click on the "as of [date]" link to refresh the screen. A little "Set Date" window opens to allow you to pick a date. After a date is selected, the information on the "Home" screen will be updated with the info based on that date. This replaces the previous "Refresh" clickable link-button for this screen.

I am a fan of FundCount

2005-09-12T15:50:00.000-07:00

I am a fan of the FundCount FC Office software and have decided to write a blog to discuss its use and to create an environment to help foster its continued development and evolution.