Why Functional Expense Allocation Matters

Nonprofits must report expenses by both nature (salaries, rent, supplies) and function (program services, management and general, fundraising). This dual classification — presented in the Statement of Functional Expenses — is closely scrutinized by donors, watchdog organizations, and regulators. The allocation of shared costs between functions significantly affects perceived organizational efficiency.

The Allocation Framework

FUNCTIONAL EXPENSE ALLOCATION:

EXPENSE CATEGORIES AND TOTALS:
- Salaries and wages: $[X]
- Employee benefits: $[X]
- Payroll taxes: $[X]
- Occupancy (rent, utilities): $[X]
- Depreciation: $[X]
- Insurance: $[X]
- Office supplies: $[X]
- Printing and publications: $[X]
- Travel: $[X]
- Professional services: $[X]
- Technology: $[X]

FUNCTIONS:
- Program A: [Description]
- Program B: [Description]
- Management and General
- Fundraising