Telling Your Story with Functional Expense Schedules

1/14/2020

THOUGHTWARE?

Not-for-Profit

Telling Your Story with Functional Expense Schedules

January 14, 2020

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TO RECEIVE CPE CREDIT

? Individuals

Participate in entire webinar Answer polls when they are provided

? Groups

Group leader is the person who registered & logged on to the webinar Answer polls when they are provided Complete group attendance form Group leader sign bottom of form Submit group attendance form to training@ within 24 hours of webinar

? If all eligibility requirements are met, each participant will be emailed their CPE certificate within 15 business days of webinar

Presenters

Emily George, CPA Senior Managing Consultant egeorge@ Stephanie Whitacre, CPA Director swhitacre@

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Today's Topics

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Functional analysis

5 IRS Form 990

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Program services analysis

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Substantiating allocations

3 Indirect cost

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4 Management & general clarification

Common errors in functional reporting

Statement of Functional Expenses

? Presents an organization's expenses by both natural & functional categories

? Functional categories

Program Administrative Fundraising

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Statement of Functional Expenses

1/14/2020

Reporting of Expenses by Nature & Function

? Functional analysis requirement for all organizations (in one location) either on

The face of the statement of activities, As a separate financial statement, or As a schedule in the notes to the financial statements

? Must show by function & natural classification

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What Is Functional Analysis?

Reporting of Expenses by Nature & Function

? The relationship between functional classification & natural classification for all expenses shall be presented in an analysis that disaggregates functional expense classifications, such as

Major classes of program services & Supporting activities

? Management & general ? Fundraising ? Membership development

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Reporting of Expenses by Nature & Function

? Required to provide qualitative disclosures about methods used to allocate costs among program & support functions

? Examples, per the standard, of natural expenses

Salaries & wages Employee benefits Professional services Supplies Interest expense Rent Utilities Depreciation

Expenses vs. Losses

? No requirement to report losses by functional category ? Examples of losses

Bad debt ? can be either expense or loss Impairment of long-lived assets Change in market value of investments Foreign exchange rates Natural catastrophes Sell of building & equipment Winning/losing a lawsuit

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Functional Classification Defined

? Method of grouping expenses according to the purpose for which the costs are incurred

? The primary functional classifications are program services & supporting activities

Statement of Functional Expenses

Program Services ? Top Three Programs

Supporting Services

Fundraising

Membership Development

Management & General

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Functional Classifications ? Management & General

? Management & general

Activities that are not identifiable with a program, fundraising activity or membership-development activity, but are indispensable to the organization

Functional Classifications ? Management & General

? Management & general

May include accounting, general management & oversight, audit, budgeting, financing, communications with the public, human resources, insurance, occupancy, legal & risk management

What are some other types of G&A expenses?

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