Statement of functional expenses
/What is the Statement of Functional Expenses?
A statement of functional expenses is used to show how expenses are incurred for each functional area of a nonprofit entity. In essence, it reveals how a nonprofit has decided to allocate its available funds in order to fulfill its mission.
Format of the Statement of Functional Expenses
The functional areas included in the statement of functional expenses typically include programs, fundraising, and management and administration. This presentation appears as a matrix, where each functional area is listed across the top row of the report, and the expense types are listed down the left side.
How Important is the Statement of Functional Expenses?
The statement of functional expenses is considered an ancillary report that can be added to the primary set of financial statements. Thus, it is not necessary (unless demanded by a recipient of the financial statements), but can contain useful information. Also, it must be included in a nonprofit’s audited financial statements.