Not-for-profits are required to report expenses by the
functional classifications of program services and supporting
services on the financial statements because it is required by
GAAP. Additionally, they are required to report expenses by the
functional classifications of program services, management and
general, and fundraising on Form 990 because it is required by the
IRS.
In addition to being required by GAAP and the IRS, these
expenses need to be sorted because donors, funding sources,
regulators, members of the board and charity watchdog organizations
are scrutinizing the expenses to gain meaningful information so
they can make decisions about you.
The Form 990 is a public document
and can be viewed by anyone online at GuideStar.com. What are
people looking for? Primarily the ratio of program service
expenses to total expenses and perhaps to a lesser extent, the
ratio of fundraising expenses to total contributions. They
want to make sure you are worthy of
