Classifying Expenses – Is it Program or Supporting Services

The latest view on not-for-profit accounting issues

Not-for-profit organizations are required to report financial information about the functional classifications of expenses, such as major program services and supporting services.

There is often confusion surrounding when to classify an expense as program related versus supporting services (which is usually management & general or fundraising).  Program services are activities that result in goods or services being distributed to beneficiaries, customers, or members that fulfill the purpose/mission of the organization.  So then what activities are supporting services?  The following are some common types of typical management & general and fundraising activities.

Management & General –
• Organizational oversight
• Business management
• General recordkeeping (even when related to programs)
• Budgeting activities
• Finance activities
• All management and administration activities except for direct conduct of program services

Fundraising –
• Publicizing and conducting fundraising campaigns
• Maintaining donor mailing lists
• Conducting special fundraising events
• Preparing and distributing fundraising materials
• Any other activities connected with soliciting contributions

If some staff members spend a portion of their time directly supervising program services but also perform any of the above activities, their salaries and expenses should be allocated among those functions.

Jessica Puckett, CPA, CFE