Avoiding Dysfunctional Expenses- Expense Allocation and Joint Costs for Nonprofit Organizations

Expenses don’t always get the attention they deserve, especially when it comes to how nonprofits should be allocating them under GAAP. After all, they are the most significant estimate included in many nonprofit financial statements. Yet, this is an area where judgment, bias, and pressure to perform are on full display. A nonprofits’ identity and purpose are not based on how they receive money, but on how they spend it, and functional expense allocation is the way this information is shared with stakeholders. This session will challenge your assumptions, strengthen your judgment, and elevate your functional allocation skills. We’ll review the key concepts underlying functional expense allocations, and then explore their application to joint costs, financial statement presentation, and appropriate footnote disclosures. Our presentation will identify common errors and miscues that we see in practice, as well as provide you with a commonsense framework for approaching functional expense allocations.