Program service or supporting activity? Get your expense allocation right

Description

Abstract: The push for more transparency from nonprofits has placed a greater emphasis on how an organization’s expenses break down — in other words, how it uses its resources. In 2016, the FASB released a new rule that reflects this priority. While the rule has been in effect for almost two years, some nonprofits still struggle with properly allocating their costs. This article explains the FASB’s requirements and common reporting problems such as the mishandling of joint costs and overallocating to the management and funds category. Permissible allocation methods also are discussed. A sidebar highlights the FASB’s definitions of program services and supporting activities.