Functional expense reporting is an area of financial reporting unique to not-for-profit entities. GAAP requires that not-for-profit entities present an analysis of expenses by function and nature in one of three places:
Face of the statement of activities
Separate statement (statement of functional expenses)
Notes to financial statements
As well, the Form 990 includes a statement of functional expenses (Part IX), where NFPs are required to present this information. Functional expense accounting and reporting draws frequent questions.
In this archived