DEFINTION OF NONPROFIT ORGANIZATIONS (NFP or NPO)

There is currently no IFRS issuance covering NPO accounting

so we resort to using other relevant pronouncements of equally
competent bodies.
SFAS Nos. 116 and 117 (ASC Topic 958)
Appendix D of SFAS No. 116, Accounting for Contributions Received
and Contributions Made, and SFAS No. 117, Financial Statements of
Not-for-Profit Organizations, defines a nonprofit organization
substantially the same as SFAC No. 4, paragraphs 6 and 7, which is
as follows:
An entity that possesses the following characteristics that
distinguish it from a business enterprise:
(a) contributions of significant amounts of
resources from resource providers who do not
expect commensurate or proportionate pecuniary
return,
(b) operating purposes other than to provide
goods or services at a profit, and
(c) absence of ownership interests like those of
business enterprises. Not-for-profit organizations
have those characteristics in varying degrees.
Organizations that clearly fall outside this definition include
all investor-owned enterprises and entities that provide
dividends, lower costs, or other economic benefits directly
and proportionately to their owners, members, or
participants, such as mutual insurance organizations, credit
unions, farm and rural electric cooperatives, and employee
benefit plans.
Examples of Nonprofit Organizations
Some examples of non-governmental, nonprofit organizations are:

Cemetery organizations
Civic and community organizations
Colleges and universities
Elementary and secondary schools
Federated fund-raising organizations
Fraternal organizations
Labor unions
Libraries
Museums
Other cultural organizations
Performing arts organizations
Political parties
Political action committees
Private and community foundations
Professional associations
Public broadcasting stations
Religious organizations
Research and scientific organizations
Social and country clubs
Trade associations
Voluntary health and welfare organizations
Zoological and botanical societies

Voluntary Health and Welfare Organizations

Voluntary health and welfare organizations generally provide
guidance, training, goods and services to the general public
according to their specific mission. Examples of voluntary health and
welfare organizations include the following:

Salvation Army
Red Cross
CARE
Goodwill Industries

United Way
Boy Scouts
Girl Scouts
Boys Clubs
Girls Inc.
Nonprofit organizations whose purpose is to find a cure for
or help people who have diseases such as cancer,
diabetes, heart disease, or muscular dystrophy.

Four (4) Main categories of Nonprofit organizations

1.) Voluntary Health and Welfare Organizations
2.) Health care entities (Hospitals and clinics)
3.) Colleges and universities
4.) Others
KEY SFASs AFFECTING NONPROFIT ORGANIZATIONS
Most nonprofit organizations (NPOs) adopt the accounting and
reporting requirements of U.S. generally accepted accounting
principles (GAAP). When financial statement users permit, some
NPOs are utilizing other comprehensive bases of accounting (special
purpose reporting frameworks) such as modified cash or the income
tax basis. For-profit and nonprofit organizations may also adopt
International Financial Reporting Standards (IFRS) or IFRS for Small
and Medium-Size Entities as an alternative reporting framework.
Discussions in this series will focus on accounting and reporting
requirements included in U.S. GAAP. A brief discussion of
Statements of Financial Accounting Standards (SFASs) that
specifically affect NPOs accounting and reporting is included below.
1.) FASB Summary of Statement No. 116 (Topic 958)
Accounting for Contributions Received and
Contributions Made)
This Statement establishes accounting standards for contributions
and applies to all entities that receive or make contributions.
Generally, contributions received, including unconditional promises to
give, are recognized as revenues in the period received at their fair
values. Contributions made, including unconditional promises to give,
are recognized as expenses in the period made at their fair values.
Conditional promises to give, whether received or made, are
recognized when they become unconditional, that is, when the
conditions are substantially met.
This Statement requires not-for-profit organizations to distinguish
between contributions received that increase permanently restricted
net assets, temporarily restricted net assets, and unrestricted net
assets. It also requires recognition of the expiration of donor-imposed
restrictions in the period in which the restrictions expire.
This Statement allows certain exceptions for contributions of services
and works of art, historical treasures, and similar assets.
Contributions of services are recognized only if the services received
(a) create or enhance nonfinancial assets or (b) require specialized
skills, are provided by individuals possessing those skills, and would
typically need to be purchased if not provided by donation.
Contributions of works of art, historical treasures, and similar assets
need not be recognized as revenues and capitalized if the donated
items are added to collections held for public exhibition, education, or
research in furtherance of public service rather than financial gain.
This Statement requires certain disclosures for collection items not
capitalized and for receipts of contributed services and promises to
give.
2.) FASB Summary of Statement No. 117 (Topic 958)
Financial Statements of Not-for-Profit Organizations
This Statement establishes standards for general-purpose external
financial statements provided by a not-for-profit organization. Its
objective is to enhance the relevance, understandability, and
comparability of financial statements issued by those organizations. It
requires that those financial statements provide certain basic

information that focuses on the entity as a whole and meets the

common needs of external users of those statements.
This Statement requires that all not-for-profit organizations provide a
statement of financial position, a statement of activities, and a
statement of cash flows. It requires reporting amounts for the
organization's total assets, liabilities, and net assets in a statement of
financial position; reporting the change in an organization's net
assets in a statement of activities; and reporting the change in its
cash and cash equivalents in a statement of cash flows.

these circumstances, all the requirements of generally accepted

accounting principles applicable to nonprofit organizations must be
met, if material. When auditing entities that receive federal funds,
governmental accounting and reporting principles, and requirements
of oversight agencies, must also be reflected in performing the
engagement and preparing reports.
NONPROFIT ORGANIZATION FINANCIAL STATEMENTS
Basic nonprofit organization financial statements include:

This Statement also requires classification of an organization's net

assets and its revenues, expenses, gains, and losses based on the
existence or absence of donor-imposed restrictions. It requires that
the amounts for each of three classes of net assets-permanently
restricted, temporarily restricted, and unrestricted-be displayed in a
statement of financial position and that the amounts of change in
each of those classes of net assets be displayed in a statement of
activities.

Statement of Financial Position

This Statement amends FASB Statement No. 95 (Topic 230),

Statement of Cash Flows, to extend its provisions to not-for-profit
organizations and to expand its description of cash flows from
financing activities to include certain donor-restricted cash that must
be used for long-term purposes. It also requires that voluntary health
and welfare organizations provide a statement of functional expenses
that reports expenses by both functional and natural classifications.

Statement of Activities

3.) FASB Summary of Statement No. 124 (Topic 958)

Accounting for Certain Investments Held by Not-forProfit Organizations
This Statement establishes standards for accounting for certain
investments held by not-for-profit organizations. It requires that
investments in equity securities with readily determinable fair values
and all investments in debt securities be reported at fair value with
gains and losses included in a statement of activities. This Statement
requires certain disclosures about investments held by not-for-profit
organizations and the return on those investments.
This Statement also establishes standards for reporting losses on
investments held because of a donor's stipulation to invest a gift in
perpetuity or for a specified term.
4.) FASB Summary of Statement No. 157 (Topic 820)Fair
Value Measurements
The definition of fair value retains the exchange price notion in earlier
definitions of fair value. This Statement clarifies that the exchange
price is the price in an orderly transaction between market
participants to sell the asset or transfer the liability in the market in
which the reporting entity would transact for the asset or liability, that
is, the principal or most advantageous market for the asset or liability.
The transaction to sell the asset or transfer the liability is a
hypothetical transaction at the measurement date, considered from
the perspective of a market participant that holds the asset or owes
the liability. Therefore, the definition focuses on the price that would
be received to sell the asset or paid to transfer the liability (an exit
price), not the price that would be paid to acquire the asset or
received to assume the liability (an entry price).
Issues Related to Reporting Frameworks
With the exception of a few disclosure requirements, GAAP is
basically the same for large and small entities. As an alternative to
GAAP, management may elect to prepare its financial statements on
another comprehensive basis of accounting (OCBOA), such as the
modified cash or income tax basis. When such presentations are
acceptable to users of the financial statements, accountants may
audit, review or compile OCBOA statements. IFRS and IFRS for
Small and Medium-Size Entities are also recognized as GAAP by the
AICPA and FASB as alternatives to U.S. GAAP.
GAAP-basis financial statements are usually required by
accountability organizations, government agencies and grantors. In

This statement reports total assets, liabilities, and net assets of an

organization and any consolidated subsidiaries. SAS No. 117 (Topic
958-210-45) requires net assets to be reported as permanently
restricted net assets, temporarily restricted net assets, and
unrestricted net assets. Unrestricted net assets may include
designations made by an entitys board of directors or trustees.

This statement reports the changes in permanently restricted net

assets, temporarily restricted net assets, unrestricted net assets, and
the total change in net assets. Revenues are reported in the classes
to which they apply. Temporarily restricted revenues are reclassified
as unrestricted when time and purpose designations have been
accomplished. Revenues from permanently restricted net assets will
be accounted for as specified in the related agreements or, if not
specified, as unrestricted. All expenses will be recorded as
unrestricted in functional categories, program services, management
and general, fundraising and, if applicable, member development.
Statement of Cash Flows
This statement follows the requirements of SFAS No. 95 (ASC 230).
The statement of cash flows reports cash flows in total rather than by
the three classes of net assets. One significant difference is that
certain restricted donations (usually permanently restricted) are
classified as cash flows from financing activities and not included in
income from operations.
Statement of Functional Expenses
Voluntary health and welfare organizations must present this
statement in a matrix format that identifies major categories of
expense and their allocation among major categories of program
services, management and general and fundraising expenses. Other
nonprofit organizations may voluntarily present this Statement to
provide financial statement users a better understanding of the
entitys use of resources.
ACCOUNTING STANDARDS NET ASSETS

STATEMENT OF FINANCIAL POSITIONNET ASSETS

Although the use of fund accounting is still permitted, SAS No. 117
(ASC 958) compliance requires net assets to be classified based on
and donor-imposed restrictions in these categories:
Unrestricted
Temporarily restricted
Permanently restricted
The use of temporarily restricted net assets has been limited by
donor-imposed time or purpose restrictions. Permanently restricted
net assets are created by donor restriction (usually trust or
endowment agreements) or by law to be maintained by the
organization in perpetuity. The use of unrestricted net assets is not
limited in any way, except possibly by an entitys board of directors.

Any board designations of unrestricted net assets can, of course, be

changed by additional board action.
The amounts of the three classes of net assets must be presented
separately and aggregated as the total of net assets. Additional
disclosures are required for temporarily and permanently restricted
net assets, including a description and dollar amount of the different
types of permanent and temporary restrictions.
Reclassifications
Reclassifications of net assets are recorded on the statement of
activities and occur between temporarily restricted net assets and
unrestricted net assets when donor time and purpose restrictions
have been satisfied. No distinction is made between expenditures of
restricted and unrestricted funds in the statement of activities; all are
reported in the unrestricted net assets column.
UNDERSTANDING REVENUE RECOGNITION
All principles of revenue recognition discussed in these materials are
based on US accounting standards. On July 1, 2009, the Financial
Accounting Standards Board (FASB) launched its online Accounting
Standards Codification (ASC) which is the one authoritative source of
US GAAP. The FASB combined all accounting standards included in
the existing GAAP Hierarchy from SFAS No. 162 in the ASC, all of
which is now considered authoritative GAAP. While other literature
may be useful for guidance in accounting and reporting activities, it is
not considered authoritative.

958-605-25-1: Revenue from exchange transactions follow generally

accepted accounting principles (GAAP); for example, revenue
derived from membership dues in exchange transactions shall be
recognized over the period to which the dues relate. Nonrefundable
initiation and life membership fees received in exchange transactions
shall be recognized as revenues in the period in which the fees
become receivable if future fees are expected to cover the costs of
future services to be provided to members. If nonrefundable initiation
and life membership fees, rather than future fees, are expected to
cover those costs, nonrefundable initiation and life member fees
received in exchange transactions shall be recognized as revenue
over the average duration of membership, the life expectancy of
members, or other appropriate time periods.
Contributions Received:
958-605-25-2: Except as provided in paragraphs 958-605-25-16
through 25-18, contributions received shall be recognized as
revenues or gains in the period received and as assets, decreases of
liabilities, or expenses depending on the form of the benefits
received. The classification of contributions received as revenues or
gains depends on whether the transactions are part of the NFP's
ongoing major or central activities (revenues), or are peripheral or
incidental to the NFP (gains). A contribution made and a
corresponding contribution received generally are recognized by both
the donor and the donee at the same time, that is, upon occurrence
of the underlying eventthe nonreciprocal transfer of an economic
benefit.

Revenues and Gains Overview:

958-605-25-3: Donor-imposed restrictions place limits on the use of

contributed resources and may affect an entity's performance and its
ability to provide services. However, limitations on the use of donated
resources do not change the fundamental nature of the contribution
transaction or conclusions about when to recognize the underlying
event.

605-10-25-1: The recognition of revenue and gains of an entity

during a period involves consideration of the following two factors,
with sometimes one and sometimes the other being more important
consideration:

958-605-25-4: A major uncertainty about the existence of value may

indicate that an item received or given should not be recognized. For
example, a gift of clothing or furniture has no value unless it can be
utilized in either of the following ways:

To understand principles of revenue recognition for both for-profit and

nonprofit organizations, we must begin with the authoritative
standards from the ASC.

a. Being realized or realizable. Revenue and gains

generally are not recognized until realized or realizable. Paragraph
83(a) of FASB Concepts Statement No. 5,
Recognition and
Measurement in Financial Statements of Business Enterprises,
states that revenue and gains are realized when products (goods or
services),
merchandise, or other assets are exchanged for
cash or claims to cash. That paragraph states that revenue and
gains are realizable when related assets received
or held
are readily convertible to known amounts of cash or claims to cash.
b. Being earned. Paragraph 83(b) of FASB Concepts
Statement No. 5, Recognition and Measurement in Financial
Statements of Business Enterprises, states that revenue is not
recognized until earned. That paragraph states that an
entitys
revenue-earning activities involve delivering or producing goods,
rendering services, or other activities that constitute its ongoing major
or central
operations, and revenues are considered to have
been earned when the entity has
substantially accomplished
what it must do to be entitled to the benefits
represented by the
revenues. That paragraph states that gains commonly result from
transactions and other events that involve no earning process, and
for
recognizing gains, being earned is generally less significant
than being realized or
realizable.

Used internally by the not-for-profit entity (NFP) or for

program purposes
Sold by the NFP

If an item is accepted solely to be saved for its potential future use in

scientific or educational research and has no alternative use, it may
have uncertain value, or perhaps no value, and shall not be
recognized. For example, contributions of flora, fauna, photographs,
and objects that are identified with historic persons, places, or events
often have no value or have highly restricted alternative uses.
958-605-25-5: However, contributed tangible property worth
accepting generally possesses the common characteristic of all
assetsfuture economic benefit or service potential. The future
economic benefit or service potential of a tangible item usually can
be obtained by exchanging it for cash or by using it to produce goods
or services. Certain forms of contributed resources may be more
difficult to measure reliably than others, but the form of the
contributed resources alone should not change conclusions about
whether to recognize the underlying event.
The following section discusses the application of nonprofit
accounting and reporting standards to the statement of activities.

Not-for-Profit Entities--Revenue Recognition958-605-25

STATEMENT OF ACTIVITIESREVENUES

General Note: The Recognition Section provides guidance on the

required criteria, timing, and location (within the financial statements)
for recording a particular item in the financial statements. Disclosure
is not recognition.

Contributions

General:

Paragraph 5 of SFAS No. 116 (ASC 958-605) describes a

contribution as an unconditional transfer of assets or settlement of
liabilities in a voluntary nonreciprocal transfer. Transferred assets
may be cash, securities, property, use of facilities or utilities,

materials and supplies, services, and unconditional promises to give

those items in the future.
Unconditional promises to give, contributions, must be distinguished
from:

Intentions to Giveplanning to or intending to give.

Exchange TransactionsThis for that transactions in
which tangible benefits are transferred in exchange for
payments. Selling merchandise or collecting fees in
connection with program services are examples. Some
government grants that require the grantee to perform
services are usually considered exchange transactions.
Agency or Intermediary TransactionsTransfers of
assets as an agent or intermediary, not as the principal
beneficiary of a transaction.

Contributions received and promises to give are recorded at their fair

value and reported as an increase in net assets when received as
unrestricted, temporarily restricted, or permanently restricted. When
the donor has imposed restrictions on the gift that will be met in the
future reporting period, the gift is restricted, not deferred revenue.
Restricted Contributions
When the donor has restricted the use of a contribution, or its use to
a future time period, the contribution is restricted. Gifts for building
programs, specific program services or projects, or endowments will
be recorded as a restricted contribution. The use of gifts can be
expressly specified in letters, trust agreements or other written
documents given in response to an appeal in a newsletter or
conference. In any case, there must be some evidence of the
promise to give and the restrictions on its use.
Temporary and Permanent Restrictions:
Temporary restrictions usually give the recipient organization control
over the disposition of the funds in accordance with the donorimposed restrictions. Permanent restrictions usually establish
endowments that prohibit invasion of the principal but usually permit
unrestricted use of the income from the endowments assets. The
trust instrument creating an endowment may restrict the use of
income for specified purposes, in which case a temporary restriction
would be created.
Temporarily restricted contributions are recognized as support when
received and reclassified to unrestricted net assets when time and
purpose restrictions have been satisfied.
Unrestricted Support:
Contributions not subject to donor-imposed time and purpose
restrictions are recorded in unrestricted net assets when received or
promised. When contributions are promised for future periods, they
are recorded in temporarily restricted net assets unless the donor
specifies their use in a current period.
Restrictions on Contributions Met in the Same Year:
Restricted contributions may be reported as unrestricted support if:
a)
b)
c)
d)

the restrictions are met in the same reporting period,

that policy is followed consistently,
the policy is disclosed, and
the organization has a similar policy for accounting for
restricted investment income and gains.

Designations Imposed by the Board of Directors:

The board of directors or trustees of a nonprofit organization may
designate portions of unrestricted net assets for specific purposes.
Amounts may be set aside to accommodate special needs of certain
programs, unusual expenses or other expenditures consistent with
the organizations exempt purposes. Different from restricted net

assets, these designations can be reversed by the governing board.

They are, therefore, presented as a sub-category of unrestricted net
assets.
Donated Materials or Merchandise:
Donated materials or merchandise are generally recorded as
contributions and inventory or expenses in the period received. Such
donations are recorded at their fair value on the date of donation.
Materials or merchandise donated for a specific program or purpose
would be recorded as restricted contributions. Unconditional
promises to give materials and merchandise should be recorded as
contributions even though the promise is for a future date. The
requirements of SFAS No. 157 (ASC 820) should be followed in
determining fair value. An established market price may be
determined from industry valuation services, catalogs, vendor price
lists, independent appraisals, or subsequent sales prices. Donations
of unusable assets should not be recorded.
The Internal Revenue Code and Regulations permit certain nonprofit
organizations to receive donations from manufacturers and retailers
of usable products and merchandise. These NPOs redistribute the
products and merchandise to other tax-exempt organizations,
charging only a small administrative fee. The manufacturers and
retailers receive a contributions deduction on their tax returns for
one-half the difference between cost and the last sales price of the
products or merchandise. These in-kind contributions are recorded
at their fair market values by the recipient organizations.
The downside is, however, that recipients of products must maintain
detailed inventory records and track the disposition of each individual
donated item. Penalties can run as high as the fair value of all
products and merchandise received under the program.
Organizations may receive contributions of gifts-in-kind (such as
tickets, gift certificates, or merchandise) to be used for raffles,
auctions or giveaways for fundraising purposes. Contributions of
these items should be recognized as contribution and measured at
fair value. Any differences in amounts received in exchange for these
donated items should be recognized as adjustments to the
contributions revenues.
Donated Long-lived Assets and Free Use of Facilities:
Contributions of long-lived assets or the free or below-market use of
facilities should be recorded in the period received at fair value.
Unconditional promises to give are recorded on the date of the
promise. When the free use of facilities is not promised for a
specified period of time, the contribution and expense would be
recorded in each period of occupancy. Long-term promises of free
use of facilities should be recorded in restricted net assets and
reclassified as time periods expire. The long-term free use of
facilities may be classified according to the nature of the facility, e.g.,
office space, building, recreation center, etc.).
Donated Services:
SFAS No. 116 (ASC 958-605) requires the fair value of donated
services to be recorded if the services:

Create or enhance a nonfinancial asset or

Require specialized skills, are provided by entities or
persons possessing those skills, and would need to be
purchased if they were not donated.

The value of services are recorded as in-kind contributions in the

period provided and charged to a nonfinancial asset (such as a
building) or to an expense account, depending on their nature.
SFAS No. 116 (ASC 958-605) requires that organizations receiving
donated services disclose the activities or programs for which those
donated services were used, the nature and extent of those services,

and the amount recognized as revenue during the period. An

organization may disclose the number of volunteer hours received
during the year and their estimated fair value, even though they
cannot be recorded under SFAS No. 116.
A major benefit or recording in-kind donations is that they become
program services expenses as they are used or consumed.
Increased program services expenses lower the ratio of general and
administrative expenses to total expenses.
Accountability
organizations, grant agencies and potential donors look for low
general and administrative expense ratios to maximize the use of
their support in accomplishing the exempt purposes of the nonprofit
organization.

Service Fees/Dues
Service fees are usually exchange transactions that are recorded
when services are provided. Fees for ticket sales that relate to
events in future periods should be deferred until the period in which
the event occurs.
Membership dues may include a contribution as well as an exchange
transaction. The portion considered a contribution should be
recorded as such. The exchange transaction would be recognized
over the period of benefit. An example of the exchange portion of
dues would be when a member receives a magazine or a monthly
service throughout the period covered by the dues.

Agency Transactions:

Sales of Merchandise and Publications

A donor may transfer assets to the organization and instruct the

organization to distribute to a beneficiary:

Merchandise and bookstores are operated by many nonprofit

organizations to earn revenue. Sales of merchandise, books,
subscriptions and other products are sold through these and other
outlets. Sales of these items are recorded at the time of sale or
shipment. The sales of subscriptions, on the other hand, should be
recognized over the period to which the subscription applies.

the assets received,

income from those assets, or
both.

Agency transactions are voluntary transfers of assets to recipient

organizations that have little or no discretion in determining the use
of the transferred assets. When a recipient organization can choose
the beneficiary of the gift, i.e., has variance power, it would normally
record the gift as a contribution. If an organizations receives gifts to
be passed through to designated beneficiaries, these gifts would be
recorded as liabilities until paid to the beneficiaries.
Exchange Transactions:
Exchange transactions are essentially purchases of goods and
services from another entity and are not contributions. Government
grants are often exchange transactions because they provide assets
in exchange for goods or services. Grants from non-governmental
organizations are normally recorded as contributions because there
is no reciprocal exchange.
Recognizing Other Accrual Basis Revenues:
Recognizing revenue on the accrual basis for nonprofit organizations
follows the same principles as for-profit organizations: revenue is
recognized in the period when it is earned. Other than contributions
revenue for nonprofit organizations may consist of the following:

Special events
Program service fees
Sales of merchandise and publications
Third-party reimbursements
Investment income and gains and losses

Special Events
Fundraising events most commonly include dinners, benefit concerts
and appearances by artists, or athletic events. Funds received by
the nonprofit organization normally include an exchange transaction
and a contribution. The portion of the funds that represents the fair
value of the tangible benefits received by the donor is the exchange
transaction. Any amount in excess of the tangible benefits would be
the donors deductible contribution.
Nonprofit accounting principles require that the gross amounts of
revenues and expenses from special events be reported in the
statement of activities if they are major activities in the organizations
fundraising plan. If the special events are only held occasionally,
expenses may be netted against revenues. Income tax regulations,
however, prohibit netting revenues and expenses from special events
in an organizations Form 990. To avoid possible penalty
assessments in the event of an IRS audit, a good practical rule is to
always present the gross amounts of special events revenues and
expenses in both financial statements and information returns.

Third-Party Reimbursements
Health and welfare organizations are often reimbursed by third
parties for the costs of providing the services to the public. These
reimbursements should be recognized in the same period
reimbursable costs are incurred.
NONPROFIT GAAP FOR EXPENSES
Types of ExpensesAccounting and Presentation
Nonprofit organizations expenses are classified as follows:

Functional expenses
Naturally classified expenses
Classification of particular costs

The statement of activities and footnotes contain information about

the costs associated with an NPOs services and how it uses its
resources. Expenses are reported according to their functional
classification and include:

Program services
Supporting activities:
o Management and general activities
o Fundraising activities
o Membership development activities

Program services include the activities that result in the fulfillment of

the organizations mission or purposes by distributions of goods or
services to the appropriate recipients. Providing food and clothing,
educational activities, counseling and child care are examples of
such services. A statement of functional expenses is required for
health and welfare organizations, or may voluntarily be presented by
other NPOs, which allocates the natural classifications of
expenses to individual major programs.
Management and General activities include:

Oversight
Business management
General recordkeeping
Budgeting
Financing
Soliciting funds other than contributions (exchange
transactions, government contracts, etc.)
Distributing information to the public regarding stewardship
Announcements concerning appointments
Preparation and distribution of annual reports

All management and administration except that which is

directly related to program services or fundraising activities

Fundraising activities include:

Publicizing and conducting fundraising campaigns

Maintaining donor mailing lists
Conducting special fundraising events
Preparing and distributing fundraising manuals, instructions
and other materials
Conducting other activities involved with soliciting
contributions

Membership Development activities include:

Soliciting for prospective members and membership dues

Membership relations
Similar activities

When there are no significant benefits or duties connected with

membership in an NPO, the membership development costs may be
classified with fundraising. When membership development activities
are conducted jointly with other activities, costs should be allocated
to both

Classification of Particular Costs

Certain costs should be classified as follows:

Premiums given to potential donorsfundraising expense.

Costs of salesseparately deducted from related sales
amount unless it is a program (museum bookstore) or
supporting service (not a program but major activity) or a
peripheral activity (such as a church selling a cookbook) for
which costs are presented separately.
Interest costsallocated to program and supporting
services; un-allocable amounts should be reported as
management and general expenses.
Costs of occupancy and maintenanceallocated to
program and supporting services but it is not a separate
supporting service.
Payments to related local and national organizations
allocated to functional classifications to the extent possible;
un-allocable amounts are presented as a separate
supporting service.
Expenses of Federated Fundraising Entities (such as
United Way)fundraising expenses.