Reporting and Operations
Not-for-profit organizations are required to track expenses by natural category and by function.
Natural categories include salaries, payroll taxes, rent, professional fees and office supplies.
Functional categories include program, general and administrative and fundraising expenses. Most organizations have more than one program and each of these should be tracked separately.
Generally, the internal interim statements are shown by natural category, with a separate statement of activities presented for each function. An overall statement then combines all the functional statements for the organization.
If an audit has been conducted, the audited statements will contain expenses on a functional level.
The Internal Revenue Service Form 990 requires both natural and functional expenses be reported.
All invoices should note the account coding on the invoice. The coding should be approved when the check is signed.