Page 30 - Religious Organization Guide

PREPARING A STATEMENT OF FUNCTIONAL EXPENSES - CONTINUED PREPARING A STATEMENT OF FUNCTIONAL EXPENSES - CONTINUED

DOCUMENTATION AND POLICY DEVELOPMENT

Having a documented policy for expense allocation is critical. It should outline the
methodologies used, the rationale behind them, and how they are reviewed. This
documentation should be shared with organizational leaders, auditors, and users of the
financial statements to ensure transparency and compliance.
► Postage and Shipping: Allocate through use studies.
► Interest Expense: Allocate based on asset use or loan use. CONCLUSION
► Rental and Maintenance of Equipment: Allocate based on equipment use.
Preparing a statement of functional expenses is a crucial task for churches and synagogues,
► Printing and Publications: Use studies or specific uses. and it’s required for compliance with US accounting standards. By understanding the
► Travel and Transportation: Allocate based on employee use or salary dollars for difference between natural and functional classifications, accurately tracking costs,
those traveling. and employing appropriate allocation methodologies, these organizations can ensure
transparent and meaningful financial reporting. Regular reviews and well-documented
► Insurance: Allocate using square footage, asset use, and/or salary dollars. policies further support the accurate allocation of expenses, helping to maintain trust and
► Depreciation and Amortization: Use asset use and/or square footage for allocation. accountability with stakeholders.
► Website Hosting and Maintenance: Allocate through use studies.
► Other Expenses: Allocate using other reasonable bases. ahnaz is a Partner in the Audit Department at Cerini & Associates, where she focuses on
REVIEWING AND UPDATING ALLOCATION BASES M serving nonprofit and religious organizations, as well as clients in the education and healthcare
sectors. Since joining the firm in 2010, she has gained extensive experience in financial
It is essential to review and update allocation bases regularly, especially when significant statement audits and reviews, tax return preparation, cost report filing, and various consulting services.
changes occur, such as acquiring new office space, incurring new debt, starting or Mahnaz brings her expertise, diverse background, and supportive approach to every engagement,
discontinuing programs, or changing staff positions. Regular reviews ensure that the helping mission-driven organizations meet their goals with confidence and compliance.
allocation methods remain reasonable and consistent over time. MAHNAZ CAVALLUZZI, CPA | PARTNER | MCAVALLUZZI@CERINICPA.COM

29 30