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The 3 things Nonprofits should know about GAAP Expense Rules

Savvy donors want to make sure their gifts are being used properly and that the organizations they choose to champion are fiscally responsible and transparent.  GAAP compliance allows not only donors, but also creditors and other stakeholders, to view financial data in a format that is consistent from organization to organization.  

When it comes to GAAP Expense Rules, there are three things nonprofit organizations should be aware of when creating financial reports:

  1. Expense should be reported as a decrease in unrestricted net assets
  2. Expenses should be reported gross and not netted against revenue (investment expenses would be an exception)
  3. Expenses should be reported by function

As the financial director of your nonprofit your credibility as well as the credibility of the organization is dependent on accurate reporting.

Since the IRS requires expenses to be reported by functional expense on the Form 990 for 501c3 and 501c4 organizations – it’s important that you have clarity about Functional Expenses Reporting.

AccuFund is designed specifically and solely for nonprofits.   As a result, the reporting requirements for nonprofits are built into the software so that you can generate reports directly from the system.  

Dawn Westerberg