Not-For-Profit Functional Expense Reporting: Management and General
Posted on 10.18.18
By Eric D. Turner, CPA | Business Assurance & Advisory Services Senior Manager | Not-for-Profit Team
Welcome back to Keiter’s series on ASU 2016-14, Not-for-Profit Entities (Topic 958), Presentation of Financial Statements of Not-for-Profit Entities. This article focuses on changes to expense reporting for management and general expenses.
What Are Management and General Expenses?
The FASB has provided improved guidance regarding management and general expenses by noting that the following items are always considered to be management and general in function:
- Business management
- General recordkeeping and payroll
- Financing, including unallocated interest costs
- Soliciting funds other than contributions and membership dues
- Administering government, foundation, and similar customer-sponsored contracts, including billing and collecting fees and grant and contract financial reporting
- Disseminating information to inform the public of the NFP’s stewardship of contributed funds
- Making announcements concerning appointments
- Producing and disseminating the annual report
- Employee benefits management and oversight (human resources)
- All other management and administration except for the direct conduct of program services, fundraising activities, or membership development activities
Management and General Expenses Definition
Management and general expenses are defined as those activities that represent direct conduct or direct supervision of programs or other supporting activities requiring allocation to management and general activities.
To assist in the adoption of this new standard, GAAP now includes the following examples:
- IT – benefits various functions and generally would be allocated
- CEO – could be allocated to program, fundraising, and M&G
- CFO – could be allocated to M&G and investment expense
- HR – generally would assign all to M&G
- Grant Accounting and Reporting – program reports would be program (grant-related) but financial reports and related accounting would be M&G
Management should take time now to review these expenses and determine how they are currently classified in the financial statements. These changes could have a significant impact on reporting; this impact should be known and communicated to the board prior to adoption of the new standard.
The next article in this Keiter series on ASU 2016-14 will cover the final two key topic areas: Statement of Cash Flows and Investment Return…stay tuned!
Additional Not-for-Profit Accounting Resources:
Colin Hannifin, CPA, Manager, Business Assurance & Advisory Services
Colin is a Business Assurance & Advisory Services Manager at Keiter. He has significant experience in public accounting for both the not-for-profit and private sectors. Colin’s clients rely on him for sound advice and insights on accounting regulations and changes that may impact their business. Read more of Colin's insights on our blog.
Richard Lewis is a Partner at Keiter and has over 15 years of accounting and auditing experience in both corporate and public accounting. He provides audit and assurance services to non-profit organizations such as foundations, religious entities, private schools, membership, and voluntary health and welfare organizations. He supervises some of our larger non-profit engagements that include the Uniform Guidance. Richard is a member of the Firm’s Not-for-Profit team. Read more of Richard’s insights on our blog.