A statement of functional expenses is used to show how expenses are incurred for each functional area of a nonprofit entity. Functional areas typically include the following:
- Management and administration
This presentation appears as a matrix, where each functional area is listed across the top row of the report, and the expense types are listed down the left side. The statement of functional expenses is considered an ancillary report that can be added to the primary set of financial statements. Thus, it is not necessary (unless demanded by a recipient of the financial statements), but can contain useful information.