If you’re considering starting a nonprofit, it’s important to understand the different types of expenses that are allowed and not allowed as part of your nonprofit financial statements. This article will help you do just that, as well as provide you with a template for an expense report to use.
What are Typical Nonprofit Expense Categories?
Nonprofits, like for-profit businesses, have many expenses to consider. These are typically broken down into three categories: program expenses, administrative expenses, and fundraising expenses.
Program expenses include the costs associated with running your nonprofit’s programs and services. For example, if you run a nonprofit that teaches people a certain language, then your expenses in this category will include the cost of renting space, hiring teachers, and buying materials.
Depending on your nonprofit, the program expenses may be the highest category of expenses. For example, a nonprofit that provides housing for the homeless will have high program expenses due to the costs of renting or owning property, utilities, and maintenance. These expenses may also overlap with administrative expenses. Your nonprofit will need to carefully categorize each expense for accounting and tax purposes.
Administrative expenses are the costs associated with running the day-to-day operations of your nonprofit. This category includes expenses such as office rent, salaries, utilities, and office supplies. If your nonprofit has a website, the cost of hosting and maintaining that website would also be considered an administrative expense.
Fundraising expenses are the costs associated with raising money for your nonprofit. This can include the cost of hosting events, mailing donations, and hiring a development staff. Depending on the size of your nonprofit, this category may be the second-highest expense after program expenses.
What’s Not Allowed as an Expense?
So, what is not allowed as an expense on your report? The answer is simple: anything that does not fit into one of the three categories mentioned above. This includes the cost of travel, entertainment or gifts. Any expenses that are considered personal in nature are not allowed.
What is an Expense Report?
An expense report is a document that itemizes all of the expenses incurred by an individual, organization, or company. This report is typically used for reimbursement or tax purposes. The report also provides the nonprofit with an opportunity to be transparent and honest about where donations and income are spent.
Expense Report Template
Below is a template that you can use for your nonprofit expense report. This template is meant to be a guide and can be modified to fit the needs of your specific nonprofit.
Nonprofit Expense Report Template
Name of Nonprofit: ___________________________
Contact Person: ___________________________
Phone Number: ___________________________
Purpose of Expense Report: ___________________________
Total Amount of Expenses: ___________________________
List of Expenses:
Approved by: ___________________________