Programs and functional expenses

What functions are#

A nonprofit reports its costs by what they were for, as well as by what they were. Each cost has a function:

• Program services: the work the organization exists to do. For a literacy group, tutoring, books for children, reading nights.
• Management and general: running the organization. The office, the audit, the board, bookkeeping.
• Fundraising: asking for gifts and grants. Appeal mailings, grant writing, the gala's invitations.

Form 990 Part IX asks for every expense in these three columns, and grantors and donors ask what share went to programs. Functions are for a tax-exempt organization only.

This guide uses EscBooks' own words. The Nonprofit preset calls projects Programs; change the words in Terms and features, and everything here works the same.

Set it once, on a project#

Projects/Summer Reading

Summer Reading

Lantern Hill Reading ProjectActive

Program services

Edit

Time Entries

Jul 30Tutoring, Eastside branch6.5 h

Jul 29Take-home bag packing3.0 h

Jul 28Tutoring, Eastside branch6.0 h

Jul 27Reading circle, Main library4.5 h

Jul 24Tutoring, Westside branch5.0 h

Jul 23Book sorting for take-home bags2.5 h

Expenses

What the organization spent, with receipts.

Add Expense

Jul 22, 2026Bluebonnet BooksSummer ReadingProgram services$1,150.00

Jul 15, 2026Riverside Print ShopSpring GalaFundraising$1,450.00

Jul 9, 2026Hollow Oak PropertiesManagement and general$1,000.00

Statement of Functional Expenses

Jan 1 – Dec 31, 2026 · Each kind of expense by what it was for.

CSVPrint

Columns

By functionPrograms as columns

Program servicesManagement and generalFundraisingTotal

Supplies$16,080.00$16,080.00

Legal & professional$2,400.00$3,600.00$6,000.00

Payroll$52,000.00$11,600.00$5,800.00$69,400.00

Payroll taxes$3,978.00$887.40$443.70$5,309.10

Advertising$600.00$300.00$1,450.00$2,350.00

Rent$9,000.00$3,000.00$12,000.00

Total expenses$84,058.00$19,387.40$7,693.70$111,139.10

Summer ReadingFamily Literacy NightsTotal program servicesManagement and generalFundraisingTotal

Supplies$13,600.00$2,480.00$16,080.00$16,080.00

Legal & professional$1,600.00$800.00$2,400.00$3,600.00$6,000.00

Payroll$44,300.00$7,700.00$52,000.00$11,600.00$5,800.00$69,400.00

Payroll taxes$3,388.95$589.05$3,978.00$887.40$443.70$5,309.10

Advertising$400.00$200.00$600.00$300.00$1,450.00$2,350.00

Rent$7,200.00$1,800.00$9,000.00$3,000.00$12,000.00

Total expenses$70,488.95$13,569.05$84,058.00$19,387.40$7,693.70$111,139.10

Step 1 of 4PauseStart over

1. 1Open the program's project and click Edit. Under Function, pick Program services, and save. Its costs and logged hours count there.
2. 2An expense on a project follows its project's function; any other is management and general. Pick its Function to change it, such as the cost of a gala's dinner.
3. 3Reports → Advanced → Statement of Functional Expenses: each kind of expense by function, as Form 990 Part IX lays them out.
4. 4Under Columns, Programs as columns gives each program its own column.

A program is a project whose function is Program services. Set it on the project, and its costs and hours follow.

1. Open the project on Projects and click Edit (or set it in Add Project).
2. Under Function, pick Program services, Management and general or Fundraising.
3. Click Save. The project's page shows its function beside its status.

• An expense on the project counts under its function, unless the expense says otherwise.
• Hours logged on it count there too, and split each payroll (see Splitting salaries by time).
• A gala or an appeal is a project too, set to Fundraising. A project with none set counts as management and general.

On an expense#

Each expense has a Function, in Add Expense. Left blank, it follows its project (the choice says which), or is Management and general (default) when it has no project. Pick one to change it for that expense.

• A split expense (see Expenses) has a function for each part: one receipt can be part program supplies, part office.
• A payroll's own expenses are split by hours logged; picking a function on one puts all of it there instead.

On equipment#

Equipment has a Function too, in its dialog on Equipment: what it's used for. Its depreciation and any write-off count there. Not set, it counts as management and general.

Cost of direct benefits to donors#

What donors get back at an event (the gala's dinner, the golf outing's green fees) is a fourth choice on an expense: Cost of direct benefits to donors.

• It's kept out of the three columns, and set against special events revenue: the statement of activities shows it as Less costs of direct benefits to donors.
• On the Form 990-EZ worksheet it's line 6c, direct expenses of fundraising events.
• The event's other costs (invitations, the band, staff time) are fundraising. See Record a gift for the ticket side.

Donated services#

Services given as a gift (see Record a gift) are recorded as an expense at their fair value. Set that expense's function like any other: Montauk Design's donated website is management and general, or program services if the site runs a program.

• They're in the statement of activities and the statement of functional expenses, and stay off Form 990.
• They can't be a cost of direct benefits to donors.

The statement of functional expenses#

Reports → Advanced → Statement of Functional Expenses: each kind of expense (payroll, rent, supplies…) as a row, and Program services, Management and general, Fundraising and Total as columns. It's the layout of Form 990 Part IX.

• Under Columns, Programs as columns gives each program project its own column, then Total program services.
• Equipment's depreciation is a row of its own, Depreciation and write-offs, split by each item's function.
• Costs of direct benefits to donors are listed under the table, apart from the columns and the total.
• Donated services are in the columns and the total, at fair value; the note under the table says how much, since Form 990 leaves them out of Part IX.
• CSV downloads it, and Print prints it.

The statement of activities, on Reports, shows expenses by function too: Program services, Management and general and Fundraising, then the total.