Explain and apply functional expense classification using activity evidence instead of desired overhead ratios.
The move: make the allocation evidence-based before it becomes a dashboard metric. Separate nature from function The nature of an expense is what was purchased: salaries, rent, supplies, software, travel. The function is why the cost was incurred: program, management and general, or fundraising. A single natural expense can split across functions when the underlying activity is mixed. Use a driver that matches the cost Good allocation drivers are boring because they track actual use. Occupancy can follow square footage or scheduled room use. Shared salaries can follow time and effort. Printing may follow job counts. Software may follow user…
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