Lesson 3 – Example

Example

How to allocate a cell phone bill for $1000. For a nonprofit, the bill needs to be analyzed to determine who has a cell phone and which department they work in. The executive director and fiscal director, development director and his associates, plus six phones used by employees in various programs.

$1000 cell phone bill must be allocated to the following functional areas:

  • Management and General – Two phones 20% – $200
  • Fundraising – Two phones 20% – $200
  • Program Service Expense – Six phones 60% – $600

When reading the financial statements, it is easy to identify the $1000 cell phone expense was mainly incurred to support its mission, with a portion allocated to management/general and fundraising.