Question

15.       The American Cancer Society had the following costs during the year ended December 31, 2018:

Fund-Raising $650,000

Administrative (Including 90,000 for data processing) 390,000

Research 130,000

What should the American Cancer Society report as program service expenses? Explain

Answer 1

• Based on main function of the organization ; expenses incurred are categories as either program or supporting service expenses. Supporting service expenses are further classified into Administrative/ Management -general Expense and Fund raising expenses
• Management/ Administrative Expense includs expenses related to administration , budgeting , financing etc…
• Fund raising expense includs those expenses concerned with publicizing and conduction fund raising incl. special fund raising , distribution of fund raising etc..
• Programme service cost includes cost for those activities that distribute good and services that fulfill the purpose or mission of the organization to beneficereies that means such expenses are incurred by a nonprofit organization in providing one of its programs.

Values as provided in the question are
Fund-Raising	$          650,000
Administrative (Including 90,000 for data processing)	$          390,000
Research	$          130,000

Accordingly American Cancer Society will classify above expense as
Fund-Raising	$ 650,000
Administrative (390000-90000)	$          300,000
Programming Expense (130000+90000)	$          220,000

* Administrative (390000-90000) will exclud data processing expense of 90000 as being cancer society (medical) must have invested huge amount in research programme and processing of research hence its directly related to programming activity

*Programming Expense - Being cancer society this inclueds Research programe expense of 130000 + data processing expense of 90000 as explained above