Keeping good records of expenses is critical to maintaining accurate chapter finances. There are certain minimum requirements for recording expenses that must be adhered to for IRS purposes. The best way to determine how to classify expenses into the right category is to look at the ultimate goal of the expense itself.
Chapter expenses typically fall into one of three categories: mission related, administrative and revenue generating.
Mission Related Expenses
The primary category for chapter expenses is mission related expenses. These expenses are for the direct benefit of guests or the site and DO NOT generate any revenue for the chapter. Ultimately, most chapter expenses should fall into this category. Supplies for a bird watching program, mice to feed the snakes, new paint in the bathhouse and replacement of the glass on an exhibit all are examples of mission related expenses. Generally, site support expenses can be broken down into high level categories but most will fall under either programming expenses (those that support interpretation at the site), maintenance and repair expenses (those involved in the upkeep of the site or its structures), or project expenses (those resulting from a new project such as the construction of a new bridge or interpretive center).
The second common type of expenses relates to those expenses incurred to help run the chapter. These expenses have no direct benefit to the supported site. Some typical expenses that may fall into this category are:
- Telephone expenses
- Credit card fees
- Banking charges
- Food for a chapter meeting
- Office supplies
The best way to determine if an expense is a chapter operations expense is to answer the following questions:
- Will a guest benefit from this expense?
- Will the site directly benefit from this expense?
- Will the chapter earn money because of this expense?
- If the answer to all three questions is “no,” then it is very likely to be an operation expense.
Revenue Generating Expenses
Some expenses are designed to generate revenue. The end goal for these expenses is to create an experience or a product that will be sold to the guest. Fundraising expenses incurred to generate revenue, the cost of merchandise sold to generate revenue or the cost of a program for which a fee is charged are all considered revenue generating expenses. In the previous section, Recording Revenue, several different types of revenue were mentioned. Generally speaking, any expenses incurred in generating those revenues, must be categorized as such.