The largest challenge in setting up the Statement of Functional Expense report just might be coming up with a good natural classifications list. I consulted with several accountants, auditors, and accounting firms asking what they might be advising their church clients to use. The list below is a composite of that research. You also should check with your auditor for additional guidance.
Thanks to ECFA, Rodney Smith with PSK, and Dave Heston for their contributions to this list.