.04 Allocation of Expenses.

A. Program Services Expenses.

(1) Program services expenses are activities which the organization was created to conduct and which form the basis for the organization's tax-exempt status. Each major program service shall be distinguishable from all other program services, and shall include activities, the costs of which can be practicably segregated and accounted for in the records of the organization.

(2) Examples of program services expenses include, but are not limited to, the following:

(a) Research;

(b) Public education;

(c) Professional education and training;

(d) Patient services; and

(e) Community services.

(3) The expenses of public education materials and activities, which include a specific appeal for financial support, may be jointly allocated with other functions according to the Financial Accounting Standard Board's Statement of Position 98-2 and any subsequent accounting guidance.

B. Supporting Services Expenses. Supporting services expenses are the expenses related to the organization's auxiliary services that support program services. The expenses of supporting services shall be allocated between two classifications: management and general expenses, and fund-raising expenses.

C. Management and General Expenses.

(1) Management and general expenses are the expenses which are not directly identifiable with any of the organization's program service activities or fund-raising activities but are indispensable to the conduct of each of them and to an organization's existence. They include expenditures for the overall direction of the organization, general record keeping, business management, general board activities, and related purposes.

(2) Examples of management and general expenses include, but are not limited to, the following:

(a) General board and committee meetings;

(b) Executive direction;

(c) General staff meetings;

(d) Office management;

(e) Accounting, auditing, and budgeting;

(f) Legal services;

(g) Personnel procurement;

(h) Purchasing and distribution of materials unrelated to fund-raising activities;

(i) Receptionist, switchboard, mail distribution, filing, and other central services;

(j) Administrative reporting;

(k) Legal and accounting services generated by papers required to be filed by the Act;

(l) Fees required by the Act; and

(m) Organization and procedure studies.

(3) If the chief officer or any member of his staff spends a portion of his time directly supervising fund raising or program service activities, his salary and expenses shall be prorated among those activities. If the chief officer or any member of his staff spends all of his time supervising the overall direction of the organization, his salary and expenses shall be management and general expense.

(4) Direct supervision of program services and of fund raising shall be allocated to those activities and not to the management and general activities.

D. Fund-Raising Expenses.

(1) Fund-raising expenses are the expenses of those activities of which the intent and purpose is an appeal for financial support or the solicitation of funds. They include expenditures for activities that constitute an integral and inseparable part of an appeal for financial support.

(2) Examples of fund-raising expenses include, but are not limited to, the following:

(a) Transmitting appeals for contributions to the public;

(b) Salaries of personnel associated with campaigns or other solicitations;

(c) Fund-raising services and materials received from affiliates;

(d) Publicizing fund-raising campaigns and special events (for example, by paid public relations counselors, by printed, radio, and TV material; in meetings with potential contributors; through campaign "kick-off" dinners);

(e) Conducting fund-raising campaigns, including the services of fund-raising consultants and professional solicitors; purchasing, preparing, maintaining, and revising mailing lists; recruiting and training volunteer solicitors and other campaign personnel; soliciting in person or by mail; acquiring and distributing of seals and other enclosures with appeals for contributions, campaign kits, coin containers, and other fund-raising materials; and maintaining fund-raising records;

(f) Participation in local federated and governmental fund-raising campaigns, including attendance at pre-campaign budget reviews;

(g) Participation in fund-raising special events by employees of the organization benefited;

(h) Solicitation of bequests, foundation grants, and other special gifts (for example, from corporations, from affluent individuals);

(i) Clinics, workshops, and other activities for improving fund-raising techniques;

(j) Preparation and distribution of fund-raising manuals and instructions;

(k) Feasibility studies;

(l) Goods, food, entertainment, or drink sold or provided in connection with an appeal for contributions; and

(m) Postage and printing expenses incurred in connection with an appeal for contributions.

(3) An organization shall allocate to fund-raising expenses an appropriate portion of the salaries of regular staff members who devote time to record keeping relating to fund-raising activities whether during a campaign period or other period of solicitation.

E. Additional Financial Information. The Secretary of State may require charitable organizations to provide additional financial information pertaining to the allocation of expenses.