How Statement of Position 98-2 makes difficult to allocate the public or advocacy costs to programs

Not-for-profits often conduct activities  that combine program and  fund  raising.  In  the past, the cost of the  joint activity often was reported entirely as a functional program expense with no allocation to the functional support expense of fund raising. In response to concerns about fundraising costs being hidden within the program and management activities, the AICPA issued Statement of Position 98-2 making  it more difficult  to allocate educating  the public or advocacy costs to programs. SOP 98-2 sets forth the following requirements:

1. Costs of  all materials  and  activities  that  include  a  fund-raising  appeal  should be  reported  as fund-raising costs . . . unless a bona fide program or management function has been conducted in conjunction with the appeal.

2. Criteria of purpose, audience, and content must be met in order to conclude that a bona fide program or management  and general  function has been  conducted  in  conjunction with  the appeal of funds.

3. If a bona  fide program or management  function has been conducted,  the  joint costs  should be allocated using an equitable allocation base.

4. Certain information must be disclosed if joint costs are allocated.