What defines "program expense" in a nonprofit context?

In the context of nonprofit accounting, "program expense" refers to costs that are directly associated with the delivery of a nonprofit's core services or programs. These expenses are essential as they relate to the mission of the organization and are used to achieve its goals. Program expenses include costs such as salaries of staff involved in program delivery, supplies necessary for completing the programs, and any other direct costs incurred in the service of beneficiaries.

When assessing nonprofit expenditures, understanding program expenses is crucial because they form the basis of evaluating how effectively an organization utilizes its resources towards fulfilling its mission. This differentiation is critical when analyzing financial statements or preparing budgets, as it helps stakeholders understand where funds are being allocated and the impact of those expenditures on the organization's objectives.