Final answer:
The NFP that needs to prepare a statement of functional expenses is one that categorizes its expenses, providing a detailed look at how resources are used according to function and nature.
Step-by-step explanation:
The type of not-for-profit organization (NFP) that is required to prepare a statement of functional expenses is 1) NFP with functional expenses. This statement is one of the components of an NFP's financial statements, and it categorizes expenses according to both function (such as program services, management and general, and fundraising) and nature (rent, salaries, supplies, etc.). The goal of this statement is to provide donors, grantmakers, and other stakeholders with a clear view of how the NFP uses its resources.
The statement of activities, statement of financial position, and statement of cash flows are other integral parts of NFP financial reporting, but they serve different purposes. The statement of functional expenses is specifically designed to show the expenses grouped by both their function and nature.