Final answer:
A statement of functional expenses is required for most voluntary health and welfare organizations, but there may be exceptions based on the organization's annual gross receipts.
Step-by-step explanation:
A statement of functional expenses is required for most voluntary health and welfare organizations. It provides a breakdown of the organization's expenses by function, such as program services, management and general, and fundraising. This statement helps stakeholders understand how the organization allocates its resources and carries out its mission.
However, there may be certain cases where a statement of functional expenses is not required. For example, if the organization's annual gross receipts are less than $500,000, they may be exempt from including this statement in their financial reports.