Nonprofit Financial Statements: 4 Essential Reports to Know

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These statements also show your nonprofit is staying compliant with financial regulations. The Financial Accounting Standards Board also requires nonprofits to report changes in net assets based on the restriction categories of permanently, temporarily, or unrestricted. This statement offers an in-depth look into a nonprofit’s sources of funding, the uses of these funds, and whether or not the organization is operating within its budget. The other thing that FASB 117 requires of nonprofit entities is reporting of expenses by functional classification. This means that a nonprofit statement of activities should have at least two categories. Restricted Revenue includes any donations which have donor-placed restrictions on how or when the money can be spent, while Unrestricted Revenue includes any money which can be used for any purpose.

The program level goes into more detail and breaks down the income and expenses by program. This is useful for tracking the programs that are doing well and those that need more funding. Furthermore, a statement of activities gives you another opportunity to be transparent and accountable to your donors. Many nonprofits are required to submit their statement of activities to the IRS, and some nonprofits choose to make their statement of activities available to the public on their website.

Nonprofit statement of activities

Nonprofits receive revenue from a number of different sources, all of which are essential to helping the organization pursue its mission. The majority of this revenue will be recorded as gross in your statement of activities. Compared with Wellington Zoo, the financial statements used in this report are easier to follow and provide fewer details.

A Statement of Activities will help nonprofits file Form 990 with the IRS and provide needed transparency to donors, foundations, and corporations. Websites like GuideStar will also use this report to share how your organization uses revenue. A Statement of Activities is one of the four required financial statements a nonprofit must file. You can use unrestricted funds for any mission-oriented purpose, including paying general operating expenses and salaries. Simply, it reports your organization’s revenue and expenses during a specific period and the difference between them. Once the total expenses are subtracted from the total collected revenue, the result is a change in Net Assets.

  • The purpose of the nonprofit statement of activities is to provide details about transactions of the nonprofit entity how those transactions are providing for the organizations various programs and services.
  • Donations your nonprofit receives during events, campaigns, and other times throughout the year.
  • Velu’s services address the unique challenges faced by nonprofits and small businesses, fostering sustainable growth.
  • Keep in mind that the precision and accuracy of these figures are essential for a clear understanding of your organization’s financial health and operations.

Nonprofits use the statement of activities to review changes to their net assets and show revenue and expenses over the accounting year. You can check with GAAP and IFRS practices to ensure you’re correctly categorizing net assets. The statement of activities is one of the main financial statements issued by a nonprofit organization. It is prepared instead of the income statement issued by a for-profit business. Yes, the Statement of Activities can provide valuable insights for budgeting.

Segregates Financial Activity

Heliconia Scholarship Foundation shares a financial report with its donors instead of an annual report. This decision makes sense since donors to a scholarship fund are likely concerned solely with financial details from this organization. Operating revenue includes funds from donations, ticket sales, product sales, etc. Operating expenses are your employees’ salaries and the amount spent on equipment and supplies.

Nonprofit Financial Health Check: Are You Prepared to Weather Uncertainty?

Restricted Revenue shows funds with donor-placed restrictions on how or when you can spend the money. You can include all restricted funds together or segment them by donation type. In the for-profit world, they call the difference between revenues and expenses net income (or profit).

Statement of Activities for a Nonprofit Organization

When listing your nonprofit’s liabilities, you must list them by when they must be paid and separated by current and long-term liabilities. Nonprofits use the statement of financial position to list their assets, liabilities, and net assets. Nonprofits typically prepare their final Statement of Activities annually as part of their audit or review and make it publicly available. However, organizations should generate it internally more often, such as monthly or quarterly, to monitor financial performance more closely. Supporting expenses encompass administrative and general costs necessary to keep your nonprofit running smoothly. Examples include rent, utilities, office supplies, salaries of non-program staff, and professional fees.

Some of the key functionality in this type of report is that it is parameter driven and can be run for a month and across one or multiple organizational units. The columns provide current period, last year and budget comparisons and variances. The year-to-date (YTD) columns can also be expanded to see the individual months that make up the YTD amounts.

How to Create a Statement Of Activities

Proper reporting is a key aspect of effective nonprofit financial management. Compiling the four major financial statements for your organization benefits your internal operations, external compliance, and overall level of accountability from year to year. The Statement of Activities focuses on revenues, expenses, gains, and losses over a specific period, providing insights into financial performance.

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