All revenue sections from your organization must also be split between unrestricted and restricted funds. While the goal of a nonprofit isn’t to turn a profit, if you don’t bring in more than you spend, you won’t be able to survive. And a little “profit” helps build your operating reserves to help you survive a slow-fundraising quarter or unexpected expenses.

Net assets can be used as a quick measure of the organization’s net income. Since nonprofits operate with the intention of using all profit to fuel their mission, the change in net assets is typically much smaller when compared with a for-profit entity. The net effect of all revenues and expenses is a change in net assets, rather than the profit or loss figure found in the income statement of a for-profit entity. Nonprofits can record revenue and expenses with a cash or accrual method. The primary reason for this is this method lets nonprofits record revenue when it’s earned.

The Structure of a Nonprofit’s Statement of Activities [with Example]

Let’s say your nonprofit mission involves mailing books to children. When you mail out a book, the postage on that shipment is considered a program expense because it is directly related to your mission. But when you mail a fundraising appeal to your donor list, postage suddenly becomes a fundraising expense instead. And when you mail a check for your electric bill, it’s considered a general/administrative expense.

Tom is a multi-disciplined leader with over a decade of experience in nonprofit operations, technology leadership in government, and over two decades of servant leadership. Expenses can be summarized into high-level categories or broken into specific accounts or classes. Take our 2-minute survey to find out if outsourced accounting and bookkeeping is a good fit for your organization. We’ll help you determine if outsourcing your accounting and bookkeeping is the right decision for your organization.

This statement shows your organization’s assets, liabilities, and net assets. In other words, it shows what you own, what you owe, and what your organization is worth financially. If a nonprofit has over $100,000 in annual contributions or $250,000 in assets, they are required to file IRS Form 990. However, you might not be able to easily find their financial statements. In order to get their financials, you can pay for tools like Guidestar. The revenues and expenses in this report are broken down by unrestricted funds and funds with restrictions placed on them by donors, using separate columns across the statement.

Net assets with donor restrictions are usually never below zero, although special reporting may apply to an “underwater ” endowment balance (topic not covered here). Additionally, the line items in your organization’s statement of activities should match those in the operating budget you created at the beginning of the fiscal year. By comparing these two documents, you can evaluate your planned versus actual expenses and revenue generation. Then, you can reference your statement of activities to make more accurate predictions when you develop a new operating budget for the coming year.

A nonprofit statement of activities example will have a heading, body, and bottom line. No matter what option you choose, you need to gather all your financial information before you can create a nonprofit statement of activities. This includes things such as your non-profit’s bank statements, tax returns, and investment statements. Once you have all of this information, you can start creating your statement of activities.

Structure of the nonprofit statement of activities

Consider developing a financial reporting policy to provide an official reference for how your organization will create and distribute each of the four major statements in a way that maximizes transparency. As we mentioned earlier, many nonprofits use these financial statements in their annual reports to show transparency and build trust in their organization. The statement of functional expenses gives donors more details on how the organization spends funds. The IRS requires nonprofits to include this statement when filing Form 990.

Nonprofit Statement of Activities: A Comprehensive Guide

The Statement of Activities focuses on revenues, expenses, gains, and losses over a specific period, providing insights into financial performance. These financial statements are interrelated — one cannot exist without the other. Because all of the information that goes into the four major nonprofit financial statements should already be stored in your accounting software, there are two main ways to compile these reports. First, you could have someone at your organization pull the data you need and format it using one of the many financial statement templates available online.

In addition, your income statement can be used to determine how sustainable your organization’s finances are so you can make informed decisions for the future. It’s best to treat this “rule” as a guideline—when reviewing your statement of functional education or student tax credits you can get on your tax return expenses, look for areas where you could reduce overhead spending and put more funding toward your programs in the future. The Statement of Financial Position provides a snapshot of your nonprofit’s financial status at a specific moment in time.

Is there a difference between a statement of activities and an income statement?

The P&L covers all the organization’s programmatic, fundraising, and administrative expenses incurred during the period. The statement also reports all the revenue generated during the period, regardless of the source. But, since auditable nonprofit financial statements, we’ll talk about accrual accounting practices in this article.

On the other hand, they share how these funds support students throughout their education. The scholarship foundation’s details fit well with what donors expect to hear from the organization. The inclusion of the text and photographs in Wellington Zoo’s annual report further encourages trust in the organization. Code for Science & Society depicts their financial expenses on this page of their report rather concisely and transparently. There are two levels to the statement of activities; the summary level and the program level.

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. Although there are countless ways to organize your nonprofit’s financial information, most organizations compile four main types of reports. Since each of these core financial statements provides a different way to visualize the data you’ve collected, you can glean unique insights about your organization’s financial health from all of them.

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