Sample Financial Statements for Nonprofit Organizations

The largest nonprofits in the US can accumulate annual contributions totaling billions of dollars, but the statement of activities breaks the figure down into just a few lines. You can publish the statement of activities on your website, in your annual report, or share it directly with your donors and any grant-making organizations you depend on. For example, donors often check how much is spent on program services compared to administrative or fundraising activities to ensure their contributions are being used effectively. By “function” they mean the reason any expenses were incurred, such as management fees, or the costs of providing program services and fundraising activities. A Statement of Activities shows whether an organization made a profit or a loss during a period of time. It is a financial snapshot that can be used to track the organization’s financial progress.

How to Create a Statement of Activities for Nonprofits

Cash is the most liquid asset, while property and equipment may take longer to convert into cash. Crafting a compelling Statement of Activities requires attention to detail and a focus on purpose. By clearly outlining your activities, methods, and evaluation plans, you’ll not only build funder confidence but also set the stage for impactful implementation. Remember, your activities are the heart of your proposal—they translate your vision into action. This specific project information is what you can call a Statement of Activities.

Changes in Net Assets

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. Within both levels, information is given indicating the income and expenses of the nonprofit. Income sources can consist of things like grants, donations, and investment income. Expenses can include things like salaries, office expenses, and program expenses.

Reporting Contributions and Grants

This lack of detail can conceal areas needing resource reallocation, hindering strategic financial planning and the effective use of funds toward the organization’s goals. A common error in nonprofit accounting is the incorrect handling of donor-imposed restrictions. Misinterpreting these restrictions can lead to the improper recognition of revenue and restricted net assets, skewing the report on available funds for designated activities or projects. A nonprofit statement of activities with functional expenses will list all the programs under the expense section. Expenses might include salaries, office supplies, utilities, and other costs for each program.

• The net asset section of the Statement of Activities is thus not just a reflection of past and present financial status but also a guide to potential future challenges and opportunities.
• By understanding the various revenue streams and their appropriate categorization, nonprofits can effectively communicate their financial position and demonstrate the impact of their work.
• Each year, nonprofit organizations are required to file Form 990 with the Internal Revenue Service (IRS).
• You can identify trends, assess the effectiveness of revenue sources, and make informed projections for future periods.

By clearly separating these categories in the Statement of Activities, nonprofits can demonstrate their commitment to honoring donor intent and maintaining financial integrity. Additionally, comparing the statement of activities with previous years’ statements and industry benchmarks can help identify trends and highlight areas for improvement or concern. It is important to note that each nonprofit is unique, and the interpretation of financial performance should take into account the specific circumstances and objectives of the organization. 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. Your organization works hard to raise funds and to use those funds to further your mission.

• Examples of these activities may include receiving contributions of fixed assets or securities, purchasing a building by incurring a mortgage, or obtaining an asset by entering into a capital lease.
• A Statement of Activities, often compared to the Income Statement of a for-profit business, is a critical financial document for any nonprofit organization.
• The statement of activities is one of the main financial statements issued by a nonprofit organization.
• When asking for donations or funds, nonprofits are required to ask donors if they would like their donations to be restricted or unrestricted funds.
• Between fundraising, marketing, and keeping your programs afloat, your nonprofit team likely collects a variety of financial data.

Understanding your nonprofit’s financial statements is essential to getting a grasp on the overall financial position of the business. But it is impossible to fully calculate or analyze the change in net assets if financial reports or transactions are not properly recorded and organized. Introducing our Nonprofit Organization Statement of Activities Report Template—a comprehensive financial tool designed to streamline reporting for nonprofit entities. Easily customize and present your organization’s revenues, expenses, gains, and losses with this user-friendly template, ensuring transparency and accountability to stakeholders. A statement of activities quantifies the revenues and https://namesbluff.com/everything-you-should-know-about-accounting-services-for-nonprofit-organizations/ expenses of a nonprofit entity for a reporting period.

A nonprofit statement of activities (also known as a statement of financial activities or income statement) that summarizes your organization’s revenue, expenses, and change in net assets for a given year. It’s useful for staff members, donors, and board members who rely on this data to make informed decisions about your nonprofit. When reporting contributions, nonprofits must distinguish between those that are unrestricted, temporarily restricted, and permanently restricted. This classification ensures that the financial statements accurately reflect the donor’s intentions and the organization’s ability to use the funds. For instance, a grant designated for a specific program must be reported as temporarily restricted until the program’s objectives are met.

Restricted vs. Non-Restricted Net Assets

It provides insights into liquidity and cash management instead of accounting services for nonprofit organizations detailing income and expenditures. Permanently restricted revenue consists of funds that are subject to permanent restrictions. These funds must be used for specific purposes in perpetuity and are often received through endowments or bequests. To learn more about nonprofit accounting check out our nonprofit accounting standards page.

• It is important for nonprofit organizations to carefully manage their financing activities to ensure financial stability and sustainability.
• The valuation method used depends on the accounting policies of the organization.
• It facilitates clear, transparent communication of financial performance during a specific period.
• Expenses might include salaries, office supplies, utilities, and other costs for each program.
• This is no longer relevant, but it might be useful in looking at historical nonprofit statement of activities.
• Organizations often use these funds to support specific programs or initiatives that align with the restrictions imposed by the donor.

This is the nonprofit version of the income statement that is used to report the financial results of a for-profit business. No, the Statement of Activities is one of several essential financial statements for nonprofits. You should also prepare a Statement of Financial Position (Balance Sheet) and a Statement of Cash Flow. These statements collectively provide a comprehensive overview of your nonprofit’s financial position, performance, and cash flow. Nonprofit organizations play a crucial role in addressing societal needs, often relying on donations and grants to fund their missions.