Nonprofit Financial Statements: The Complete Guide with Examples

You’ll need to record information about your organization’s expenses and revenue in your Form 990. Therefore, between your statement of activities and statement of functional expense, you’ll be all set to file your Form 990 each and every year. above the line below the line financial concept 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.

  • Board members and other leaders can use this statement for better insight into how much is available to pay expenses.
  • For instance, if your nonprofit has $55,000 in expenses and $65,000 in total revenue, it would appear that your net assets are positive, at $10,000.
  • Including these items provides a more comprehensive view of your nonprofit’s financial picture.
  • In addition to the Statement of Activities, you should also prepare a Statement of Financial Position (Balance Sheet), Statement of Cash Flows, and footnotes to the financial statements.
  • This statement can be used to track your progress and make sure that your nonprofit is staying on budget.

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. Though it is possible to compress these rows down to just a few line items, it is customary to be more expansive in detailing revenues and expenses. Sometimes, revenue earned by nonprofit organizations has restrictions placed on it by the revenue source. For example, granting organizations may require the funds provided to be dedicated toward a specific service or purpose.

It is prepared instead of the income statement issued by a for-profit business. This report identifies funds received without donor restrictions and funds with donor restrictions. Additionally, this report will identify how much money the organization spent on operating expenses and how much money was raised from donations. Using an example from a company, let’s say ABC Corporation wants to plan its upcoming year.

SFAS 117 is the primary guidance related to nonprofit financial statements. Statement of activities reports are considered highly important financial statements and are used by executives and accountants to perform monthly financial analysis. 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.

Types of revenue on a nonprofit statement of activities

Repeated annual deficits in the SOA will result in an accumulated deficit on the SOFP. Net assets with donor restrictions are usually never below zero, although special reporting may apply to an “underwater ” endowment balance (topic not covered here). Your nonprofit statement of financial position is another key document for your cause. Program services, management expenses, budgeting, financial and administrative fees.

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.

  • Tyler places great emphasis on meticulous attention to detail in financial record-keeping, implementing efficient systems to ensure transparency and streamline operations.
  • The first step in reading a Statement of Activities is to understand its purpose.
  • The statement also provides a snapshot of your organization’s liquidity and flexibility.
  • The report can be used to improve fund-raising efforts by highlighting the different ways in which donations can be used to support your mission.
  • Nonprofits are an organization that does something for the public good.

This template provides a clear and organized way to present financial information, including revenues, expenses, and net change in financial position, by class, location, and project. Sharing these 3 sections with donors provides transparency and helps them understand where their donation goes. Websites like GuideStar also look at these reports when choosing which nonprofit to award their platinum and gold seals of approval. You can also show these expense amounts and percentages on your website. The results of each successive fiscal year’s financial activities accumulate on the SOFP, changing the net asset balances.

What is a Statement of Activities?

Using a statement of financial activities template can also help to ensure that financial information is presented consistently, making it easier for stakeholders to understand and interpret the data. Additionally, tracking financial performance by class, location, and project can be valuable for budgeting and strategic planning purposes. 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.

Types of expenses on a nonprofit statement of activities

This helps you develop realistic budgets and allocate resources strategically to achieve your nonprofit’s goals. Donations and contributions include funds or assets voluntarily given to your nonprofit by individuals, corporations, foundations, or other organizations. These contributions can be in the form of cash, securities, property, or in-kind donations, and they play a significant role in supporting your nonprofit’s activities and programs. This section outlines the various sources of income your nonprofit receives and should at the very least break it down by public support, earned revenues, and other revenues. Public support includes categories such as contributions/donations, donated goods, private grants, government grants, and indirect contributions.

Do nonprofits have a profit and loss statement?

By understanding where your money is coming from and going, you can make informed decisions about future expenditures. The net assets featured on your nonprofit statement of activities are simply your expenses subtracted from your revenue. This calculation shows the equity of your nonprofit organization and whether you have the revenue to cover expenses, creating a sustainable organization. Your nonprofit’s Statement of Activities must include your organization’s revenue, expenses, and net assets. The first thing you’ll want to look at when reading a nonprofit statement of activities is the net income. This will give you an idea of whether or not the organization is bringing in more money than it’s spending.

What is the Statement of Activities?

Temporarily restricted funds that must be held for a short period will be unrestricted eventually, but they must be listed under restricted funds until then. Most nonprofits also apply for government, companies, or foundation grant funding. These gifts must be posted separately from cash and in-kind contributions. If the net income is positive, that means the organization is making more money than it’s spending.

Nonprofit Statement of Activities Template

Examples include rent, utilities, office supplies, salaries of non-program staff, and professional fees. This section outlines the various sources of income your nonprofit receives, such as donations, grants, program service fees, membership dues, and investment income. It is crucial to categorize revenue types to gain insights into the sustainability of funding sources. Compared with Wellington Zoo, the financial statements used in this report are easier to follow and provide fewer details.

Also included in your restricted revenue is temporarily restricted revenue. After that time elapses, they can be released from restriction and used as the nonprofit sees fit. Meanwhile, unrestricted revenue can be allocated toward projects, operations, and other expenses as chosen by the nonprofit itself. Finally, one of the categories often listed as revenue on your statement of activities is your net assets released from restriction.

For instance, if your nonprofit has $55,000 in expenses and $65,000 in total revenue, it would appear that your net assets are positive, at $10,000. However, if $15,000 of your revenue is restricted, you’re actually $5,000 in the red and should cut expenses to maintain a sustainable organization. Be sure to pay attention to the net assets available to your organization under the “without restrictions” column of your statement of activities when analyzing the document for sustainability. If you were to simply subtract the total expenses from total revenue without taking restrictions into account, you might have a false sense of security. 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.

The report is essential for determining whether an organization can keep operating and has enough money to meet its obligations. We recommend getting in touch with an accountant to help with these activities. Your organization can save time, energy, and money by using an outsourced accounting resource to help with your statement of activities. You’re required by FASB 117 to report your expenses by functional classification, meaning you’ll need to at least split up your expenses by administrative, fundraising, and program expenses.

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