Nonprofit Financial Statements: The Complete Guide with Examples

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.

  • Organizations will separate these expenses by programs, fundraising, and management.
  • But don’t fret – although it sounds complicated, these standard financial statements are easy to compile with the right tools and guidance.
  • For instance, if you have a donor that wants to donate to school technology, your report must show that.
  • The statement of activities will also influence Report 990 generation when it comes time for tax season.

A complete set of financial statements can help reveal your organization’s strengths, weaknesses, and areas for opportunity. The purpose of the change in net assets is to articulate the net assets or equity of the statement of financial position. Compared with Wellington Zoo, the financial statements used create custom invoice templates using our free invoice generator in this report are easier to follow and provide fewer details. 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.

How Can You Use a Statement of Activities?

If your nonprofit provides and charges people fees for their services, you can also report this revenue on your Statement of Activities. Organizations can also use this report to educate board members and staff leadership on financial needs and opportunities. Providing this report to the public on the website or annual report can give transparency and instill trust. Nonprofits need a Statement of Activities to show how they can afford program and fundraising activities.

  • In analyses where budgets or forecasts are used, the planning data most often originates from in-house Excel spreadsheet models or from professional corporate performance management (CPM/EPM) solutions.
  • Websites like GuideStar also look at these reports when choosing which nonprofit to award their platinum and gold seals of approval.
  • Proper reporting is a key aspect of effective nonprofit financial management.
  • However, your organization’s reports will also look different in certain ways because nonprofits are subject to requirements that businesses aren’t.
  • It is crucial to categorize revenue types to gain insights into the sustainability of funding sources.

We recommend Quickbooks Online as our preferred accounting software. 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.

A donor could give a single donor that is to equally be split across 3 years. We consider that there is a time restriction on the funds allowing only 1/3 of the donation to become unrestricted in a given year. Here’s an example of a Statement of Activities that was a part of the organization’s audited financial statement in 2021 (page 5).

Nonprofit Financial Statements: 4 Essential Reports to Know

If you hire an accountant, you will want to oversee it to ensure it’s done correctly. This is the most expensive option, but it’s also the easiest for you. Expenses represent the costs incurred by your nonprofit in carrying out its activities and operations. While it takes money to start a nonprofit, it doesn’t have to be YOUR money.

Net assets are any assets left over after subtracting your liabilities. Your net assets can be from the current and previous operating years and include anything that holds value. Liabilities include things like salaries, debt, and grants to other organizations. 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.

Get our FREE GUIDE to nonprofit financial reports, featuring illustrations, annotations, and insights to help you better understand your organization’s finances. You can use unrestricted funds for any mission-oriented purpose, including paying general operating expenses and salaries. It includes donations, grants, fundraising, earned revenue, government funding, and special events. The Statement of Activities is the Income Statement of a nonprofit organization.

Components of the Statement of Activities

There are a few different ways that you can create a nonprofit statement of activities. You can hire an accountant to do it for you, use accounting software, or do it yourself. 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 template

This information can be used to make decisions about where to allocate resources and how to improve the organization’s financial health. Nonprofit accounting can feel complicated for nonprofits without a solid financial background, but there are ways to make filing reports easier. A Statement of Activities is similar to a for-profit income statement and is one of the four financial reports nonprofits must file. The experienced team at Jitasa has compiled, distributed, and analyzed financial statements for organizations of all sizes.

Financial Ratios

Wellington Zoo also shares further details for each financial statement to explain who is reporting these facts and how they comply with accepted standards. The below glimpse is taken from the same financial report of the Code for Science & Society that we shared earlier. The first and most desired financial statement is the Statement of Financial Position. Nonprofits use this statement to share what their organization owns and what it owes. The following is an example of a nonprofit’s statement of activities. Conversely, a statement of activities with natural classification would only list the expense types, such as salaries, utilities, office supplies, and others.

The statement of activities will also influence Report 990 generation when it comes time for tax season. The basis of Form 990 is the statement of activities and a statement of functional expense. Generally, nonprofits try to limit their operating expenses as much as possible to lower their overhead. It’s important to find the balance between reducing overhead to fund your mission and ensuring you dedicate enough funding to your operating activities to continue growing and expanding your organization. The nonprofit statement of activities separates revenue with and without restrictions so that organizations can see the flexibility in their funding in addition to the sheer amount of it.

The Statement of Activities, an essential tool for any nonprofit organization, is akin to an Income Statement or Profit and Loss Statement in the for-profit business realm. Finally, one of the categories often listed as revenue on your statement of activities is your net assets released from restriction. These are the funds that you are now able to use as unrestricted revenue, although they may have been restricted in the past. Because restrictions on revenue are a key element to be recorded in your statement of activities, let’s explore them a bit further.


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