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. The expenses your organization incurs should all support your mission in some way, whether that’s by funding daily nonprofit operations or a specific project relevant to your mission’s purpose. 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.

• Take our 2-minute survey to find out if outsourced accounting and bookkeeping is a good fit for your organization.
• For obvious reasons, executives and board members of non-profit organizations prefer to see that revenues exceed expenses.
• The results of each successive fiscal year’s financial activities accumulate on the SOFP, changing the net asset balances.
• The statement of cash flow can help you identify these issues before they become larger problems for your organization.
• When it comes to financial statements that nonprofits should be familiar with, the nonprofit Statement of Activities is one of many, but it would be toward the top of the list.
• 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.

Fundraising is the other major bucket on the https://www.bookstime.com/. When organizations host events to raise funds for their programs, the costs related to hosting these events belong in this category. The other major fundraising expense that an organization incurs is the cost of employing a fundraising coordinator, as well as any other staff members that are in charge of raising funds on an ongoing basis outside of certain events.

What is a Statement of Activities Report

The Foundation determined that it could fund its current operating budget for the upcoming year by increasing donations from individuals and businesses. After reviewing its current expenses (including salaries, rent, utilities, and other expenses) the Foundation determined that it could save $2,000 per month by canceling its health insurance policy for staff members. These changes would free up additional funds that could be used to support additional programs or services offered by the Foundation. Nonprofit organizations rely heavily on financial reports to make informed decisions about their operations.

We’ll help you determine if outsourcing your accounting and bookkeeping is the right decision for your organization. We can help you modernize and optimize your accounting systems while also taking the time-sucking bookkeeping tasks off of your hands. And be the trusted financial partner you can turn to for answers to your questions and expert financial advice. Double checking that the numbers are correct, interpreting the statement, and coming up with the next actions that your organization should take based on the analysis of the statement. This process helps catch any errors and discrepancies or may potentially catch fraud should there be any suspicious activity within your organization.

Without Donor Restrictions

Propel Nonprofits strengthens the community by investing capital and expertise in nonprofits. Propel Nonprofits is also a leader in the nonprofit sector, with research and reports on issues and topics that impact that sustainability and effectiveness of nonprofit organizations. Interpreting a non-profit cash flow statement involves analyzing the relationship between cash inflows and outflows, as well as the organization’s overall cash position. For example, if an organization has a negative net cash flow, it may be in a less favorable cash position than an organization with a positive net cash flow.

The components of notes to financial statements for nonprofits may include information on accounting policies, significant accounting estimates, contingencies, related-party transactions, and other relevant information. Examples of non-profit income statements can provide insight into how different organizations generate and spend their revenue. For instance, a non-profit that focuses on environmental conservation may have a high proportion of revenue from grants, while a non-profit that focuses on education may have a high proportion of revenue from program fees. The nonprofit statement of cash flows is designed to help nonprofits recognize how cash moves in and out of the organization. You’ll not only gain a better understanding of how much money flows into your organization on a monthly basis but also of how much your nonprofit spends monthly.

The Ultimate Guide to Budgeting for Marketing Firms

While donations are by far the largest source of revenue for most nonprofits, the sector is diverse and encompasses a variety of different organizations. Private gifts and private grants are given to a nonprofit by individuals, businesses, or other nonprofits. State grants come from government agencies at the local, state, or federal level. All of these sources of funding need to be tracked on your nonprofit Statement of Activities and other financial statements.

• When you examine your nonprofit statement of activities, it should be clear that the line items in the statement match up with those in your organization’s budget.
• FastFund Accounting automatically generates your Statement of Activities with the proper segregation of revenue classes and expense functional categories.
• Generally, nonprofits try to limit their operating expenses as much as possible to lower their overhead.
• Net assets without donor restrictions – The part of net assets of a not-for-profit entity that is not subject to donor-imposed restrictions (donors include other types of contributors, including makers of certain grants).

The Statement of Activities is similar to a for-profit business’ Income Statement. Your nonprofit statement of activities is the equivalent of an income statement of a for-profit. You will also be able to analyze your net assets and categorize your nonprofit’s revenue and expenses. This report identifies funds received without donor restrictions and funds with donor restrictions.

What is the Statement of Activities?

Your nonprofit works to accomplish its mission, and when it comes to communicating that to donors and external stakeholders, no document is as helpful as a statement of activities. It’s no surprise that donors don’t want to find that their contribution is just being used for more fundraising. It’s important for an organization to monitor how much is being spent on fundraising vs. what it brings in and what it spends on programs. Typically donors and monitoring agencies recommend that 70-80%+ of donations should be used towards the cost of programs. Fundraising efforts are the major source of funding for a non-profit’s programs.

Horizontally, the revenue and expenses are further categorized by restrictions placed on the funds. At the bottom of the report, there’s a section dedicated to the net assets of the organization. It’s important that an organization tracks the sources and uses of funds in these three groups. Programs, Fundraising, and G&A are the three major categories and have different benefits for the community and donors.

Summary of Statement No. 117

Cash flow statements for non-profits are nearly identical to cash flow statements in the for-profit world. A cash flow statement for a non-profit organization reports the amount of cash a company has on hand by factoring its operation costs, assets, and financing. These funds include what used to be termed temporarily restricted (funds restricted to a particular use or time) and permanently restricted (funds that carry a restriction permanently, like some endowments or scholarship https://www.bookstime.com/articles/statement-of-activities funds). They have donor-imposed restrictions that can be satisfied by the passage of a defined period of time (time restriction) or by performing defined activities (purpose restriction). These can be funds from a grant received to operate a specific program or project or individual contributions given with the intent of supporting a particular program or campaign. The measure of operations excludes net investment return in excess of amounts made available for operations.

A for-profit company’s balance sheet takes a snapshot of the company’s assets (what the company owns) and liabilities (money owed to others). Additionally, a balance sheet will show what is called owner’s equity (also known as stockholder’s or shareholder’s equity). When you subtract the company’s liabilities from its assets, you are left with owner’s equity. The owner’s equity represents a company’s net worth and is a very important variable for shareholders, current investors, and potential investors. For the last thirty years, I have primarily audited governments, nonprofits, and small businesses.

Final Thoughts: Your Nonprofit Statement of Activities

At Capital Business Solutions, our experienced team of non-profit accounting software excerpts knows firsthand how accurate financial reporting helps to build trust and credibility with supporters. This trust can lead to increased funding and other valuable resources for non-profit organizations. That’s why we are here to further help non-profit accounting professionals understand the most important nonprofit financial statements and how they can benefit the non-profit organizations for which you work.