Changes in net assets is a unique and critical component of the Nonprofit Statement of Activities. It reflects the difference between revenues and expenses over a specific period. This section will delve more deeply into the key components that make up a Nonprofit Statement of Activities. Understanding these elements thoroughly is essential for comprehending a nonprofit organization’s financial health and operational efficiency. Your nonprofit may already have someone on staff who fulfills your accounting needs.

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This statement offers financial insights through your organization’s liquidity and financial flexibility—represented as assets and liabilities. An effective Statement of Activities goes beyond numbers to tell a compelling story of your nonprofit’s financial health and mission impact. Relying solely on spreadsheets and figures may not fully capture the organization’s achievements and challenges.

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The difference between total revenue and total expenses is known as the change in net assets. 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. These conditions The Key Benefits of Accounting Services for Nonprofit Organizations determine how each category of funds can be used, helping stakeholders see whether resources are aligned with donor intentions and organizational goals.

• Statements of activities are useful in assessing the services provided by your organization, its ability to continue those services, and how managers have performed their stewardship responsibilities.
• External users of the statement of activities may include Grantmakers, financial auditors, donors, members, or partnering organizations.
• 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.
• However, many nonprofits struggle to fill this role and round out their teams, with 74.6% of organizations reporting job vacancies.

Analysis of Hypothetical Nonprofit Financial Data

The most practical way to keep up with accounting needs is to have a Non Profit Financial Statement Template that you use for all your accounting needs. An organization’s liabilities include any money that is owed to another party. Liabilities include expense payable balances for money that is owed for services or products received, like payroll, payroll taxes, and outstanding supplier balances. Loans and notes payable, through banks or individuals, are also listed in the liability section of the Statement of Financial Position. And secondly, if you fail to file a 990 for 3 consecutive years, you’ll automatically lose your tax-exempt status. That means its one financial document every nonprofit needs to be familiar with, even if you’re too small for an audit or struggle to pull together an accurate Statement of Activities every quarter.

• This statement is basically like a non-profit equivalent of the corporate balance sheet.
• Ultimately, your nonprofit financial statements are snapshots of your financial health and activities that you can use to improve your decision-making and secure more support down the line.
• You can identify trends, assess the effectiveness of revenue sources, and make informed projections for future periods.
• This could mean one person enters the financial data, while another reviews it.
• Even though you don’t have to pay federal taxes, almost all nonprofit organizations (the few exceptions are listed here) must file an IRS Form 990 each year.
• This Nonprofit Organization Statement of Activities Template is a meticulously designed financial reporting tool tailored for nonprofit organizations.

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It could be based on time — for example, a grant that is restricted to only a two-year program — or this could refer to endowment funds, where the principal can’t be spent, only the investment income. A typical nonprofit sees plenty of financial activity during a fiscal year—grants are awarded, fundraisers are hosted, donations are received, and expenses are paid. The nonprofit statement of activities serves as a financial summary, capturing all these monetary actions for a specific period, usually the fiscal year.

• This is no longer relevant, but it might be useful in looking at historical nonprofit statement of activities.
• By consistently monitoring your cash inflows and outflows, you’ll be able to notice important trends and use them to adjust your financial strategy in the future.
• Get our FREE guide to nonprofit financial reports, featuring illustrations, annotations, and insights to help you better understand your organization’s finances.
• This statement should also record all of the activities the nonprofit has been involved in as well as any accomplishments the nonprofit has achieved.
• Any cash activity that doesn’t fall into the operating, financing, or investing categories, gets summarized in the supplemental section of the statement of cash flows.
• Nonprofits have a primary responsibility to the Internal Revenue Service (IRS) and their donors when filing and sharing financial statements.

This statement enhances transparency and ensures compliance, especially for nonprofits required to file Form 990 or undergo audits. It demonstrates how resources are used to advance your mission while maintaining operational efficiency. Accrual basis accounting means that you record revenues and expenses when they are incurred or earned. So, if a donor pledges to make a $5 contribution each month for 1 year, you’d record $60 in income the day the pledge is made (regardless of when it is actually collected). If you or your board come from the for-profit world, it’s okay to call it a Balance Sheet among your team.

Whether you add graphs to visualize your most important financial details or simply include your audited reports on your website, consider how you can cater to your audience’s interests and preferences. Engaging stakeholders in your financial reporting and providing transparency can turn reporting requirements into increased impact for those you serve. Similar to LLS, Heifer International has an entire page on its website devoted to sharing its financial information with stakeholders, including a graph that maps out its expenses over the fiscal year. The Leukemia & Lymphoma Society (LLS) shares its audited financial statements for the past five years on its website.

Your nonprofit Statement of Activities ultimately gives stakeholders an idea of how well you’re using funds and other resources to successfully support your programming and fulfill your mission. Between fundraising, marketing, and keeping your programs afloat, your nonprofit team likely collects a variety of financial data. This information is crucial in making informed decisions about resource allocation and setting your organization up to prosper for years to come. For financial leaders in not-for-profit organizations, establishing standard procedures for maintaining an accurate Statement of Activities is not just best practice—it’s a necessity. These procedures are the backbone of transparent and reliable financial reporting, crucial for operational excellence and strategic decision-making. The following three nonprofits have included financial statements in different ways.

• Fees from rendering services, donor restricted contributions, gains & losses on investments, member dues, program fees and fundraising events.
• While the fiscal year is the most common choice for a Statement of Activities (SOA), it’s not the only option.
• You can also use the nonprofit statement of activities to evaluate the efficiency and effectiveness of the organization’s programs and services.
• One of the most challenging aspects of tracking the financial health of a nonprofit organization is properly recording diverse sources of income.
• This helps you develop realistic budgets and allocate resources strategically to achieve your nonprofit’s goals.
• Financial activities result in either a surplus (increase) or shortfall/deficit (decrease) in the organization’s net assets shown on the Statement of Financial Position (SOFP).

We are a virtual outsourced accounting and consulting firm based out of Tucson, Arizona. Our experienced team can help you navigate complex accounting systems & practices, from outsourced accounting to client advisory services. The money that was spent on capital investments, like real estate, equipment, and other fixed assets and also any money received from the sale or benefit of those investments.