Understanding a Nonprofit Statement of Activities

This article provides practical tips for updating your mission, including reasons for change, a step-by-step guide, and how to stay focused throughout the process. Keep in mind that the precision and accuracy of these figures are essential for a clear understanding of your organization’s financial health and operations. 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. Having a high level of financial transparency plays a key role in the sustainability and growth of any nonprofit organization. A Statement of Activities, often compared to the Income Statement of a for-profit business, is a critical financial document for any nonprofit organization.

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• One of the basic financial statements you’ll prepare for your clients looks at their revenue and expenses.
• But a nonprofit calls the difference between revenue and expenses change in net assets.
• Fees from rendering services, donor restricted contributions, gains & losses on investments, member dues, program fees and fundraising events.
• Note, that there is special guidance on allocating costs related to an activity that combines fundraising with elements of another function.

The statement also reports all the revenue generated during the period, regardless of the source. Since it is nonprofit and primarily funded by the United States government, government grants (federal grants) are its primary source of revenue, followed by international public agencies, corporations, and foundations. Their expenses prioritize program services as part of their mission, followed by supporting services such as fundraising and indirect costs. The expenses, revenues, and changes in net assets statement of activities example help the management achieve important objectives. Each year, nonprofit organizations are required to file Form 990 with the Internal Revenue Service (IRS).

Guide to the Nonprofit Statement of Activities

A Statement of Activities is a financial statement commonly used by nonprofit organizations. The nonprofit statement of activities is one of the primary nonprofit financial statements. It is basically the nonprofit income statement because nonprofit entities do not have an income statement. The purpose of the nonprofit statement of activities is to provide details about transactions of the nonprofit entity how those transactions are providing for the organizations various programs and services. The statement of activities is a key financial report used by nonprofit organizations to provide an overview of their financial performance over a specific period. It is like an income statement for for-profit businesses but is tailored to the unique needs and structure of nonprofits.

Nonprofit Statement of Activities: A Comprehensive Guide

It captures your assets (what you own), liabilities (what you owe), and the difference between them (your net assets). Websites like GuideStar also show a nonprofit’s Statement of Activities and use these details to award seals of approval. You must share this at the beginning of the year and the end of your financial period.

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• The organization performs research and supports democracy, political freedom, and human rights.
• The program level goes into more detail and breaks down the income and expenses by program.
• Sage Intacct nonprofit accounting software is ideal to help meet your needs.
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The SOA details the revenue earned and expenses incurred during that period, as well as the resulting net position. For nonprofits, this net position is known as “net assets,” in contrast to the “net income” or “net profit” used by for-profit entities. While functionally similar, the terminology reflects the unique goals and nature of nonprofit organizations.

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. The P&L is important because it provides a high-level overview of how retained earnings much money the nonprofit is bringing in and where it is being spent. This information can be used to make decisions about where to allocate resources and how to improve the organization’s financial health. Revenues represent the total income a nonprofit organization receives from various sources, such as donations, grants, program fees, and investment returns, during a specific period.

Program service revenue

It also breaks down expenditures on various activities, highlights how funds are allocated between projects, fundraising, and administrative tasks, and indicates whether these funds are earmarked for specific uses. This transparency and detailed accounting are vital for maintaining trust with donors, fulfilling regulatory requirements, and guiding strategic financial decisions. MIP is today’s leading accounting software for nonprofits and government organizations. Designed to let you track unlimited funds and manage your books with ease, MIP Fund Accounting® software offers a simple way to manage intricate financial processes in a single, user-friendly system. These statements also show your nonprofit is staying compliant with financial regulations. The Financial Accounting Standards Board also requires nonprofits to report changes in net assets based on the restriction categories of permanently, temporarily, or unrestricted.

Nonprofit statement of activities explained (with examples)

The nonprofit statement of activities (or income statement) is a financial report that shows your organization’s revenue and expenses over time, ultimately allowing your organization to analyze your net assets. Understanding the difference between restricted funds (designated for specific purposes by donors) and unrestricted funds (flexible money for operations) is essential for smart nonprofit financial management. Investigating the net assets over a specific period of time is an important part of planning the operating activities of a nonprofit. Determining how much surplus you have is essential for gaining insight into what your options are for adding resources into programs or fundraising. A deficit, meanwhile, Bookkeeping for Painters suggests there may need to be a hunt for new sources of funding or a reduction in costs.