Statement of Activities: Guide to Reading This Key Nonprofit Report

Leveraging technology and automation can significantly improve the accuracy and efficiency of financial reporting. Financial management systems built for nonprofits not only automate the reconciliation process but also provide detailed tracking and reporting capabilities for restricted fund management. By minimizing manual data entry, these tools reduce the risk of human error, ensuring that financial data is accurate and up-to-date. If you don’t keep up with the latest rules for recognizing revenue, you may report your organization’s income wrong on your Statement of Activities.

Action Items for Nonprofit Boards

1. Jo-Anne Williams Barnes, is a Certified Public Accountant (CPA) and Chartered Global Management Accountant (CGMA) holding a Master’s of Science in Accounting (MSA) and a Master’s in Business Administration (MBA).
2. If an organization has unrelated business income, it must file an unrelated business income tax return.
3. They need to record revenue and expenses from these activities accurately to give a clear picture of the organization’s financial status.
4. Wellington Zoo’s annual report uses its audited financial statements (from page 45) to show the organization’s financial health.
5. 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.

As you can see, the report is divided into the revenue and expenses along the vertical axis. 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 organization’s net assets. 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). Net results are classified as either with or without donor restrictions per FASB (the Financial Accounting Standards Board).

How Does Activity-Based Costing Relate To Statements Of Activities?

The way expenses are categorized and reported in the Statement of Activities is not merely a matter of financial recording but a reflection of the nonprofit’s operational priorities and efficiency. This section of the Statement of Activities plays a crucial role in how the organization is perceived by external parties and how it manages its internal operations to maximize impact on its mission. 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. Your nonprofit’s Statement of Activities must include your organization’s revenue, expenses, and net assets.

How can a Statement of Activities report be used?

This understanding allows nonprofits to ensure their financial health and stability over time. Since it is similar to an income statement it has revenues, expenses and a change in net assets. You must also break out the statement of activities into restricted and unrestricted. SFAS 117 is the primary guidance related to nonprofit financial statements. A statement of activities will show your nonprofit organization’s revenue and expenses over a specific reporting period. This information will show that your organization is a good steward of donations and is working to accomplish its designated mission or goal.

Fundamentals

Ongoing training in nonprofit accounting principles is indispensable for financial personnel. Dedicating resources to professional development enriches staff’s comprehension of intricate accounting matters, promoting a culture dedicated to precision and adherence to standards. Narratives should succinctly highlight achievements, financial strategies, and future plans in layman’s terms, while dashboards provide a visual summary of trends, ratios, and key indicators at a glance.

These include social welfare organizations, civic leagues, social clubs, labor organizations and business leagues. MIP Fund Accounting® allows you to easily generate a statement of expense with its 130-plus pre-built reports and custom report-builder. Show your organization is on track to accomplish its mission, and that it handles donor funds responsibly. You should review your statement of activities monthly to identify trends and changes.

Improved management of resources can help your nonprofit organization to achieve its goals more efficiently and effectively. By understanding how to read and understand this key nonprofit financial report, you can better allocate your resources and improve your organization’s overall performance. 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. A Nonprofit Statement of Activities is a specialized financial statement designed for tax-exempt organizations, such as charities, foundations, and associations. It provides a detailed breakdown of the organization’s revenues and expenses, emphasizing the organization’s commitment to its mission rather than generating profits for shareholders.

It can also provide insight into the sustainability of your organization’s finances. Just like the tax return is generated using information from the income statements, the information reported on the Statement of Activities is used to complete the annual Form 990. An accurate and timely Form 990 allows nonprofits to protect their nonprofit and tax-exempt statuses, as well as serve as evidence of transparency and financial stability. A statement of activities shows your organization’s revenue and expenses over a reporting period and relays that your organization is a good steward of donations and working to accomplish its mission.

If you have any more questions about nonprofit activities statements or any other financial matters, don’t hesitate to reach out to us. We’re always ready to provide expert guidance and support to help you achieve your financial goals. Contact us today, and let’s embark on a journey toward financial clarity and success together. Nonprofits typically prepare their final Statement of Activities annually as part of their audit or review and make it publicly available. However, organizations should generate it internally more often, such as monthly or quarterly, to monitor financial performance more closely.

Columns are included to report data for each class of net assets – without donor restrictions, with donor restrictions, and total. This report is important for nonprofit organizations because it helps them assess their performance and identify areas where they need to improve. Nonprofit financial statements are reports nonprofit statement of activities that show what an organization owns (assets), what it owes (liabilities), and how it uses its funds. Unlike for-profit businesses, these statements focus more on how money is used to achieve the organization’s goals. For example, the Form 990 is a type of report that nonprofits submit to the IRS every fiscal year.

Yes, the Statement of Activities can provide valuable insights for budgeting. You can identify trends, assess the effectiveness of revenue sources, and make informed projections for future periods. This helps you develop realistic budgets and allocate resources strategically to achieve your nonprofit’s goals. Grant income comes from funds given by government agencies, foundations, other nonprofits, or grant-making entities.

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. By understanding the various sources of revenue and expenses, you can target potential donors and make more informed decisions about how to allocate resources. For nonprofits, tracking and reporting operating activities are key to understanding how cash moves through the organization. This involves recording revenue and expenses from both the current and previous periods to show how the organization’s net assets have changed. By using gross receipts to record revenue and detailing cash inflows and outflows, including payments on long-term investments like buildings, nonprofits can offer a clear picture of their financial 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). Other nonprofitsOrganizations meeting specified requirements may qualify for exemption under subsections other than Section 501(c)(3).

Temporarily restricted profits might have a restriction on them for a given time period. Once that time period lapses or the purpose of the funds is fulfilled, those funds can be used for something else. This is no longer relevant, but it might be useful in looking at historical nonprofit statement of activities. As mentioned above, it is very important to know the difference between restricted and unrestricted funds when creating your statement of activities. This, along with your net assets and change in assets, should be included in and clearly identified in your report. MIP is today’s leading accounting software for nonprofits and government organizations.

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 https://turbo-tax.org/ be recorded as gross in your statement of activities. For-profit accounting departments have a standard set of reports and statements they run to analyze their finances.

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. The non-profit income statement is a map that shows where the water (money) flows in the garden. It’s a bit different from a for-profit garden, where the goal is to grow as many fruits (profits) as possible. In this nonprofit garden, the water is used to keep the plants (programs and services) healthy and growing. Gross receipts are the primary difference between nonprofits and for-profit companies filing a statement of activities. Financial statements also help nonprofits determine the future of their organization.