Statement of Activities

This report is a tool your leadership team can actually use to make decisions. The statement of activities enables leaders to make informed decisions about resource allocation and future planning. Financial reporting is rarely the highlight of anyone’s day, yet it’s one of the most important hats you wear. Kristine Ensor is a freelance writer with over a decade of experience working with local and international nonprofits. As a nonprofit professional she has specialized in fundraising, marketing, event planning, volunteer management, and board development. If you cannot find a nonprofit’s Statement of Activities, you can also ask the organization for a copy.

What is a nonprofit Statement of Activities?

Often, this leads to large audit adjustments, budget vs actual reporting difficulties, and other funding challenges. The Financial Accounting Standards Board (FASB) introduces guidelines on how nonprofits should handle grants and contracts, and these updates help nonprofits report their finances accurately and in a standard manner. Transactions or other events that are either unusual or infrequent but not within control of management should be disclosed in the notes to financial statements. Tyler’s extensive background in accounting, tax, and financial consulting bookkeeping set the foundation for Velu’s outsourced accounting solutions for nonprofits and small businesses. As a fractional CFO, he goes beyond routine duties, guiding organizations with strategic insights for sound financial decisions. Velu’s services address the unique challenges faced by nonprofits and small businesses, fostering sustainable growth.

Revenue With Restrictions vs. Unrestricted Revenue

Example 1 below depicts a NFP museum that is presenting its statement of activities following the minimum requirements in U.S. While the fiscal year is the most common choice for a Statement of Activities (SOA), it’s not the only option. The fiscal year usually makes sense because it lines up with other key financial documents, making it easier for managers and stakeholders to analyze and compare the numbers. These articles and related content is the property of The Sage Group plc or its contractors or its licensors (“Sage”).

• Specific information is available for the water fund, sewer fund, storm drainage fund, solid waste fund, community center fund, and SHRA enterprise fund as well as the total for all enterprise funds.
• Understanding the nuances of net asset classifications and the importance of consistent reporting periods provides valuable context for interpreting financial performance and evaluating long-term sustainability.
• It provides insights into financial health, enabling organizations to align their resources with strategic objectives.
• The primary function of this dual presentation is to clearly delineate which resources are immediately available for general operations and which are legally bound by external contracts.
• These state­ments are made up of government-wide financial statements and fund-based financial state­ments.
• They can either use cash or the accrual method, of which most use the latter as this method lets organizations record revenue when it’s earned.
• Always track whether income is unrestricted, temporarily restricted, or permanently restricted.

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• Unlike some other financial forms, it’s important to understand that the Statement of Activities is not a living document; it does not continuously update or change.
• Transparency fosters trust, so present the financial information clearly, allowing stakeholders to grasp the organization’s financial standing.
• Separating transactions across these two columns is required for GAAP compliance.
• You probably embarked on your nonprofit journey motivated by social values, but it’s crucial to address the financial aspects of these missions as well.
• Because a proprietary fund operates in a manner similar to a for-profit business, information about cash flows is considered as vital as it is for Intel and Coca-Cola.
• We’ll help you determine if outsourcing your accounting and bookkeeping is the right decision for your organization.
• Those revenues are to be set aside for particular expenses of the nonprofit.

The net assets featured on your nonprofit statement of activities are simply your expenses subtracted from your revenue. This calculation shows the equity of your nonprofit organization and whether you have the revenue to cover expenses, creating a sustainable organization. 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. Also included in your restricted revenue is temporarily restricted revenue. After that time elapses, they can be released from restriction and used as the nonprofit sees fit.

For governmental funds, the current financial resources measurement focus is used with modified accrual accounting. However, both pro­prietary funds and fiduciary funds use accrual accounting to measure economic resources. Since their mission isn’t to operate for profit, they don’t need to show a profit statement. They do need to show how they are using their revenues and expenses to achieve their mission. Others support more than one program and must be allocated to the appropriate functions.

Remember the power of purpose

Use this tab to determine what data to include in the report and to define the report layout. Use this tab to assign a report name and determine whether or not to include it on the actual report. This article is for informational purposes only and should not be considered financial advice. Typically, the finance team prepares these statements, while executive leadership and the https://www.bookstime.com/ board review them. Crafting a compelling Statement of Activities requires attention to detail and a focus on purpose.

Additional Revenue Insights

This lack of detail can conceal areas needing resource reallocation, hindering strategic financial planning and the effective use of funds toward the organization’s goals. A common error in nonprofit accounting is the incorrect handling of donor-imposed restrictions. Misinterpreting these restrictions can lead to the improper recognition of revenue and restricted net assets, skewing the report on available funds for designated activities or projects. While both show financial performance, a statement of statement of activities activities is for nonprofits and focuses on changes in net assets, while an income statement is for for-profits and highlights net income.

Conclusion: The Role of the Statement of Activities in Strategic Planning

The Statement of Activities shows where your income comes from and how you spend that income. It enables regular financial check-ins, with your board reviewing the statement to ensure ongoing financial health. While each financial statement provides unique insights, they complement one another to give nonprofits a full picture of their financial situation. The Statement of Cash Flows tracks the movement of cash in and out of your organization during a given period, typically the fiscal year. This statement categorizes cash flow by activity type, helping you understand where funds come from and how they’re spent.

Ending Net Assets $850 $420 $1,270

• The reporting period defines the timeframe covered by the statement of activities, providing a snapshot of an organization’s financial performance within specific dates.
• Restricted Revenue includes any donations which have donor-placed restrictions on how or when the money can be spent, while Unrestricted Revenue includes any money which can be used for any purpose.
• Expenses are categorized to reflect the diverse activities undertaken by a nonprofit.
• Specify the date range for the data included in the report by entering Balances Dates.
• Expenses are organized by functional areas, which demonstrates how money was spent on the mission versus administrative functions.

This revenue includes interest, dividends, and both realized and unrealized gains and losses on investments. Investment income is generally reported net of external advisory fees and direct internal investment expenses. For a purpose restriction, the release occurs when the non-profit expends the restricted funds for the specified purpose. The funds are released from restriction and recognized as revenue in the unrestricted column.

Why Your Nonprofit Needs to Report a Statement of Activities

By the end, you’ll have a clear understanding of how it can help you manage your nonprofit’s finances better. Reports like Form 990 are public, but internal versions may be shared only with key stakeholders, such as the board or donors. The Statement of Functional Expenses showcases your commitment to transparency by detailing how donor contributions are spent.