How your organization’s statement of activities can inform your fundraising efforts

By clearly separating these categories in the Statement of Activities, nonprofits can demonstrate their commitment to honoring donor intent and maintaining financial integrity. In some cases, the Statement of Activities may also be referred to as the “income statement” or “statement of revenues and expenses,” though “Statement of Activities” is the most common term among nonprofits. To read and understand a nonprofit financial report, you first need to familiarize yourself with the Statement of Activities. This recording transactions report breaks down your revenue and expenses by restrictions on how or when you may use them. The Statement of Activities is a great way to see where changes can be made to increase revenue or decrease expenses.

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Unconditional contributions, however, are recognized immediately, providing a more immediate boost to the organization’s financial resources. Accurate reporting of these elements is essential for maintaining the trust of donors and regulatory bodies. Interpreting the expense report is crucial for understanding a non-profit’s financial health. A statement of activities is a financial document tailored to the needs of non-profit organizations. Unlike for-profit businesses, non-profits use this report to showcase their financial operations. It serves a purpose similar https://www.bookstime.com/articles/bad-debts-expense to an income statement but focuses on changes in net assets over time.

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In addition, it’s typically required as part of the supporting documents if your client goes to a bank to try and get a loan. The statement of activities may be requested by major donors, or your client may have to provide certain information from the statement of activites statement when preparing a grant application. It’s important your client knows what the statement of activities is and how it is useful.

Integration with the Statement of Net Position

Once you have all of this information, you can start creating your statement of activities. A Statement of Activities will help nonprofits file Form 990 with the IRS and provide needed transparency to donors, foundations, and corporations. Websites like GuideStar will also use this report to share how your organization uses revenue.

• Some might presume that the main reason to prepare a nonprofit statement of activities is simply to keep the IRS happy.
• It helps management track and analyze financial data, provides transparency to stakeholders, aids in internal decision-making, and ensures compliance with legal and financial requirements.
• 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.
• Within both levels, information is given indicating the income and expenses of the nonprofit.
• A Statement of Activities (SOA) reveals the income and expenses of nonprofit organization over a reporting period.

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. As a CPA working with nonprofits of all sizes, I’ve encountered numerous errors in Board of Directors’ financial reports and Statements of Activities documents. Being aware of these common pitfalls is crucial for maintaining the integrity of your financial reporting and in turn, the trust of your supporters.

Notes to Financial Statements

If you’re in a fundraising role and you don’t currently see a statement of activities, you can share this blog post with your executive director. Request that they walk you through the statement of activities so you can approach your work from a more informed position. The statement of activities is a document that is regularly provided to board members, so there shouldn’t be any barrier to providing you with a copy. Transparency fosters trust, so present the financial information clearly, allowing stakeholders to grasp the organization’s financial standing.

Purpose

Program services represent costs that directly fulfill the non-profit’s mission. Non-profits categorize expenses into program services and supporting services. MIP 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. Board members, donors, auditors, and regulators use it to assess financial health, compliance, and effective use of resources. Regularly reviewing this and other financial statements will help you make well-informed decisions.

• It provides a clear summary of a nonprofit’s revenues, expenses, and net asset changes for a period, supporting transparency and informed decision-making.
• One of the most important reports in nonprofit accounting is the statement of activities.
• The SOA report shows a nonprofit organization’s income, expenses, and net income for a specific period of time, all or part of a fiscal year.
• The report is essential for determining whether an organization can keep operating and has enough money to meet its obligations.
• This information can help you identify potential problems early on and solve them before they become larger financial issues.
• A Statement of Activities is a financial statement commonly used by nonprofit organizations.

• However, the benefits of being transparent in your financial activities go much deeper.
• Encouraging a collaborative effort between financial and programmatic departments is key to crafting a comprehensive and compelling financial narrative.
• Analogous to the income statement in private sector accounting, this statement provides a dynamic overview of the financial results of a government’s operations over a fiscal year.
• These funds must be invested and used in accordance with the donor’s intent.
• Recovery Connect scaled their nonprofit with Instrumentl, streamlining grant management and eliminating inefficiencies.
• Whether you know it or not, the Statement of Activities is the unsung hero in the financial story of your nonprofit.

Restricted revenue for a nonprofit is revenue that is to be used to a particular purpose. Those revenues are to be set aside for particular expenses of the nonprofit. Unrestricted revenues can be used for any legal expenses that a nonprofit might have.