What is the statement of activities?

In the statement of financial position for a non for profit organization, net assets are classified as with or without donor restrictions. The detailed authoritative standards established by this Statement are presented in paragraphs 3 through 166. The reasons for the Board’s conclusions on the major issues are discussed in the Basis for Conclusions (Appendix B). Appendix D summarizes how the new standards would be incorporated into the GASB’s June 30, 1999, Codification of Governmental Accounting and Financial Reporting Standards. We have an open decision-making process that encourages broad public participation. This Statement establishes new financial reporting requirements for state and local governments throughout the United States.

Financial aid is not allocated to auxiliary services or educational revenue (housing, dining, student health insurance, etc.). Depreciation may be also allocated through a separate indirect expense column. 3) Expenses – Represents any cash outflow the NFP incurs to run the organization. Expenses can be summarized into high-level categories or broken into specific accounts or classes. Take our 2-minute survey to find out if outsourced accounting and bookkeeping is a good fit for your organization. If you’re ready for an accounting partner to ease the burden of monthly bookkeeping and accounting, reach out to us for a free consultation.

The government-wide statement of activities should be presented in a format that reports expenses reduced by program revenues, resulting in a measurement of “net (expense) revenue” for each of the government’s functions. General revenues, such as taxes, and special and extraordinary items should be reported separately, ultimately arriving at the change in net assets for the period. Special items are significant transactions or other events that are either unusual or infrequent and are within the control of management. Most governmental utilities and private-sector companies use accrual accounting. It measures not just current assets and liabilities but also long-term assets and liabilities (such as capital assets, including infrastructure, and general obligation debt). It also reports all revenues and all costs of providing services each year, not just those received or paid in the current year or soon after year-end.

Key to Fulfilling Mission

It typically includes data on revenues, expenses, and changes in net assets. 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. Concepts Statement 1 noted that annual reports should allow users to assess a government’s accountability by assisting them in determining compliance with finance-related laws, rules, and regulations.

Net results are classified as either with or without donor restrictions per FASB (the Financial Accounting Standards Board). The result of each year’s financial activity is shown as the “change in net assets,” that is, increases or decreases to the related net assets categories. The relationship of the SOA to the SOFP is shown in the illustration below. The Foundation determined that it could fund its current operating budget for the upcoming year by increasing donations from individuals and businesses. After reviewing its current expenses (including salaries, rent, utilities, and other expenses) the Foundation determined that it could save $2,000 per month by canceling its health insurance policy for staff members.

We can help you modernize and optimize your accounting systems while also taking the time-sucking bookkeeping tasks off of your hands. And be the trusted financial partner you can turn to for answers to your questions what is opening entry in accounting and expert financial advice. Double checking that the numbers are correct, interpreting the statement, and coming up with the next actions that your organization should take based on the analysis of the statement.

Open Government-Wide Financial Statements sub menu

For instance, if your nonprofit has $55,000 in expenses and $65,000 in total revenue, it would appear that your net assets are positive, at $10,000. However, if $15,000 of your revenue is restricted, you’re actually $5,000 in the red and should cut expenses to maintain a sustainable organization. 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. The statement of activities will also influence Report 990 generation when it comes time for tax season. The basis of Form 990 is the statement of activities and a statement of functional expense.

You are able to see how your organization is using its funding and how it is accomplishing your mission. It can also provide insight into the sustainability of your organization’s finances. A nonprofit statement of activities serves the purpose of providing detailed information about your organization’s transactions and how those activities further your organization’s mission via your initiatives and programs.

Ways Prospect Research Can Increase Your Organization’s Capacity

This crucial financial report is designed to provide a snapshot of your nonprofit’s overarching financial health. According to Jitasa’s statement of activities guide, the cherry on top of this report is its information is parallel to the information you need to provide on your annual Form 990. It breaks down your expenses into your program, administrative, and fundraising expenses—the same breakdown required on your annual tax forms. Ideally, approximately 70% or more of expenses should be program expenses.

These are expenses such as research and education that directly support the mission of the nonprofit. The remaining 30% or so of expenses are supporting expenses such as management and general or fundraising expenses. Categorizing expenses in this way allows the stakeholders of the nonprofit to determine how effectively the organization allocates its funds to support their programs. The statement of financial position serves a similar purpose to the balance sheet of a for-profit organization. The statement lists the assets and liabilities of the nonprofit and shows the net assets of the organization. Understanding the purpose, scope, and intricacies of each type of nonprofit accounting statement is key to success.

By understanding where your money is coming from and going, you can make informed decisions about future expenditures. 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. You may choose to break down your revenue into additional categories, such as Sources of Unrestricted Donations and Federated Campaigns. This statement is important for nonprofits because it helps to determine where changes can be made to fund necessary projects. The statement of activities is also important for nonprofits because it can help companies plan their resources and track their progress.

Revenues

The next line is money the company doesn’t expect to collect on certain sales. This could be due, for example, to sales discounts or merchandise returns. This amount represents the planned, gradual reduction in the recorded value of assets over their useful lives by charging them to expense. The State of New York pays the benefits and accrued expenses for all contract college employees. This amount includes salaries, wages, other compensation, and benefits for all non-contract college employees. State appropriations are funds distributed through the State University of New York (SUNY).

• 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.
• As mentioned above, it is very important to know the difference between restricted and unrestricted funds when creating your statement of activities.
• The operating grants and contributions are used to finance operations of specific function/program and should be reported separately from capital grants and contributions.
• 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.

” Nonprofits should never have to ask this question because all of their expenditures are well-planned, accurately recorded, and reported on in this statement. “Smith & Howard” is the brand name under which Smith & Howard PC and Smith & Howard Advisory LLC provide professional services. Smith & Howard PC and Smith & Howard Advisory LLC, practice as an alternative practice structure in accordance with the AICPA Code of Professional Conduct and applicable law, regulations and professional standards.

Search form

These changes would free up additional funds that could be used to support additional programs or services offered by the Foundation. Nonprofit organizations rely heavily on financial reports to make informed decisions about their operations. The nonprofit statement of activities is one of the core accounting documents that your organization creates.

There are many moving pieces to success including managing people, fulfilling a purpose, and prioritizing events. It is not uncommon for the details surrounding the organization’s financial health to get overlooked. The results of each successive fiscal year’s financial activities accumulate on the SOFP, changing the net asset balances.

Optimizing Fundraising Success: 8 Essential Database Best Practices

It’s important to find the balance between reducing overhead to fund your mission and ensuring you dedicate enough funding to your operating activities to continue growing and expanding your organization. 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. Meanwhile, unrestricted revenue can be allocated toward projects, operations, and other expenses as chosen by the nonprofit itself. Your organization works hard to raise funds and to use those funds to further your mission.

Since nonprofits operate with the intention of using all profit to fuel their mission, the change in net assets is typically much smaller when compared with a for-profit entity. However, to stay compliant and transparent, a nonprofit must assign appropriate attention to the organization’s financial records. In this article, we focus on one of the financial statements your nonprofit should be generating regularly and using to assess performance, growth potential, and sustainability. Running a nonprofit organization requires talent, hard work, and determination.

The statement also provides a snapshot of your organization’s liquidity and flexibility. Knowing how much cash you have available at any given time is important for maintaining stability in your finances. For-profit accounting departments have a standard set of reports and statements they run to analyze their finances. Nonprofits have essentially parallel reports, but because their accounting is different, the reports differ slightly as well. Conversely, a statement of activities with natural classification would only list the expense types, such as salaries, utilities, office supplies, and others. Have you ever looked at your personal finance history and thought to yourself, “How did I end up spending that much money?