Information from the Statement of Activities is also vital for regulatory filings, such as the IRS Form 990, which requires detailed reporting of revenue and expense classifications. A nonprofit statement of activities is a financial report that summarizes the organization’s revenues and expenses over a specific period. It is similar to a profit and loss statement in for-profit businesses but tailored to nonprofit operations. By providing a clear snapshot of the nonprofit’s economic activities, a Statement of Activities allows stakeholders to assess the organization’s financial health. This transparency and accountability is crucial for building trust with funders, donors, staff, volunteers, and even future supporters.

By accessing and using this page you agree to the Terms and Conditions.

This section is where you record income and expenses linked to their accounts and funds. Yes, nonprofits often undergo audits to ensure accuracy and compliance, especially when required by law or grant agreements. 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. It also aids in meeting audit requirements and informing stakeholders about cost allocation. The surplus or deficit in the Statement of Activities shows if your nonprofit made or lost money over a certain time.

Sign Up to Receive Financial Insights To Keep You Focused On The Money Matters

• For financial leaders in not-for-profit organizations, establishing standard procedures for maintaining an accurate Statement of Activities is not just best practice—it’s a necessity.
• However, they also serve an incredibly important function within the nonprofit itself.
• This article is for informational purposes only and should not be considered financial advice.
• This allows the NFP to communicate that it had an operating surplus (before depreciation) for the year.

Unlike for-profit companies focused on profits, these organizations rely on this statement to show changes in their resources. It helps you track donor restrictions, manage programs, and communicate with your ledger account board + supporters. By keeping your report up to date and reviewing it regularly, you’ll build trust and make smarter decisions. Resource allocation decisions are made based on the organization’s net assets to ensure that both unrestricted and restricted funds are used effectively to support the organization’s mission.

Net Assets

Our team will meet you where you are in compiling your statement of activities, analyze your financial data, and make tailored recommendations to improve your revenue and what is a statement of activities expense allocation going forward. You’re required by FASB 117 to report your expenses by functional classification, meaning you’ll need to at least split up your expenses by administrative, fundraising, and program costs. 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.

Do these reports get audited?

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. This integrated approach illustrates your organization’s impact in a more relatable, holistic way. Encouraging a collaborative effort between financial and programmatic departments is key to crafting a comprehensive and compelling financial narrative. Without that, the SOA can Mental Health Billing misrepresent the financial health of the organization and lead to future funding issues.

• The major function categories include programs, fundraising, and administrative costs.
• This form is a public document that provides information about a nonprofit’s programs, mission, and finances—and part of it includes the Statement of Activities.
• The Profit and Loss (P&L) statement, also known as an Income Statement, summarizes an organization’s revenues, costs, and expenses over a specific period, such as a quarter or fiscal year.
• Remember that the strength of your organization’s SOA is a reflection of its commitment to transparency, accountability, and mission-driven success.
• Learn how to create a fundraising strategic plan that aligns your nonprofit’s goals with your mission.
• Endowments are a common example, where the original donation remains intact while the generated income supports ongoing activities.

Open Fund Financial Statements sub menu

For example, granting organizations may require the funds provided to be dedicated toward a specific service or purpose. Also called a profit and loss, or P&L statement, the income statement, along with a balance sheet and statement of cash flows, are standard financial reports for any business. The P&L is important because it provides a high-level overview of how 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.

What is a Nonprofit Statement of Activities?

Specifically, nonprofits must indicate any limitations or restrictions that affect their cash flow. Occasionally, revenue obtained by nonprofit organizations is subject to specific conditions set by the funding source. For instance, grant-giving entities may stipulate that the funds allocated must be directed toward a particular service or purpose. Detailed and accurate financial statements also help nonprofit management make informed decisions, assess fiscal performance, and ensure regulatory and legal compliance with nonprofit requirements. It’s also crucial for nonprofits so that they can show how they afford fundraising and program activities. The Statement of Activities also offers insights into the overall improvement of the organization, including decreasing costs and increasing revenue.