Nonprofit Statement Of Activities

When it comes to financial statements that nonprofits should be familiar with, the nonprofit Statement of Activities is one of many, but it would be toward the top of the list. The Statement of Activities displays yearly revenue and expenses in a format that's easily comparable to profit-centered businesses. The Statement of Activities shows everyone what goes on behind the scenes at a nonprofit.

The Statement of Activities is similar to a for-profit business' Income Statement. The main difference is nonprofits are guided by their missions instead of profits, and as such, they often use the terms "Statement of Activities" and "change in net assets" instead of "Income Statement" and "Balance Sheet." Still, like other nonprofit financial statements, a Statement of Activities reports changes in net assets over time.

To comply with nonprofit accounting standards and to align with donors' wishes, nonprofits should track changes in net assets. Funds without donor restrictions, which are sometimes referred to as general operating funds, are used for general purposes, like program services or administrative expenses. Funds may also come with donor restrictions stating that those funds are to be used for specific purposes, like an endowment or building fund. Funds may also be restricted by time.

Format And Organization

A thorough SOA report provides context for board members to understand the financials at your nonprofit. Context should be included in the SOA report in the form of charts, graphs, images, and other visual aids that help readers understand the numbers.

Nonprofit Accounting Basics provides a useful framework for assembling your SOA. A nonprofit Statement of Activities example should have a heading, body, and bottom line. The body will contain three sections: revenue, expense, and net assets. A multi-columnar format will be used to present the change in net assets according to the intent of the donor, split into unrestricted or restricted columns.

Statements should include the total spent so far this year, the annual budget for the current year, and what percentage of that budget has been spent. Nonprofit reporting should also include totals for the last 12 months and a projection toward the end of the year.

Expenses To Record On A Nonprofit Statement Of Activities

Expenses are classified in categories. Natural classifications indicate the type of expenses incurred. Examples include utilities, rent, office supplies, and salary expenses. Functional classifications indicate the activity that incurred the expense: fundraising, management, or program expenses.

Organizations can use the Statement of Financial Activities and natural classification to show the functional expenses of each program. Under this expense section, every expense will be listed.

Many expenses match up directly to a program activity or a combination of programs. These expenses can be easily matched simply by adding them to the cost pool for that activity. If you share a building with other programs, you must allocate the rent on a fair and impartial basis.

Note, there is special guidance for combining fundraising with elements of another function. These expenses, called joint activities on your Statement of Activities, should be allocated based on the time spent providing each service.

Revenues To Record On A Nonprofit Statement Of Activities

Your nonprofit accounting Statement of Activities can include a wide variety of income: fees from rendering services, contributions with donor restrictions, gains and losses on investment income, cash flow, member dues, and fees for programs and fundraising events. While you should always report revenue on a gross basis—or the sale price before tax is deducted—you can report investment income on a net basis. Government funding is also important to note.

You might also hear this referred to as your Statement of Financial Position, but that's a different document. The same goes for your Statement of Functional Expenses.

While donations are by far the largest source of revenue for most nonprofits, the sector is diverse and encompasses a variety of different organizations. Private gifts and private grants are given to a nonprofit by individuals, businesses, or other nonprofits. State grants come from government agencies at the local, state, or federal level. Federal grants are given to nonprofits directly from the federal government. All of these sources of funding need to be tracked on your nonprofit Statement of Activities and other financial statements. These revenue sources are further defined as with or without donor restrictions.

Revenues And Expenses With Donor Restrictions

A nonprofit's restricted revenue is reserved for a particular purpose, such as paying off debt or repaying an endowment. Unrestricted funds are available to be used for any expenses the organization may have. When asking for donations, a nonprofit should communicate with donors about how they'd like their donation to be used so this information can be properly recorded for reporting purposes.

Some nonprofit organizations might have to set aside some of their profits to make sure they comply with the restrictions of their mission. After a certain amount of time, those restrictions may no longer apply, so those funds could be used for other things.

For help with your Statement of Activities and other common financial reports, visit the Aplos nonprofit accounting software page for details about streamlining your bookkeeping.

Aplos provides helpful resources, but it is not meant to be a substitute for professional services. Always consult a CPA or trusted professional when seeking tax or accounting advice.