Jo-Anne is a certified Sage Intacct Accounting and Implementation Specialist, a certified QuickBooks ProAdvisor, an AICPA Not-for-Profit Certificate II holder, and Standard for Excellence Licensed Consultant. To calculate the change in net assets, you subtract net revenue from net expenses. 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. By studying the CFS, an investor can get a clear picture of how much cash a company generates and gain a solid understanding of the financial well-being of a company.

• As noted above, the CFS can be derived from the income statement and the balance sheet.
• As an accountant prepares the CFS using the indirect method, they can identify increases and decreases in the balance sheet that are the result of non-cash transactions.
• Nonoperating revenues with the exception for taxes and investment income should be also reported as program revenues.
• Unlock a template for a one-time fee, which includes unlimited access and full support for template implementation.
• Nonprofit organizations rely heavily on financial reports to make informed decisions about their operations.

Therefore, you need to make sure that your accounting system is well organized from start to finish, or else you may have errors in your statement. From this CFS, we can see that the net cash flow for the 2017 fiscal year was $1,522,000. The bulk of the positive cash flow stems from cash earned from operations, which is a good sign for investors. It means that core operations are generating business and that there is enough money to buy new inventory. Negative cash flow should not automatically raise a red flag without further analysis. Poor cash flow is sometimes the result of a company’s decision to expand its business at a certain point in time, which would be a good thing for the future.

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Changes in cash from financing are cash-in when capital is raised and cash-out when dividends are paid. Thus, if a company issues a bond statement of activities to the public, the company receives cash financing. However, when interest is paid to bondholders, the company is reducing its cash.

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. Others support more than one program and must be allocated to the appropriate functions. If a building is shared by several programs, for example, the rent must be allocated using an objective method.

Statement of Functional Expense

Tom is a multi-disciplined leader with over a decade of experience in nonprofit operations, technology leadership in government, and over two decades of servant leadership. Also interfund payments in lieu of taxes (PILOTs) that are not payments for services (or are not a reasonable equivalent of the value of these services) should be reported as transfers. This amount includes the costs of maintaining and operating the university’s physical plant. Operating expenses are costs incurred in fulfilling the Cornell’s primary mission of "learning, discovery, and engagement." The majority of sponsored funding for research and mission-related activities comes from the federal Department of Health and Human Services, the National Science Foundation, and non-federal foundations. Federal appropriations are funds distributed through various federal agencies for land grant institutions like Cornell, used for agricultural education and research, other special research projects, and extension activities.

At the bottom of the report, there’s a section dedicated to the net assets of the organization. The first thing you’ll want to look at when reading a nonprofit statement of activities is the net income. This will give you an idea of whether or not the organization is bringing in more money than it’s spending.

Nonprofit Statement of Financial Activities Template

Since functional expenses are a big theme for many investors, particularly the percentage of money you’re spending on programs, most nonprofit Statement of Activities are organized according to functional expenses. You can use unrestricted funds for any mission-oriented purpose, including paying general operating expenses and salaries. The statement of functional expenses is a matrix, because it reports expenses by their function as well as the type of expense. All expenses, except for investment expenses, are reported as expenses that decrease net assets without donor restrictions. Investment expenses can decrease net assets with donor restrictions if allowed by the terms of the donation. The form and content of these statements are prescribed by the Financial Accounting Standards Board (FASB) in their codification 958.

• The basis of Form 990 is the statement of activities and a statement of functional expense.
• These payments may have been made with cash, credit, or even through in-kind donations.
• This amount represents assets for capital acquisitions and reclassifications that are released from the temporarily restricted classification to become unrestricted.
• Expenses are reported in categories that identify specific functional areas, such as mission based programs, and support services including management and general and fundraising.
• All general revenues, including taxes, should be reported net of estimated refunds and uncollectible amounts.
• Net assets with donor restrictions are usually never below zero, although special reporting may apply to an “underwater ” endowment balance (topic not covered here).
• For investors, the CFS reflects a company’s financial health, since typically the more cash that’s available for business operations, the better.

Nonprofits have essentially parallel reports, but because their accounting is different, the reports differ slightly as well. Changes in cash from investing are usually considered cash-out items because cash is used to buy new equipment, buildings, or short-term assets such as marketable securities. But when a company divests an asset, the transaction is considered cash-in for calculating cash from investing. If you are interested in working for a nonprofit, it’s helpful to understand the differences between nonprofits and find ways to translate your experience into a job with one. From Executive Director to Program Manager, find out what you are a great fit for. 2) Revenues – An NFP can have a variety of revenue streams, which is basically how the NFP receives cash.

Statement of Activities Line Items

Functional expenses are reported by their functional classification and recorded in a Statement of Functional Expenses. This method of expense reporting is most commonly used by nonprofit organizations. Out of the four most common financial statements in a nonprofit, the Statement of Activities, also known as the Profit & Loss (P&L), is the broadest. The P&L covers all the organization’s programmatic, fundraising, and administrative expenses incurred during the period. The statement also reports all the revenue generated during the period, regardless of the source. While for-profits need to compile a profit and loss statement along with their income statement, nonprofits can skip that step because they’re not operating for profit.

This report includes pledges, depreciation, and accruals (non-cash, long-term liabilities), and subsidiary income and expenses. In contrast, the Operating Budget includes cash payments on pledges, debt repayments, and omits accruals. However, as you know a nonprofit is not like any other business, so it is no surprise that nonprofit financial reports are different. For nonprofit organizations, the financial report that meets the requirements for an income statement is called the Statement of Activities. This report identifies funds received without donor restrictions and funds with donor restrictions.

Management and General

The state of Texas presents governmental and business-type activities by function for expenses and program revenues. General revenues, capital contributions, contributions to permanent and term endowments, transfers, and special and extraordinary items are reported separately after the total net (expense) revenue of the state’s functions. In a non-profit organization, the statement of activities is used in lieu of an income statement. The cash flow statement measures the performance of a company over a period of time.

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. 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. If you haven’t seen one for your organization yet, or want to try your hand at compiling one, use the following template to get started. 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.