5 Essential Nonprofit Financial Documents
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Nonprofit Financial Reporting and Tax-Exempt Status
5 Most Important Nonprofit Financial Documents
1. Nonprofit Statement of Financial Position
Without Donor Restrictions (funds that can be used for any purpose) With Donor Restrictions (funds that can only be used for a specific purpose) With Temporary Donor Restrictions (funds that are free to be used for other purposes so long as the original purpose was fulfilled or the time for it has come and gone)
What Does the Statement of Financial Position Tell You?
2. Income Statement (Statement of Activities)
Revenues This includes all flows of cash into your organization, such as donations, grants, fundraising, earned revenue, and government funding. To comply with Generally Accepted Accounting Principles (GAAP), you must separate your revenue into at least two categories – restricted revenue and unrestricted revenue. Expenses This section reports all cash that flows out of your organization, including the cost of programs, fundraising, and overhead. Change in Net Assets This is your nonprofit’s “bottom line.” In the for-profit world, they call the difference between revenues and expenses net income (or profit). But a nonprofit calls the difference between revenue and expenses change in net assets. This is your surplus, or funds available to continue operations.
3. Cash Flow Statement
Operating activities This includes revenues and expenses from operating your nonprofit (such as the cost to pay salaries and buy office supplies) and revenue from contributions. Investing activities This includes things like interest earned on investments, the purchase of long-term investments, and payments on long-term investments (such as buildings, land, or equipment). Financing activities This includes earnings and expenses from financial activities, such as interest earned from savings or interest paid on loans.
4. Functional Expenses Statement
5. Annual Report
Financial statements Accomplishments Impact stories Mission statements Donor spotlights (such as major donors and recurring donors)
Example of Financial Position Document
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