Nonprofit accounting can feel complicated for nonprofits without a solid financial background, but there are ways to make filing reports easier. A Statement of Activities is similar to a for-profit income statement and is one of the four financial reports nonprofits must file. Nonprofits can use this report to file Form 990 with the IRS…
Nonprofit accounting can feel complicated for nonprofits without a solid financial background, but there are ways to make filing reports easier. A Statement of Activities is similar to a for-profit income statement and is one of the four financial reports nonprofits must file.
Nonprofits can use this report to file Form 990 with the IRS and provide donors with transparency and trust in the organization.
This article will discuss what a statement of activities entails and why nonprofits need them.
A Statement of Activities includes revenue and expenses during a nonprofit’s reporting period (a fiscal or calendar year) and gives an overview of the changes to an organization’s net assets during that time.
Nonprofits use this report to file Form 990 with the Internal Revenue Service (IRS).
Nonprofits need a Statement of Activities to show how they can afford program and fundraising activities. This report also shares how things can be improved by increasing revenue and decreasing costs.
Organizations can also use this report to educate board members and staff leadership on financial needs and opportunities. Providing this report to the public on the website or annual report can give transparency and instill trust.
Your nonprofit’s Statement of Activities must include your organization’s revenue, expenses, and net assets.
Your nonprofit’s revenue must include the following.
Donations your nonprofit receives during events, campaigns, and other times throughout the year.
Donors will often give product gifts to help with programs or events. Most in-kind donations will come from companies providing products for an event, silent auctions, and raffles.
Donors may give nonprofits land or stock donations. These gifts must be posted separately from cash and in-kind contributions.
Most nonprofits also apply for government, companies, or foundation grant funding. Organizations must report all grant funding.
If your nonprofit provides and charges people fees for their services, you can also report this revenue on your Statement of Activities.
Investing in companies and social entrepreneurs with missions that fit your organization’s purpose is an excellent way to raise more funds. Investing in these companies can help nonprofits raise significant funds and feel comfortable with their purchase.
All revenue sections from your organization must also be split between unrestricted and restricted funds.
Unrestricted funds can be used where your nonprofit needs them most. Restricted funds must be used where the donor asks.
For instance, if you have a donor that wants to donate to school technology, your report must show that. The restricted section in your report will educate all who view it that these funds cannot be used to pay rent or cover maintenance fees.
Temporarily restricted funds that must be held for a short period will be unrestricted eventually, but they must be listed under restricted funds until then.
Your organization must also list expenses on your Statement of Activities report. You should split your expenses by programs, administrative, and fundraising costs.
Sharing these 3 sections with donors provides transparency and helps them understand where their donation goes. Websites like GuideStar also look at these reports when choosing which nonprofit to award their platinum and gold seals of approval. You can also show these expense amounts and percentages on your website.
Your organization’s change in net assets must finish this report. Net assets are your total revenue minus your total expenses.
You must share this at the beginning of the year and the end of your financial period. You will also split net assets by unrestricted and restricted.
Since many of your expenses will cover salary, insurance, rent, utilities, events, technology, etc., you may find that your restricted funds are higher than unrestricted ones.
This may be a sign to cut expenses wherever possible.
Here’s an example of a Statement of Activities that was a part of the organization’s audited financial statement in 2021 (page 5).
Statement of Activities is part of your nonprofit’s accounting requirements and is often included in its annual report or audited financial report. If you’re starting a new nonprofit, a statement of activities is one of the 4 financial reports you must file.
The Donorbox Nonprofit Blog offers a number of accounting-related guides and articles. You may also want to check out our blogs under “starting a nonprofit” providing insights into important requirements, tax filing, and more. Subscribe to our newsletter to receive the best of our resources in your inbox every month.
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A Statement of Activities is one of the four required financial statements a nonprofit must file. This statement is the equivalent of a for-profit’s income statement.
A Statement of Activities will help nonprofits file Form 990 with the IRS and provide needed transparency to donors, foundations, and corporations. Websites like GuideStar will also use this report to share how your organization uses revenue. It’s a good practice to start including it in your annual report.
Nonprofits will share this information with the IRS, but they may also share this report on their website and annual report to inform donors about the use of funds.
Websites like GuideStar also show a nonprofit’s Statement of Activities and use these details to award seals of approval.
If you cannot find a nonprofit’s Statement of Activities, you can also ask the organization for a copy. Nonprofits unwilling to share this information should be questioned about their reasons for lack of transparency.
Nonprofits may receive donations that donors, corporations, or foundations wish to use on specific programs or expenses. Nonprofits must follow all donor requests, and these donations must be listed under restricted funds on a Statement of Activities.
Temporarily restricted funds, like those being held until matching funds are raised, must also be listed under restricted funds.
Any other donations that do not come with a designation can be termed unrestricted funds.
Disclaimer: By sharing this information we do not intend to provide legal, tax, or accounting advice, or to address specific situations. The above article is intended to provide generalized financial and legal information designed to educate a broad segment of the public. Please consult with your legal or tax advisor to supplement and verify what you learn here.
Kristine Ensor is a freelance writer with over a decade of experience working with local and international nonprofits. As a nonprofit professional she has specialized in fundraising, marketing, event planning, volunteer management, and board development.
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Kristine Ensor