Sample Financial Statements for Nonprofit Organizations

Nonprofit financial statements are formal records that provide a comprehensive overview of a nonprofit organization’s financial health and activities. Unlike for-profit businesses, nonprofits have unique reporting requirements to show how funds are used and managed. It’s an essential tool for nonprofit organizations to ensure financial accountability, transparency, and stakeholder confidence. The nonprofit statement of financial position is also known as a balance sheet, which is what for-profit organizations usually call their equivalent statement. It provides a snapshot of your organization’s financial health, meaning it plays an especially important role in nonprofit financial audits. Although there are countless ways to organize your nonprofit’s financial information, most organizations compile four main types of reports.

• Although there are countless ways to organize your nonprofit’s financial information, most organizations compile four main types of reports.
• Learn to create nonprofit financial statements for transparency and donor trust with our step-by-step guide and template.
• Finally, financing revenue comes from the earnings and interest earned on your financial activities and savings.
• It’s what a for-profit company would call Net Income or, simply, profit.
• FDIC insurance is available for funds on deposit through Thread Bank, Member FDIC.
• Third, these statements serve as a tool for financial planning and budgeting.

Make Reports Clear and Open

A final benefit of regular internal audits is the knowledge they provide. Audits give your nonprofit an excellent overview of where you need improvements. Regular audits will keep your Board of Directors and employees accountable for their decisions. The federal government is not the only one that requires regular audits by nonprofits.

• In this article, we’ll explore why nonprofit organizations need financial statements.
• Furthermore, they have a responsibility to demonstrate that they manage funds effectively and ethically.
• They include information on the organization’s assets, liabilities, revenues, expenses, and net assets.
• If you are using fund accounting software built for nonprofits, these reports will be native in your system.
• Your board members need to keep an eye on your nonprofit’s finances, but they don’t have to become finance pros to do this.

Does the IRS need access to a nonprofit’s balance sheet? Who else should be able to see it?

The Statement of Activities provides a detailed overview of an organization’s revenue and expenses. It shows how funds are generated and how they are used to support the organization’s mission and programs. This statement is crucial for understanding the financial health and sustainability of a nonprofit. It allows stakeholders to see the sources of revenue, such as accounting services for nonprofit organizations donations, grants, and program fees, as well as the expenses incurred in carrying out the organization’s activities. By analyzing the Statement of Activities, stakeholders can assess the efficiency and effectiveness of the organization’s operations and evaluate its impact on the community.

Follow GAAP and IRS Rules

Externally, donors, other grantor agencies or lending institutions may request compiled financial statements from a nonprofit, which can be what drives the need for a compilation engagement. The CPA will read the financial statements and propose adjustments or modifications if anything comes to light that is not materially correct. Unlike a preparation engagement, the CPA’s role is more transparent in a compilation engagement for external users. For example, if the CPA is not independent of the nonprofit in a compilation engagement, this would be required to be disclosed in the report that is issued along with the financial statements. Similar to a preparation engagement, the CPA is not required to review support for underlying accounting transactions, perform analytical procedures, or gain an understanding of internal controls. The CPA’s objective in a compiled financial statement engagement is to apply accounting and financial reporting expertise to assist management in the presentation of the financial statements.

These are divided into current assets (convertible to cash within a year) and non-current assets (long-term resources like property and equipment). Preparing consolidated financials can drag out close timelines, as you can see in the chart above. For most multi-entity nonprofits, consolidation can require days or even weeks; however, with the right accounting system, nonprofits can create consolidated financials in hours or minutes. Together, we can empower your nonprofit organization to achieve financial success, make a greater impact in your community, and secure a sustainable future. Don’t wait – contact us now and let JFW Accounting Services be your trusted financial partner.

• The operating reserve ratio measures how long a nonprofit can continue its operations without additional revenue.
• This type of audit generally addresses issues with your tax return, discrepancies between your organization’s and freelancers’ or employee returns, or if a division of the IRS issues an IRS-wide examination.
• Separating out restricted and unrestricted net assets gives you a more detailed perspective on how much you can put toward each initiative and overhead expense you need to pay for.
• Sharing your financial reports gives companies a clear view of how well you manage your funds and what kind of impact you’ve had.
• Categorizing expenses by function enables transparency and helps stakeholders understand how efficiently the organization allocates resources.
• It’s like a financial check-up to make sure you’re using your funds wisely.
• This part of your financial report should celebrate the top fundraising efforts and praise your major donors.

The Statement of Activities, also known as the income statement, shows the revenues, expenses, and changes in net assets of a nonprofit organization over a specific period. It provides information on the https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ organization’s financial performance and the sources and uses of funds. Nonprofit financial statements are important because they provide transparency and accountability to stakeholders, including donors, grantors, and the public.

In regards to Currencycloud’s services when funds are posted to your account, e-money is issued in exchange for these funds, by an Electronic Money Institution who we work with, called Currencycloud. In line with regulatory requirements, Currencycloud safeguards your funds. This means that the money behind the balance you see in your account is held at a reputable bank, and most importantly, is protected for you in the event of Currencycloud’s, or our, insolvency.