Financial and Summary Statement

From WikiAdvocacy

Nonprofits must issue several types of financial statements on an annual basis (corresponding with the organization's fiscal year):

  • Statement of financial position (balance sheets)
  • Statement of activities (income statement)
  • Statement of cash flows

Nonprofits must also be able to provide information about expenses by functional classification (program services, supporting services) and often by natural classification (rent, salaries, telephone).

The following is an example of how one organization goes about this.

Jim Moore


“Nonprofits must allocate expenses according to FASB categories (loosely described as: program, fundraising, and admin – or management and general). The following are some recommendations for how to go about this:

1. Create a timesheet that makes it easy. The timesheet itself will be a mess, because it has to itemize all the categories you wish to track, but Excel has a way with this stuff, so a nice Excel template makes a wonderful timesheet, and it does all of the math for you.

2. Do not “standardize” the allocations. One quick look by an auditor will reveal that the CEO is rubber-stamping a template timesheet, and that the data collected are meaningless.

3. Setting aside 5 minutes at the end of the day enables executives and department heads to estimate how they spent their days fairly accurately, and perhaps reflect on how they spend their time. There are tools for this sort of thing if you prefer. This one comes recommended: toggl

4. If you use QuickBooks, align your timesheet coding with QuickBooks classes. Each program should have its own class that tracks revenues and expenses for that program. So, if you have a grant from the Child Welfare Foundation to fund public education, you could track everything related to that activity with a simple class such as: CWF-PE. If you have to draw from your general fund to pick-up slack for expenses the grant doesn’t cover, your bookkeeper can transfer general fund money into that class to make the books balance.

5. In QuickBooks payroll, your bookkeeper would setup “recurring transactions” for each employee that includes all possible expense categories. This way, the bookkeeper can process your timesheet verbatim according to how you’ve allocated your time without having to recreate this mess each time. Where the item is zero, just enter zero in the payroll entry and let QuickBooks do the math based on hourly rate.

6. Meanwhile, QuickBooks can also use the classes to track everything else related to each activity and parse it out so you can, at a moment’s notice, find out precisely how much everything actually costs...not just hard costs, but also labor.

7. If your organization accounts for in-kind (and you should), then allocate volunteer time to these classes as well.

Disclaimer: I am not an attorney or a CPA. All comments shared are opinions only, and they are not, nor should they be construed to be counsel. Please seek counsel from an attorney or CPA.”

Annual Reports

Annual reports have two major functions: to report your financial status and to give an overview of your organization's values and accomplishments. High-end annual reports from large corporations are publicity pieces, beautiful designs on high-quality paper with profiles of important individuals and projects that contributed to the company's success. Publicly traded companies make these reports available to all, while other organizations may limit the distribution of various parts of their annual overview and detail reporting.

As you plan end-of-year reports, consider your audience. You will most likely wish to reassure your membership that you are focusing on outcomes for their health and privacy, and reassure donors that their money is being spent wisely. An annual report can also generate interest in your organization on the part of individuals or companies with whom you hope to work. An annual report is a place to show who your organization is, demonstrate your fiscal responsibility, and celebrate your successes with stories and images of positive outcomes for your membership.

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