How to Prepare a Net Asset Roll Forward

A net asset roll forward is a financial schedule that methodically tracks the changes in an organization’s net assets over an accounting period. It serves as a bridge, connecting the net asset balance at the beginning of a period to the balance at the end. This schedule is common in non-profit accounting, where it offers a transparent view of how financial activities have impacted the organization’s resources. It provides a consolidated summary of the inflows and outflows that constitute the total change in net assets, which is a primary measure of financial performance for these entities.

Information Required for Preparation

Before constructing the schedule, specific financial data must be gathered from the organization’s accounting records. The foundational piece of information is the beginning net asset balance, which is carried forward from the prior period’s audited statement of financial position (the balance sheet). This starting figure must be segregated into its respective classes, net assets with donor restrictions and net assets without donor restrictions, as defined by Financial Accounting Standards Board (FASB) guidance.

Next, all additions that occurred during the period must be identified and quantified. This includes all forms of revenue and support, such as contributions from donors, grants, and service fees. It also encompasses investment returns, including interest, dividends, and both realized and unrealized gains or losses on investments. This information is typically sourced from the organization’s general ledger and should correspond to the revenue and gain categories reported on the statement of activities.

Deductions from net assets also need to be compiled. These are the expenses incurred by the organization in fulfilling its mission and supporting its operations. This includes program service expenses, which are costs directly related to the non-profit’s mission-driven activities, as well as supporting service expenses like management, general overhead, and fundraising costs. The total of these deductions on the roll forward must reconcile to the total expenses presented on the statement of activities.

A unique and important component to gather is the value of net assets released from restriction. This occurs when a donor’s stipulation on a contribution has been satisfied, either by the passage of time or by the organization incurring expenses for the specified purpose. For example, if a donor gives $10,000 for a specific program, those funds are initially recorded as “with donor restrictions.” Once the organization spends $10,000 on that program, the restriction is met, and the amount is reclassified.

Constructing the Roll Forward Schedule

The standard structure for this schedule is a table with rows detailing the financial activities and columns for the different net asset classes. The columns are typically labeled “Without Donor Restrictions,” “With Donor Restrictions,” and “Total,” providing a comprehensive view of the changes across the organization.

The process begins by populating the top row with the beginning net asset balances for each class, taken directly from the prior period’s financial statements. Following this, rows are added for each category of addition. Contributions, grants, and other revenues are entered into the appropriate column based on whether they were received with or without donor-imposed restrictions. For instance, a grant designated for a future project would be placed in the “With Donor Restrictions” column, while proceeds from an annual fundraising gala would likely go into the “Without Donor Restrictions” column.

The next step is to record the deductions. A row for total expenses is added, with the full amount typically entered as a negative value in the “Without Donor Restrictions” column. This is because, under accounting principles, expenses are paid from unrestricted funds unless the organization has a specific policy to use restricted funds first and the expense meets a donor’s purpose-restriction.

A critical part of the construction is recording the net assets released from restriction. This is shown as a simultaneous entry in two columns: a negative amount in the “With Donor Restrictions” column and a corresponding positive amount in the “Without Donor Restrictions” column. This entry reflects the satisfaction of a donor’s stipulation and the resulting reclassification of funds, having a net-zero effect on the “Total” column.

Finally, the ending balance for each net asset class is calculated. This is done by summing each column vertically: the beginning balance, plus all additions, minus deductions, and adjusted for any releases from restriction. The sum of the “Without Donor Restrictions” and “With Donor Restrictions” columns should equal the “Total” column for every row, ensuring the internal integrity of the schedule.

Review and Reconciliation Procedures

After the roll forward schedule is constructed, it must be reviewed and reconciled for accuracy. The total ending net assets on the schedule must exactly match the total net assets reported on the current period’s statement of financial position. Any discrepancy indicates an error that must be investigated and resolved.

Another reconciliation involves the statement of activities. The total change in net assets calculated on the roll forward must agree with the “Change in Net Assets” line item on the statement of activities. This confirms the schedule accurately reflects the organization’s operating results. This process serves as an internal control, validating the integrity of the financial data and ensuring all transactions, like releases from restriction, have been properly recorded.