What Is a Statement of Activities?
Explore the fundamental financial report that illustrates how non-profit organizations manage and change their overall resources.
A Statement of Activities is a primary financial statement for non-profit organizations, providing a clear overview of their financial performance over a specific period, typically a fiscal year. This statement illustrates how an organization’s net assets have changed due to its operations, similar to how an income statement tracks profit for a for-profit business. It helps stakeholders understand the organization’s financial health and how effectively it uses its resources to achieve its mission.
Components of the Statement
The Statement of Activities generally presents three main sections: revenues and other support, expenses, and the resulting change in net assets. These sections collectively show how financial resources were generated and utilized during the reporting period. The statement’s structure allows for a clear calculation of the overall increase or decrease in the organization’s total net assets.
Sources of Revenue and Support
Non-profit organizations generate income from various sources. Contributions, which include donations from individuals, corporations, and foundations, represent a significant portion of revenue. These can be cash or non-cash contributions, such as donated materials or services. Grants, funds provided by government agencies or other foundations, are another common revenue stream.
Program service fees, like tuition, admission fees, or membership dues, are revenues earned directly from activities related to the organization’s mission. Investment income, including interest, dividends, and gains from the sale of investments, also contributes to a non-profit’s financial resources. Under FASB Accounting Standards Update 2016-14, investment returns are presented net of all related external and direct internal expenses. Additionally, organizations may generate revenue from special events or other miscellaneous sources.
Types of Expenses
Expenses on the Statement of Activities are categorized by their functional classification. The Financial Accounting Standards Board requires non-profits to present expenses by both nature and function.
Program service expenses are costs directly linked to carrying out the organization’s mission. Examples include costs for delivering direct services or operating specific programs.
Management and general expenses cover the administrative and overhead costs necessary for the overall operation of the organization. These can include salaries for administrative staff, office supplies, general accounting, and general liability insurance. Fundraising expenses encompass costs associated with soliciting contributions and grants. The Internal Revenue Service (IRS) Form 990, an informational tax return for non-profits, also requires these three functional categories: program services, management and general, and fundraising.
Net Assets and Their Classification
Net assets represent the accumulated resources of a non-profit organization, similar to equity in a for-profit entity. Non-profits classify net assets into two main categories: net assets without donor restrictions and net assets with donor restrictions.
Net assets without donor restrictions are funds available for general use at the discretion of the organization’s governing board. Net assets with donor restrictions are funds whose use is limited by specific donor-imposed stipulations. These restrictions might dictate how the funds can be used (e.g., for a specific program) or when they can be used (e.g., an endowment where only the income can be spent). This distinction ensures compliance with donor intentions and provides clarity on the availability of funds.