What Is a Statement of Activities for Non-Profits?

The Statement of Activities serves as a central financial report for non-profit organizations, providing a clear picture of their financial performance over a specific period, typically a fiscal year. This statement is analogous to an income statement for a for-profit business, but it is tailored to reflect the unique financial characteristics and objectives of non-profits. Its role is to show how an organization’s resources have changed due to its operations, contributions, and other activities. It offers stakeholders a transparent view of how the organization utilizes its funds to further its mission.

Understanding the Statement of Activities

The Statement of Activities details how a non-profit organization’s net assets increase or decrease due to its various operations and support activities. This statement demonstrates how a non-profit generates and uses its resources to achieve its stated mission. Non-profits emphasize accountability and the effective deployment of funds to fulfill their societal purpose.

Non-profits rely on this statement to provide transparency to donors, grantors, and the public, showing how financial resources are managed and applied. It helps external parties understand where funds come from and how they are spent, fostering trust and supporting fundraising efforts. Internally, the Statement of Activities assists management and board members in assessing financial health, identifying trends, and making informed decisions about resource allocation and program effectiveness. It is also a core document used when filing the annual IRS Form 990.

Key Components of the Statement of Activities

The Statement of Activities primarily comprises three sections: Revenues, Expenses, and Net Assets. Revenues represent the total income a non-profit receives from various sources during the reporting period. These can include contributions and donations from individuals or corporations, grants from foundations or government agencies, program service fees (such as tuition or event registrations), and investment income. Each type of revenue sustains operations and advances the organization’s mission.

Expenses detail the costs incurred by the non-profit in carrying out its activities. These are categorized by function to provide insight into how resources are utilized. Common expense categories include program services, which are direct costs associated with delivering the organization’s mission, such as salaries for program staff or direct aid. Management and general expenses cover administrative overhead, like office rent, utilities, and general administrative salaries. Fundraising expenses include costs directly related to soliciting donations, such as marketing and event costs.

Net Assets represent the residual value of the organization’s assets after liabilities are deducted, similar to equity in a for-profit entity. The Financial Accounting Standards Board (FASB) Accounting Standards Update 2016-14 simplified net asset classifications into two main categories. “Net Assets Without Donor Restrictions” are those that can be used for any purpose consistent with the organization’s mission, as determined by the board. “Net Assets With Donor Restrictions” are subject to specific donor-imposed conditions regarding their use or the timing of their availability. This distinction helps stakeholders understand the flexibility of the organization’s resources.

Structure and Presentation

The Statement of Activities is presented with revenues listed first, followed by expenses, which then lead to the “Change in Net Assets” for the period. This arrangement clearly shows the financial inflows and outflows and their overall impact on the organization’s financial position. The statement categorizes revenues and expenses by the presence or absence of donor restrictions. This columnar format allows for a clear visual separation of unrestricted activities from those constrained by donor stipulations.

For instance, contributions designated by donors for a specific program or future period are presented in the “Net Assets With Donor Restrictions” column. Expenses are also presented with a functional breakdown, showing how much was spent on program services versus supporting activities like management and fundraising. The resulting change in each net asset class, and the total change in net assets, indicates whether the organization experienced a surplus or deficit for the reporting period. This organized presentation helps users quickly grasp the financial story of the non-profit for the given timeframe.

Distinguishing from Other Financial Statements

The Statement of Activities serves a similar purpose to an Income Statement (also known as a Profit and Loss Statement) used by for-profit businesses, yet it has distinct differences tailored to the non-profit sector. While both report revenues and expenses over a period, the Income Statement calculates “Net Income” or “Profit,” reflecting a return to owners or shareholders. In contrast, the Statement of Activities focuses on the “Change in Net Assets,” as non-profits do not have owners or aim to generate profit.

A key distinction lies in how resources are classified. The Statement of Activities uniquely categorizes revenues and expenses based on donor restrictions, distinguishing between “Net Assets Without Donor Restrictions” and “Net Assets With Donor Restrictions.” This classification is important to non-profit accounting, as it communicates how an organization manages funds according to specific donor wishes and legal requirements. For-profit income statements do not include such classifications, as their funding is generally unrestricted by nature. This specific focus allows the Statement of Activities to provide a clear portrayal of a non-profit’s financial stewardship and mission fulfillment.