Financial statements prepared for non-profit organizations are subject to different requirements than traditional for-profit businesses. In either case, the statements required are representative of the organization’s overall health. The FASB (Financial Accounting Standards Board) issues annual guidelines that require, at minimum, the following documents to be submitted:
Statements of Activities - This statement focuses on the organization itself and is most often used as a supplemental information source. By being able to visualize revenue and expense activities, fluctuations in net assets over time are made easily visible. More so, the variety of asset types included can be broken down to determine which areas offer the greatest return. These figures are necessary, as gains or losses on investments will alter the figures reported.
Statement of Current Financial Position - Most commonly referred to as the balance sheet, this document defines the level of assets, liabilities and equity associated with an organization at a given point-in-time. Information about the overall liquidity position, as well as current and long-term obligations is also included. This statement should break down all asset and liability types into respective categories in order to provide a clear point-of-reference for review.
Financial Statement Disclosures - This area includes all information regarding contributed programs or activities. Included here is information regarding depreciation methods, as well as a breakdown explanation between permanent restriction of held assets and unsold assets that have been donated under conditions of permanent endowment. The contribution of art and collectible items also would be included here.
Statement of Cash Flows - Tracks the movement of cash as it flows in and out of the entity. Both internal and external cash flows may be included.
Statement of Functional Expenses - This statement typically includes all information necessary to meet the needs, purpose, or mission of the organization. Expenses may include those administrative duties necessary for operation. Other information, such as fundraising and publicity expenditures, as well as membership development activities, will also be mentioned here as well.
Preparers of these financial statements must be aware of the differences between unrestricted net assets, temporarily restricted net assets and temporarily restricted support. Depending on the focus of a non-profit organization, the components may vary. However, complete financial statements should meet the minimum requirements listed above.
Financial Officers of non-profit organizations should maintain planning records and past analyses to create periodic financial reports. By doing this, the organization will be held internally accountable to maintain their mission; as well as meet the needs of the community they serve.