Blog · Board and management reporting
Nonprofit financial statements connect resources, restrictions, operating activity and cash. Follow a worked US nonprofit example through the statement of activities, financial position, functional expenses and cash flows.
Non profit financial statements show an organization's resources, obligations, activity and cash movements, with donor restrictions kept visible. Read the reports as one connected package: a rise in net assets does not by itself establish how much cash management can spend on next month's bills.
For a US nongovernmental nonprofit using GAAP, start with the reports below and their notes. FASB's nonprofit presentation update describes the two net asset classes and an expense analysis by both nature and function in one location. That analysis can appear in a separate statement, the activities statement or the notes.
| Report or disclosure | Business question | Export detail to retain |
|---|---|---|
| Statement of financial position | What do we own and owe at this date? | Asset, liability and net asset accounts |
| Statement of activities | What changed during the period? | Revenue, expenses and restriction releases |
| Expense analysis by nature and function | What did resources buy, and for which purpose? | Natural category, program and supporting function |
| Statement of cash flows | Why did cash change? | Operating, investing and financing movements |
| Notes | What qualifications affect the figures? | Restrictions, availability, commitments and policies |
The controller owns the ties. Program leaders review expense assignments, development confirms donor terms, and the finance director translates the evidence into funding decisions.
Consider an illustrative US community-learning organization for the fiscal year ended June 30, 2026. All amounts are USD. It has no investment gains, asset disposals or other changes outside the activity shown.
| Activity | Without donor restrictions (USD) | With donor restrictions (USD) | Total (USD) |
|---|---|---|---|
| Contributions recognized | 950,000 | 500,000 | 1,450,000 |
| Program fees | 350,000 | 0 | 350,000 |
| Restrictions released | 420,000 | -420,000 | 0 |
| Revenue and releases subtotal | 1,720,000 | 80,000 | 1,800,000 |
| Program expenses | -1,250,000 | 0 | -1,250,000 |
| Management and general expenses | -240,000 | 0 | -240,000 |
| Fundraising expenses | -160,000 | 0 | -160,000 |
| Change in net assets | 70,000 | 80,000 | 150,000 |
| Beginning net assets | 700,000 | 300,000 | 1,000,000 |
| Ending net assets | 770,000 | 380,000 | 1,150,000 |
The release reflects donor purposes or time requirements being satisfied. Its two entries cancel in the total column. Total external revenue is $1,800,000, expenses are $1,650,000, and the difference is the $150,000 change in net assets.
Rebuild the table with the first contribution line in row 2 and restriction columns B:C. The row total formula in D2 is:
=SUM(B2:C2)
Fill it down. In B9, calculate =SUM(B2:B4)+SUM(B6:B8); in B11, calculate =B9+B10. The same formulas work in column C. Do not add the row 5 subtotal twice.
Net assets without donor restrictions can include property and internally designated reserves. They are not simply spare cash. The separate nonprofit financial analysis explains how to assess operating funding and availability after the statements reconcile.
The organization's closing balances are:
| June 30, 2026 balance | Amount (USD) |
|---|---|
| Cash | 480,000 |
| Receivables | 260,000 |
| Prepaid expenses | 40,000 |
| Property and equipment, net | 760,000 |
| Total assets | 1,540,000 |
| Accounts payable and accrued expenses | 170,000 |
| Debt | 220,000 |
| Total liabilities | 390,000 |
| Net assets without donor restrictions | 770,000 |
| Net assets with donor restrictions | 380,000 |
| Total liabilities and net assets | 1,540,000 |
The proof is $1,540,000 - $390,000 = $1,150,000, matching ending net assets. Check period-end entries, omitted entities and account mapping if balances disagree. See the nonprofit balance sheet for more on financial position.
Natural expenses identify what was purchased; functions identify why. The same dollars appear in both views, so never add them together.
| Natural expense | Program (USD) | Management and general (USD) | Fundraising (USD) | Total (USD) |
|---|---|---|---|---|
| Salaries and benefits | 720,000 | 120,000 | 60,000 | 900,000 |
| Occupancy | 180,000 | 40,000 | 20,000 | 240,000 |
| Program supplies | 300,000 | 0 | 0 | 300,000 |
| Other expenses | 50,000 | 80,000 | 80,000 | 210,000 |
| Total | 1,250,000 | 240,000 | 160,000 | 1,650,000 |
The functional totals match the statement of activities, and the natural categories also sum to $1,650,000. Document how shared payroll and occupancy were assigned. The IRS Form 990 instructions require accurate expense reporting and documentation of allocation methods; they also explain reconciliation items between books and the return. Form 990 therefore needs its own tie to the statements.
The positive $150,000 activity result differs from operating cash because timing and noncash expenses intervene. Here is the complete bridge for this example:
| Cash bridge | Amount (USD) |
|---|---|
| Change in net assets | 150,000 |
| Add depreciation included in expenses | 80,000 |
| Subtract increase in receivables | -110,000 |
| Subtract increase in prepaid expenses | -20,000 |
| Add increase in payables and accruals | 30,000 |
| Operating cash flow | 130,000 |
| Equipment purchases | -60,000 |
| Debt principal repayments | -30,000 |
| Net change in cash | 40,000 |
| Beginning cash | 440,000 |
| Ending cash | 480,000 |
Adding the three activity groups gives $130,000 - $60,000 - $30,000 = $40,000. Beginning cash plus that change equals the $480,000 financial-position balance. Equipment purchases explain investing cash use; depreciation allocates cost to expenses without using cash in this period.
For the general relationship between results and cash, see financial analytics. The monthly financial report template provides a broader reporting layout; nonprofit reporting still needs the restriction detail illustrated here.
Bring a sample of your own statement exports and supporting expense detail to Covirage. Covirage maps the columns, its tools compute and check the revenue, expense and cash movements, and the external AI model explains the results with every figure traced to its rows. Create a free Covirage account and bring a sample of your own data.
See FP&A reporting for the supporting reporting workflow.
It serves a similar performance-reporting purpose, but tracks changes in a nonprofit's net assets rather than owners' earnings. It also distinguishes activity with and without donor restrictions. A release moves amounts between those classes without creating new total revenue.
Under US GAAP, expense information by nature and function must be presented together in one location. That can be a separate statement, the statement of activities or the notes. A familiar standalone functional expense report is one presentation option.
Form 990 is an IRS information return with its own reporting instructions. It can differ from the financial statements, including the treatment of some donated services. Reconcile it to the books rather than treating it as an interchangeable statement package.