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What is a Statement of Activities?

Statement of Activities

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Statement of Activities

A Statement of Activities is a financial statement commonly used by nonprofit organizations. It is analogous to the income statement used by for-profit entities. The Statement of Activities provides detailed information about the revenues (often referred to as “support” in the nonprofit realm) and expenses of the organization, allowing stakeholders to understand how the nonprofit’s funds are sourced and utilized during a specific period.

Key elements of a Statement of Activities include:

  • Support and Revenues: This section details the various sources of revenue for the nonprofit. Common sources include:
    • Contributions and donations
    • Grants
    • Membership dues
    • Program service revenues (e.g., fees from services or programs the nonprofit offers)
    • Investment income
    • Special events revenue
    • Sales of assets or merchandise
  • Expenses: This section breaks down the costs incurred by the organization in achieving its mission. Expenses are often categorized by function, such as:
    • Program services (costs directly related to fulfilling the nonprofit’s mission)
    • Management and general (administrative and operational costs)
    • Fundraising (costs associated with raising money for the organization)
  • Change in Net Assets: This is the difference between the total revenues and total expenses. It’s a measure of whether the nonprofit’s financial position improved or declined over the period.
  • Net Assets: Net assets are similar to equity in for-profit companies. They represent the residual interest in the organization’s assets after liabilities are deducted. The Statement of Activities might show changes in:
    • Unrestricted net assets (funds that can be used for any purpose)
    • Temporarily restricted net assets (funds that have donor-imposed restrictions that will lapse with time or upon a certain event)
    • Permanently restricted net assets (funds that have donor-imposed restrictions to maintain the principal in perpetuity)
  • Time Frame: Just like income statements, a Statement of Activities can be prepared for any period, such as monthly, quarterly, or annually.

The Statement of Activities is essential for donors, grantors, board members, and other stakeholders, as it provides a clear picture of how a nonprofit is generating and using its resources. When paired with other financial statements, such as the Statement of Financial Position (equivalent to the Balance Sheet in for-profit entities), it offers a comprehensive view of the organization’s financial health and sustainability.

Example of a Statement of Activities

Let’s consider a fictional nonprofit organization named “Helping Hands for Education” that focuses on providing educational resources to underserved communities. Here’s a simplified version of their Statement of Activities for the year ending December 31, 2023:

Helping Hands for Education
Statement of Activities
For the Year Ended December 31, 2023

Support and Revenues:

  • Contributions and Donations: $300,000
  • Grants: $200,000
  • Membership Dues: $50,000
  • Program Service Revenues (from educational workshops): $30,000
  • Investment Income: $10,000
  • Special Events Revenue (after deducting expenses): $40,000
  • Total Support and Revenues: $630,000

Expenses:
Program Services:

  • Educational Resource Distribution: $250,000
  • Workshops and Training: $100,000
  • Total Program Services: $350,000

Supporting Services:

  • Management and General: $100,000
  • Fundraising: $50,000
  • Total Supporting Services: $150,000
  • Total Expenses: $500,000

Change in Net Assets: $130,000 (Total Support and Revenues of $630,000 minus Total Expenses of $500,000)

Net Assets, Beginning of Year: $200,000
Net Assets, End of Year: $330,000 (Net Assets at Beginning of Year plus Change in Net Assets)

From this Statement of Activities, stakeholders can deduce:

  • “Helping Hands for Education” raised a total of $630,000 in support and revenues in 2023.
  • The organization spent $500,000, with the majority ($350,000) going directly to program services that align with its mission.
  • The net assets (essentially the nonprofit’s retained earnings) increased by $130,000 over the year.
  • By the end of 2023, the total net assets of the organization amounted to $330,000, which represents the financial resources it has accumulated over time.

This statement offers a clear insight into the financial activities and overall health of the nonprofit, making it a crucial tool for donors, board members, and other interested parties.

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