When a bank or a grantor requests a nonprofit agency's financial reports, what reports are they really asking for?
The following reports meet the terms of the request for your nonprofit financials:
· Profit and Loss (P&L) - shows organizations expenses vs. its revenue. P&L financial reports are great tools for monitoring over and under spending. P&L financial reports can be designed to monitor grant expenditures by adding a third variable the grant budget, then the P&L monitors revenue received against anticipated revenue and budget expense line items against actual expenditures.
· Income Statement - shows the amount of change in each category of net assets(unrestricted net assets, temporary restricted and permanently restricted net assets).
· Statement of Cash Flows - indicates cash separated by; cash used for operations,investments, and financing activities
· Balance Sheet - shows an organization's total assets, total liabilities and provides totals for unrestricted net assets, temporary restricted and permanently restricted net assets.
Definitions of different types of funds:
What are unrestricted funds/assets?
They are dollars free of restrictions - You can use the funds any way the nonprofit board of directors sees fit.
What are temporary restricted funds/assets?
They are dollars that have funder imposed restrictions - The restrictions can have a time limit or a restricted purpose (how the donor would like to see the funds spent). When you write grants for temporary restricted funds, you have specified a need/purpose and the funder is agreeing to fund you based on the specific need/purpose. Once the need/purpose is met the remaining funds can be moved to "unrestricted".
What are permanently restricted funds/assets?
They are dollars with restrictions that can never be removed; an example is an endowment fund. Endowment funds are funds where the principal must remain intact and can never be reduced. Donations of land and buildings for permanent use by the organization are examples of permanently restricted assets.
Here is My Monthly Nonprofit Podcast by Subscription ($9.95/month) with the exception of My Interviews with Nonprofit Organizations which are Free
To View Podcast Before Subscribing Press the Link Below!
Press Link to Subscribe Now!
60 second and 60 minute Education & Compliance Tidbits and Trainings to review at your leisure .... Updated Monthly