How to Read a Nonprofit Statement of Activities

The non-profit statement of activities reads much like an Income Statement in for-profit organizations.

Instead of breaking down the activities into Revenue, Cost of Sales, General and Administrative Expenses, and Other Income and Expenses, the non-profit statement breaks down income and expenses into three major buckets:

  • Program revenue and expenses
  • Fundraising revenue and expenses
  • General & Administrative expenses

Nonprofit Statement of Activities: Program Revenue and Expenses

Perhaps the most important bucket for a non-profit is the cost of programs. Donors want to see that a non-profit is using its resources to further the mission and provide programs for the community it supports. Often programs will typically spend more money than they collect.

Depending on the organization, the programs may charge an annual fee or ticket price to bring in revenue for the organization, but these are usually minimal compared to the fundraising revenue. The mission of a non-profit is to provide continued service to the community without a profit motive like most businesses.

The expenses that are included in programs are anything directly related to providing their services. This includes any staff and a portion of the supervisory staff, as well as any related costs. Related costs are costs such as insurance, all or a portion of the building costs, and any direct program supplies are all considered the cost of programs.

Fundraising Revenue and Expenses

Fundraising is the other major bucket on the non-profit statement of activities. When organizations hold events to raise funds for their programs, the costs related to hosting these events belong in this category. This category is very easily identified and easy to classify correctly. The other major fundraising expense that an organization incurs is the cost of employing a fundraising coordinator, as well as any other staff members that are in charge of raising funds on an ongoing basis outside of certain events.

The fundraising efforts are the major source of funding for a non-profit’s programs. The donors want to know how much of their contribution is being used towards programs.

It’s no surprise that donors don’t want to find that their contribution is just being used for more fundraising. It’s important for an organization to monitor how much is being spent on fundraising vs. what it brings in and what it spends on programs. A general guideline to follow: 75% of collected revenue should be used towards the cost of programs.

General & Administrative Expenses

The last section of the non-profit statement of activities is the general and administrative expenses. With any business, there are other costs of doing business that do not directly benefit the donor or community.

There is a certain level of administrative time that an organization needs to conduct. This includes things like accounting and audit costs, employee training, administrative time for employees to keep necessary records, any supplies needed to complete these tasks, and software needed to track donors or certain program items. This should be a minimal piece of the overall expenditures for an organization but needs to be identified in their financials.

It’s important that an organization tracks the sources and uses of funds in these three groups. Programs, Fundraising, and G&A are the three major categories and have different benefits for the community and donors. For an organization whose mission is to benefit the community rather than turn a profit, they need to ensure that the funds are being used in the right way.

Click here to download the full guide on nonprofit outsourcing.

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