Statement of Activities

What Is A Statement Of Activities?

A Statement of Activities details financial performance on nonprofit organizations throughout a fiscal year. It contains data on operating earnings, operating costs, non-operating revenues and expenses, and changes in net assets. Pledges, accruals (non-cash, long-term liabilities), depreciation, and subsidiary income and expenses are all included in this report.

The statement of financial activities is a document that lists a nonprofit organization's income and expenses for a given reporting period. It is similar to an income statement for for-profit businesses. These two documents provide a brief overview of how the organizations' net assets have changed during that given period.

• A statement of activities (SOA) unveils nonprofit organization's income and expenses over a specific period. It showcases fund allocation toward achieving organizational goals.
• It is essential for the financial operations of a nonprofit organization, much like an income statement in for-profit entities.
• It helps determine whether a company can obtain enough funding for operational support. Additionally, it highlights necessary changes (rising income, falling costs, or both) to fund critical projects.
• SOAs enable enterprises to make well-informed decisions.

Statement Of Activities For Nonprofit Explained  

A Statement of Activities (SOA) reveals the income and expenses of nonprofit organization over a reporting period. It demonstrates how the funds are used to achieve the organization's goals. It is similar to an income statement for a for-profit organization. An income statement is used to show a company's profitability. A nonprofit organization is driven more by a mission or a service than financial success. The SOA contrasts an organization's net assets with its income and expenses for a fiscal year. 

All firms must closely monitor their financial performance in order to make wise judgments. The nonprofit sector is no exception to this rule. For management to comprehend the bigger picture and improve the organization's performance, revenues and expenses must be reported. A SOA is essential for the financial operations of a nonprofit organization, much like an income statement.

It also helps determine whether a company can obtain enough funding to support its operations and identify what has to change (rising income, falling costs, or both) to fund critical projects. It helps identify certain programs that cost more and have a low success rate. The organization can adjust its activities to succeed in its ventures. Conversely, if a project does well, the organization can invest more in it and apply the insights to other projects. In essence, they help the organization make informed decisions.

Examples  

Let us consider these examples to understand the concept better:

Example #1 

Let us consider the SOA of Sunshine Nonprofit Organization for the year ended on June 30, 2022.

Statement of Activities of Sunshine Nonprofit Organization for the year ended on June 30, 2022

Basis	Without donor restrictions	With donor restrictions	Total
Revenues Grants and Contribution revenues   Net assets released from restrictions   Total revenues	$20000     5000       25000	$5000     (5000)	$25000           25000
Expenses   Program service expenses   Fundraising   Total expenses	$2000     $500     $2500	-         -	$2500
Change in net assets	$22500	-	$22500

In the SOA for the year ended June 30, 2022, the funds received via grants and net assets released from restrictions total $25,000. Expenses, including significant programs, fundraising, administration, and general, total $2,500. Consequently, the increase in net assets of $22,500 is derived after deducting both revenues and expenses.

Example #2

The image below is the SOA of a nonprofit organization in Washington, DC, called Freedom House (2015). The organization performs research and supports democracy, political freedom, and human rights. Initially founded in October 1941, the organization describes itself as a clear voice for freedom and democracy worldwide.

Source

Since it is nonprofit and primarily funded by the United States government, government grants (federal grants) are its primary source of revenue, followed by international public agencies, corporations, and foundations. Their expenses prioritize program services as part of their mission, followed by supporting services such as fundraising and indirect costs. Revisions of the changes in net assets, then follow it. The expenses, revenues, and changes in net assets help the management achieve important objectives.

Template 

There are three key sections in the SOA:

1. Revenue/Income 
2. Expenses
3. Change in Net Assets

A sample template would look like the following:

Statement of Activities

Nonprofit' name and period

Sections	Without donor restrictions	With donor restrictions	Total
Revenues
Expenses
Change in net assets

Statement Of Activities vs Income Statement

The differences between the SOA and income statement are listed below:

Key Points	Statement of Activities	Income Statement
Concept	An SOA shows nonprofit organization's revenue and expenses over a reporting period.	A statement outlining the company's income and expenditures is called an income statement.
Aim	The purpose of the SOA is to provide users with information about the changes in the net assets.	It displays a company's profitability or loss over a specific time frame.
Applicability	SOA applies to nonprofit entities.	Income statements are applicable to for-profit organizations.
Frequency	SOA is computed annually.	Income statements, unlike other financial statements, are published quarterly or monthly.

Frequently Asked Questions (FAQs)  

Recommended Articles

This article has been a guide to what is Statement Of Activities. Here, we explain its examples, template, and comparisons with income statement. You may also find some useful articles here –

• Nonprofit vs For Profit Organizations
• Not-For-Profit Organization
• Non Profit Accounting