This document provides an overview of nonprofit financial statements and accounting principles. It discusses the key financial statements including the statement of financial position, statement of activities, statement of cash flows, and notes. It describes the different types of assets, liabilities, and net assets that appear on the statement of financial position. The statement of activities shows revenue, expenses, and changes in net assets. The auditor's role and internal financial statements are also summarized. Basic accounting concepts for nonprofits like pledge recognition and functional expense allocation are explained.

1. Understanding Nonprofit Financial
Statements
Presented by: Scott Haumersen, CPA, Managing Partner

2. In General
• There are different types of nonprofit
organizations so presentations may vary
based on unique circumstances
• Differences may exist between internal and
external Financial Statements
• Generally Accepted Accounting Principles
(GAAP) apply including SFAS 116 & 117
along with other accounting industry
standards

3. Basic Nonprofit Financial
Statements According to GAAP
• The Statement of Financial Position
• The Statement of Activities
• The Statement of Cash Flows
• Notes to Financial Statements
Optional: Statement of Functional Expense

4. Auditor’s Role
• Provide an opinion on the GAAP Basis
Financial Statements
• Report deficiencies in internal control over
financial reporting
• Report certain information to audit
committees

5. Basic Internal Financial
Statements
• May include:
– Budget Analysis
– Departmental Cost Centers
– Projections
– Cash Flow Analysis

6. Statement of Financial Position
Pledges or Promises to Give
• Many times these items are not recorded on interim
financial statements
• Oral, but most commonly written agreements by
donors to contribute cash or other assets to the
organization
• May be Conditional or Unconditional
– Conditional – Generally depends on some future event to occur before
the promisor is bound (not recorded if there is more than a remote
possibility the future event will not happen)
– Unconditional – Generally the receipt of the promise is only contingent
on the passage of time
• May include restrictions

7. Statement of Financial Position
• Assets Restricted for Long-term Purposes
• Capital Campaign
• Temporarily restricted net assets

8. Statement of Financial Position
Long Term Debt
• Debt repayments in periods occurring after
the next fiscal year
• Also would include capital leases

9. Statement of Financial Position
Net Assets
• Unrestricted – Assets which are not restricted
either by donors or by law
– Also includes board designated funds
• Temporarily Restricted - Usage of is limited by
donor-imposed time or purpose restrictions
• Permanently Restricted – Assets which have been
restricted by donor or law to be maintained by the
organization in perpetuity
– Endowment Funds

10. The Statement of Activities
• Revenue Recognition
• Exchange Transaction
• Contributions
• By category of Net Assets
• Net Assets released from restrictions
• Functional Allocation

11. The Statement of Activities
• In-kind or Donated Goods or Services
– Donated goods are recorded at their fair value
• Catalogs
• Vendors
• Appraisals
– Donated services also recorded at fair value, if:
• Specialized – attorney, architect, plumber
• Would otherwise be purchased by the organization
• Unrealized Investment Income or Loss

12. The Statement of Cash-Flows
• Non-cash items
• Collections of Contributions restricted for
long-term purposes

13. The Statement of Functional
Expenses
• Required for Voluntary Health & Welfare
Organizations
• Others may adopt

14. Notes to the Financial
Statements
• Required by GAAP to provide additional
disclosures
• Summary of Significant Accounting policies
• Joint Cost Activities
• Management & General Costs
• Temporarily Restricted Net Assets
• Conditional Promises to Give
• Promises to Give

15. Ratio Analysis
• Financial profitability
• Liquidity
• Capital Structure
• Asset efficiency

16. Thank You!
Scott Haumersen, CPA, Managing Partner
Wegner CPAs
2110 Luann Lane
Madison, WI 53713
608.442.1925
scott.haumersen@wegnercpas.com