What Is a Nonprofit Balance Sheet?

It is calculated by dividing liquid assets (cash, marketable securities, and receivables) by current liabilities. This metric is particularly relevant for nonprofits with limited inventory, as it focuses on the most liquid assets. Regular evaluation of liquidity ratios ensures adequate resources to cover immediate financial commitments and maintain operational stability. The Statement of Activities is an important financial statement for nonprofit organizations. It provides a detailed overview of the revenue and expenses of the organization for a specific reporting period.

What Is a Nonprofit Balance Sheet? Breaking Down This Report

Although the selected YMCA has a higher-than-average contributions and grants ratio, it is not high in an absolute sense, with most revenues continuing to come from program fees and membership dues. The fundraising efficiency ratio is less than the peer group average, but well above the minimum recommended by charity watchdog groups. Overall, both https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ the trend and benchmarking analyses suggest nothing is out of the ordinary in this year’s liquidity, operating, or spending ratios.

• They can provide tailored guidance to meet your organization’s specific needs and help navigate the complexities of nonprofit financial management.
• Implementing a donor dashboard can further enhance donor confidence by providing them with clear insights into how their funds are being utilized.
• With regard to liquidity, the selected YMCA is very close to the peer group average for the months of spending ratio and has a cash position near the top of the peer group distribution.
• The accounting approach stipulated here is very similar to the equity method of accounting, which is described in Accounting Principles Board (APB) Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock.
• Working with an accounting partner experienced in nonprofit compliance can provide valuable protection.
• The careful management of permanently restricted net assets is essential not only for compliance with legal and ethical standards but also for ensuring the financial and operational stability of the organization in the long run.

Practical Strategies for Funding Your Nonprofit’s Operating Reserves

This calculation provides a more accurate measure of a nonprofit’s financial position compared to just total assets. One benefit of trend analysis is that it identifies deviations in the ratios, such as the unusually high liquidity values in Year 1. A 46% decline in cash from Year 1 to Year 2 would almost certainly merit investigation.

Nonprofit balance sheet insights

Furthermore, a recipient organization acts as an agent for, and on behalf of, a beneficiary if it agrees to solicit assets from potential donors specifically to be used by the beneficiary and to distribute those assets to the beneficiary. A recipient organization also acts as an agent if a beneficiary can compel the organization to make distributions to the beneficiary or on behalf of the beneficiary. If the foundation’s donors give it variance power, the right to give the funds to other beneficiaries, the hospital has no revenue until the foundation directs the funds to the hospital. Otherwise, the issue turns to whether the hospital has an economic interest in the foundation.

If so, gifts to the foundation become hospital revenue in the form of an increase in the net assets of the recipient organization. Without the economic interest, the hospital records the gifts to the foundation as assets and contribution revenue. Through its Nonprofit Sector in Brief report series, accounting services for nonprofit organizations NCCS shed light on the size and finances of nonprofits.