4 Important But Basic Financial Statements

Executives and board members alike generally don't get much joy from financial reporting. They would rather focus on how to best fulfill their organization's mission yet, in order for that to become a reality, the fact of the matter is that these sometimes tedious tasks are a necessary part of any nonprofit.

As Marci Thomas and Kim Strom-Gottfried explained in their book "The Best of Boards," all nonprofits have at least three or four financial statements that must be completed if the organization is to meet federal and state regulations. These statements, which must be read together to have a complete picture of the organization, were described by Thomas and Strom-Gottfried:

• Statement of Financial Position: Also known as a balance sheet, this statement reports the organization’s assets, liabilities, and net assets at a specific point in time (usually at the end of the organization’s fiscal year).
• Statement of Activities: This statement reports the results of operations (revenues and expenses) and change in net assets for the year.
• Statement of Cash Flows: This statement provides information about the cash receipts and disbursements of the organization that result from operating activities, financing activities, and investing activities.
• Statement of Functional Expenses: This statement provides information about the organization’s expenses by function and by natural classification.