Nonprofit Finance Flashcards
(15 cards)
Receivable
Receivable Defined: A receivable represents money that your organization is entitled to but has not yet received.
For a multi-year grant, this is the total amount promised by the funder, recorded as revenue in the fiscal year when the grant agreement is signed.
Why It Decreases: Each year, as the funder disburses payments, the receivable decreases because those payments are now actual cash (or revenue) received. For example:
In FY22, the full $300,000 multi-year grant is recorded as a receivable.
In FY23, when $100,000 is paid, the receivable drops to $200,000.
This continues until the full amount is received, at which point the receivable reaches zero.
Accrual Basis Accounting
Accrual Basis Accounting: Revenue is recognized when it is earned (e.g., when a grant agreement is signed or a funder pledges support), regardless of when the cash is received.
If your organization follows accrual accounting, accruals/pledges will typically appear in your financials as receivables, making it crucial to align your grant tracking with Finance to understand how they are managed.
Accrual
The amount pledged but not yet received.
Cash Received
Cash Received: Actual funds disbursed by the funder and deposited in your account.
“Grant Dollars Raised” in Finance means
How much has been accrued
“Grant Dollars Raised and Collected” In Development means
How much has been accrued (pledged/pending) AND collected in cash
Generally Acceptable Accounting Principles
a set of standardized guidelines for financial accounting and reporting in the United States. They ensure consistency, transparency, and comparability in financial statements across organizations, including nonprofits.
For nonprofits, GAAP compliance is essential to:
- Demonstrate accountability to donors, funders, and regulators.
- Provide accurate and transparent financial information for decision-making.
- Prepare for audits and maintain eligibility for funding or grants.
Revenue Recognition - Unconditional Pledges
Recorded as revenue when promised, not when received.
Revenue Recognition - Conditional Pledges
Not recorded as revenue until conditions are met (e.g., achieving specific program outcomes).
Classification of Net Assets - Without Donor Restrictions
Funds that can be used for general operations.
Classification of Net Assets - With Donor Restrictions
Funds restricted by donors for specific purposes or timeframes.
Key Considerations for Development Teams x Finance Reporting
Tracking Restricted Funds
Ensure donor restrictions (program-specific, time-based) are clearly communicated to Finance and tracked accurately in your systems (e.g., Salesforce).
Reconciling Donations
Development teams may focus on pledges and cash received, while Finance focuses on revenue recognition (accruals). Regular reconciliation ensures both teams are aligned.
Grant and Donation Reporting
Development must provide detailed reports for funders, while Finance prepares broader financial reports. Collaborate to meet both sets of requirements.
Statement of Financial Position (aka Balance Sheet)
a snapshot of an organization’s financial health at a specific point in time. It shows what the organization owns, owes, and its net worth, giving stakeholders an overview of its financial position.
Statement of Activities (aka Income Statement)
It shows the revenues, expenses, and changes in net assets over a specific period (e.g., a fiscal year), providing insight into how the organization’s financial situation has changed during that time.
Net Assets
Difference between revenues and expenses
