Your nonprofit’s board of directors has an important responsibility: providing financial oversight to help ensure your organization remains financially healthy and accountable.
But how can board members make informed decisions if they don’t have the right financial information?
Regularly reviewing nonprofit financial reports is one of the most important ways your board can fulfill its financial oversight responsibilities.
And the good news? Board members don’t need to be accountants to understand the basics!
Here are five financial reports every nonprofit board should be familiar with.
1. Statement of Financial Position (Balance Sheet)
The Statement of Financial Position provides a snapshot of your nonprofit’s financial health at a specific point in time.
It shows three important categories:
- Assets: What your organization owns, such as cash, investments, and equipment.
- Liabilities: What your organization owes, including unpaid bills and loans.
- Net Assets: The difference between assets and liabilities, categorized based on donor restrictions.
Why your board should review it: This report helps board members evaluate your organization’s financial stability, available resources, and outstanding obligations.
2. Statement of Activities (Income Statement)
The Statement of Activities shows your nonprofit’s revenue, support, expenses, and changes in net assets over a specific period.
Think of it as your organization’s financial performance report.
It helps answer questions such as:
- Are revenues keeping pace with expenses?
- Is the organization operating with a surplus or deficit?
- How has our financial position changed over time?
Why your board should review it: Understanding financial activity helps leadership identify trends, evaluate financial performance, and make informed decisions.
3. Budget vs. Actual Report
Creating an annual budget is important, but reviewing how actual financial results compare to that budget is equally essential.
A Budget vs. Actual Report compares planned revenues and expenses with what actually occurred.
For example, if fundraising revenue is lower than expected or program expenses are higher than anticipated, this report helps identify those differences.
Why your board should review it: Regular budget comparisons allow leadership to identify potential financial concerns early and make adjustments when necessary.
4. Statement of Cash Flows
A nonprofit can appear financially healthy on paper and still experience cash flow challenges.
The Statement of Cash Flows shows how cash moves into and out of your organization through operating, investing, and financing activities.
It helps answer an important question:
Does our nonprofit have enough cash to meet its financial obligations?
For organizations with tight operating budgets or seasonal fundraising revenue, understanding cash flow is particularly important.
Why your board should review it: This report helps board members evaluate liquidity and understand how the organization generates and uses cash.
5. Functional Expense Report
Nonprofits need to understand not only how much they’re spending, but also how those expenses support their activities.
Functional expense reporting categorizes expenses into areas such as:
- Program services
- Management and general activities
- Fundraising
This information may be presented in a separate Statement of Functional Expenses or elsewhere in the financial statements.
Why your board should review it: Understanding how resources are allocated helps leadership evaluate spending priorities and communicate financial information to stakeholders.
How Often Should a Nonprofit Board Review Financial Reports?
For many small nonprofits, reviewing financial reports at least quarterly is a reasonable starting point, with monthly reporting providing even greater visibility.
The appropriate frequency depends on your organization’s size, financial complexity, risks, and board meeting schedule.
At a minimum, I recommend having financial records updated and reconciled monthly so accurate information is available whenever leadership needs it.
And remember: Financial reports are only as reliable as the bookkeeping behind them!
Frequently Asked Questions
What is the most important financial report for a nonprofit board?
There isn’t just one! The Statement of Financial Position, Statement of Activities, and Budget vs. Actual Report are especially useful for routine financial oversight. Together, they provide a picture of financial stability, operating performance, and progress against the budget.
Do small nonprofits need all these financial reports?
Even small nonprofits benefit from understanding these financial areas. However, the format, level of detail, and reporting frequency should be appropriate for the organization’s needs. Not every report needs to be presented separately at every board meeting.
Who is responsible for preparing nonprofit financial reports?
Financial reports may be prepared by a bookkeeper, accountant, finance staff member, or qualified volunteer. Regardless of who prepares them, nonprofit leadership and the board remain responsible for appropriate financial oversight.
Accurate Bookkeeping Leads to Better Financial Decisions
Your nonprofit’s financial reports should do more than satisfy reporting requirements. They should provide meaningful information that helps your leadership team make confident decisions.
At Busy Bean Bookkeeping®, I understand how important accurate, timely financial information is to nonprofit organizations.
With professional experience in nonprofit and government accounting, including general ledger accounting, reconciliations, and financial reporting, I help nonprofits maintain organized financial records that support effective financial management.
Whether your organization needs ongoing monthly bookkeeping, reliable financial reporting, or help getting its books back on track, I’d love to learn more about your needs.
[Explore My Nonprofit Bookkeeping Services]