Statement of Activities

If you've ever seen a for-profit income statement (revenue minus expenses equals profit or loss), the Statement of Activities is the nonprofit version — but with an important twist. Instead of showing profit, it shows the change in net assets, and it breaks everything down by whether funds are restricted or unrestricted.

The statement has two main sections. The revenue section shows all incoming money — donations, grants, program fees, investment income, special event revenue — categorized by whether it's with or without donor restrictions. The expense section shows where the money went, typically organized by program services versus supporting services (management/general and fundraising). At the bottom, you see the change in net assets: did your organization's financial position improve or decline during this period?

One concept unique to nonprofits is "net assets released from restrictions." When you fulfill the conditions of a restricted gift (by spending it on the designated purpose or when the time restriction expires), the money moves from the "with restrictions" column to the "without restrictions" column. This release is shown as a negative in the restricted column and a positive in the unrestricted column — it's not new money, just a reclassification.

The Statement of Activities tells the story of your nonprofit's year. Did you bring in more than you spent? Are you growing your unrestricted reserves, or depleting them? What percentage of your spending goes to programs versus overhead? Every grant application, every board meeting, and every audit centers on this document.

Funders particularly care about the program expense ratio — the percentage of total spending that goes to actual programs versus administrative costs and fundraising. While the old rule of thumb (80% to programs) has been challenged, a very low program ratio still raises red flags.