Terms To Know
- Assets represent what the nonprofit owns. Current assets are the sum of all assets that the nonprofit could convert to cash in less than one year. This includes cash and cash equivalents or accounts receivable. Long-term assets are the sum of all other assets, such as property, long-term certificates of deposit, or CDs.
- Liabilities represent what the nonprofit owes. Current liabilities are the sum of all money due within one year including debt. Long-term liabilities are the sum of all other liabilities.
- Net assets, or the equivalent of a nonprofit’s net worth, equals total assets minus total liabilities. Unrestricted net assets are the portion of net assets that are free from donor-imposed stipulations and used for general operations. Temporarily restricted net assets are the portion of net assets subject to donor-imposed stipulations that nonprofits must meet through actions and/or the passing of time. Permanently restricted net assets are the portion of net assets subject to donor-imposed stipulations that the organization must maintain in perpetuity.
Where To Find Financial Information
- Charity rating services. These online rating services are great starting points. You can learn about the nonprofits you are considering, particularly if those organizations are larger and well known. The services typically analyze financial statements as part of their rating methodologies.
- Annual reports. Many nonprofits voluntarily publish annual reports, and the reports tend to include financial information and a report on the year’s activities. The financial information could come from the IRS Form 990, or financial statements.
- IRS Form 990. This is perhaps the most accessible source of information on virtually any public charity with annual gross receipts of $25,000 or more. Nonprofits file a Form 990 annually, which offer a ton of information on a nonprofit’s finances, governance and oversight.
- Financial statements (audited or unaudited). Many nonprofits subject their financial statements to an auditor for outside review and testing. And other nonprofits likely have unaudited financial statements available for review.
- Budgets. By comparing the budget to financial statements, you will see a nonprofit’s progress and trends from year to year.
Larger organizations tend to make their financials available online. If you’re interested in smaller organizations, you should contact them directly. That way, you’re more likely to receive the information you want, and you’ll get insight into how the organization handles requests and questions.