Financial Statements
"Many nonprofit board members may not know the first thing about a balance sheet. Or an income statement. Or cash flow. Their first reaction upon seeing columns of figures may be to yawn and pass the papers on to someone else.
But for board members, there is no one else. Board members of nonprofit organizations must set and monitor the organization’s full array of goals.
Like it or not, that includes getting involved in the financial results of the operation. In order for board members to carry out their fiduciary responsibilities effectively, they must be able to read and understand the financial statements that are produced periodically - typically monthly - by management.
So, are board members doomed to boredom and bafflement? Hardly. Financial statements are easy enough to understand - if you know what to look for."
Taken from "Understanding Nonprofit Financial Statements" by Steven Berger, CPA
What are Financial Statements & Why are They Important?
Financial statements reflect the agency’s financial well-being.
- The Profit and Loss Statement, or Income Statement, reports all income and expenses on a monthly basis, with the current year-to-date figures also reported. It will also reflect whether the agency has more money being spent than what is coming in.
- The Profit and Loss vs. Budget Statement compiles the year-to-date actual income and expenditures versus the amounts budgeted for the year-to-date. Additionally, it compares the difference between the actual and budgeted figures in both dollars and percentages.
- The Balance Sheet shows the assets, liabilities, and net equity of the agency as of the end of the month.
Financial statements provide a detailed picture of the agency.
It is important, as a board member, to carefully review the reports, especially taking note of how the agency’s money is spent. As a board member, you are expected to provide oversight, to ensure good stewardship of the funds awarded to the agency. If funds are being spent in a way that does not align with the agency mission, vision, and goals, it is the board’s responsibility to ask questions, and, if necessary, take action. Additionally, if there does not appear to be adequate funds available to accomplish the agency’s mission, vision, and goals, the board should focus their efforts on increasing funding for the agency through active fundraising and donations.
RVAP's unique position
RVAP is in a unique position compared to most nonprofit agencies, because we are a commission of the University of Iowa Student Government. As a Priority 1 commission of the UI Student Government, we receive top priority in actual funds allocated to our program generated from student fees. This also allows RVAP to receive in-kind office space, utilities, custodial services, payroll and benefit services, and grant administration from the University of Iowa. RVAP also uses the University’s Federal tax identification number allowing us to receive discounts on a variety of purchases, including office supplies and equipment. RVAP does not file a tax return, such as Federal 990, which is required of most nonprofit organizations.
How does this apply to the financial statements?
As part of the University, we have no outlay for rent, building maintenance, or utilities. This also means we do not have to take out a line of credit to cover our payroll costs for each month, which is a common practice in many nonprofits or for profit businesses. However, we are required to complete an annual audit (separate from the University) in order to comply with our Federal grant standards.
