Reporting and Operations
Accurate, timely, and readable internal reports that present relevant financial information, with enough context for thorough understanding, are imperative for good management and critical for knowing what’s going on with your organization financially.
Reports generated for the board of directors (or trustees) should be agreed upon by the staff and board: which reports, what they will look like, who will get them, and how often. This inventory of monthly or quarterly reports should minimally include: the Statement of Financial Position (SOP--sometimes called the balance sheet) and the Statement of Financial Activities (SOA--sometimes called the profit and loss report, income and expense report, or budget report). For the general board, these should be one-page summary reports with narrative notes and supplemented with specific focus detail reports as needed. Examples include: income and expense (profit and loss) line items by activity, cash flow projection, fundraising progress, and program or project reports.
To be strategically useful, reports should show numbers in context so a board member could answer the following questions about the SOA report: What was last year’s total? What is the annual budget for this year and what percentage of the budget is represented by the year-to-date amounts? How do we expect to end the year and how does that compare to the approved budget? What are the reasons for the significant variances? What is the status of restricted revenue, if any, as distinct from unrestricted?
The most useful SOP reports include columns showing restricted and designated funds separately from unrestricted. They include a prior year comparative and narrative explanations of significant changes or unusual balances. Good financial management requires even small and midsize organizations understand and use the SOP report. This report reveals critical information about cash balances, investments, receivables, payables, and the overall financial health of the organization and shows the cumulative results of all years of operation. From this report a board member could tell: Do we have enough cash to pay our bills? Are receivables or payables around the same as usual? (If different, narrative notes should explain why.) Are restricted funds protected? What portion of net assets is available for operations versus restricted or invested in property, plant, and equipment?
Managers and committee members should receive more detailed reports and may receive them more frequently than the general board. Staff and committee chairs should decide what reports they need, how often, and at what level of detail to fulfill their management and oversight responsibilities. For example, the finance committee usually sees more detail than the general board; the fundraising committee would see a specific fundraising report produced by either the finance office or the development office; and the marketing committee may want to see detail regarding the organization’s earned revenue from program activities.
Formatting reports for maximum readability is a very important consideration often overlooked. All reports being sent to board members, finance committee members, staff managers, or other stakeholders should be:
- labeled with the organization name and title of the report.
(Many board members serve on more than one board. Including the organization name and report title is not only courteous, but is an indicator of the care the organization takes in its reporting function.)
- dated, both in terms of the “as of” date of the data contained as well as the date the report was printed or generated.
(In Excel, a footer can be added to note “Printed on [Date]”.)
- displaying column headings and significant row totals in bold type for emphasis.
(Focusing attention on significant totals assists the reader with comprehension of the data and with gauging what is the most important information.)
- checked to ensure the page set up is “printer friendly” and column headers and row labels are carried over if there is more than one page to the report.
(Besides wasting paper, it’s very inconvenient and doesn’t help readers to understand the report if that last column doesn’t make it onto the page, or they have to keep flipping to the first page to check what’s in each column on page two. Printer friendly reports also indicate courtesy and care as noted above.)
In smaller organizations with only one or two staff members, or a volunteer staff, it is especially important to decide in advance and set expectations regarding report requirements. Staff can then allow adequate time to produce the desired reports and not worry about being disrupted by ad hoc reporting requests.
No matter how small the organization, high-quality financial reports lead to better financial management. Good reports include relevant and useful content presented in a reader-friendly format.
The following links related to Nonprofit Accounting Basics pages provide greater detail on how to read each report as well as recommended formatting:
© 2007 Elizabeth Hamilton Foley