Understanding Nonprofit Financial Statements: Key Reports Every Nonprofit Should Know

Key Takeaways

• Nonprofit financial statements are essential for transparency, accountability, and informed decision-making.
• The four required GAAP statements provide a full view of financial position, mission performance, cash activity, and expense allocation.
• Nonprofit reporting differs significantly from for-profit accounting due to donor restrictions, functional expense reporting, and fund accounting.
• A structured preparation process helps nonprofits produce accurate, compliant statements that support audits, grant reporting, and board oversight.
• Limelight complements accounting systems by offering budgeting, forecasting, real-time fund tracking, and deeper analysis that builds on these statements.
  

Nonprofit financial statements do more than satisfy compliance requirements. They show how well an organization is managing its resources, funding its programs, and sustaining its mission. Yet many nonprofit leaders struggle to interpret these statements clearly or connect them to day-to-day decisions.

When financial statements are incomplete, outdated, or difficult to understand, it becomes harder to answer essential questions: Are programs adequately funded? Do restricted gifts align with donor intent? Is the organization running a surplus or drifting toward a deficit? These gaps can affect board oversight, donor confidence, and long-term stability.

Accurate, well-prepared nonprofit financial statements provide clarity. They help CFOs, finance teams, and executive leaders monitor an organization’s financial health, track restricted and unrestricted resources, and communicate fiscal responsibility to stakeholders. They also form the foundation for budgeting, forecasting, and grant reporting.

This article breaks down the four key non profit financial statements and explains how they work together to support financial transparency and mission delivery.

The Four Core Financial Statements for Nonprofits

U.S. nonprofit organizations that are subject to audit or meet certain size thresholds are required to prepare four core Generally Accepted Accounting Principles (GAAP) financial statements, as governed by FASB ASC 958 (Not-for-Profit Entities).

These statements work together to give leaders, boards, and donors a clear view of financial position, mission performance, cash activity, and how funds are allocated. Each statement answers a different question about organizational health, and together they form the foundation for compliance, oversight, and planning.

Below is a breakdown of each statement.

Statement of Financial Position

Statement of Financial Position example

The Statement of Financial Position is the nonprofit version of a balance sheet. It presents the organization’s financial position at a single point in time by listing what it owns, what it owes, and the net assets available for mission activities. This report is essential for understanding liquidity, resilience, and long-term stability.

This statement follows FASB ASC 958-210, which requires nonprofits to classify net assets based on donor restrictions.

Assets

Assets include everything the organization owns and can use to support its mission.

• Current assets: cash, receivables, grants due within 12 months, short-term investments
• Non-current assets: buildings, equipment, long-term investments, endowment holdings

A healthy liquidity position (strong current assets relative to current liabilities) indicates capacity to meet program and operational commitments.

Liabilities

Liabilities reflect the organization’s obligations.

• Current liabilities: accounts payable, accrued payroll, short-term debt, upcoming grant deliverables tied to conditional funding
• Non-current liabilities: long-term loans, notes payable, multi-year lease obligations (as required under ASC 842 for operating and finance leases)

Understanding liabilities helps leaders assess risk exposure and debt capacity.

Net assets

Net assets represent the residual value after subtracting liabilities from assets.

Under FASB ASC 958, net assets fall into two categories:

• Without donor restrictions: funds the nonprofit can use at its discretion
• With donor restrictions: time-restricted, purpose-restricted, or permanent endowments

Note: Net assets were formerly broken into unrestricted, temporarily restricted, and permanently restricted prior to ASU 2016-14, which collapsed them into two categories effective for fiscal years beginning after December 15, 2017.

Why it matters:
This statement allows nonprofit leaders to evaluate liquidity, reliance on restricted funding, and long-term financial flexibility. Following ASU 2016-14, nonprofits must also disclose the availability and liquidity of resources to meet operating needs.

The Statement of Financial Position shows a snapshot in time, but it doesn’t explain how the organization arrived there. The Statement of Activities fills that gap.

Statement of Activities

Statement of Activities example 

The Statement of Activities is similar to an income statement, but it reflects mission delivery rather than profit. It reports revenue, expenses, and changes in net assets over a fiscal period.

This statement follows FASB ASC 958-225, which requires reporting by net asset class.

Revenues

Nonprofit revenue streams often vary across:

• Contributions: individual donations, corporate giving, major gifts
• Grants: government awards and private foundation grants
• Program service revenue: membership dues, tuition, service fees
• Investment income: endowment returns, interest, dividends

Contributions must be reported based on whether they include donor-imposed restrictions.

Expenses

Expenses must be categorized to reflect operational strategy:

• Program services: costs directly supporting mission activities
• Management and general: administrative oversight, finance, HR
• Fundraising: donor outreach, events, campaigns

Tracking these categories is required for both GAAP reporting and Internal Revenue Service (IRS) Form 990.

Changes in net assets

The difference between revenue and expenses results in either:

• Increase in net assets (surplus): demonstrating financial growth and sustainability
• Decrease in net assets (deficit): indicating spending exceeds available resources

This helps boards assess sustainability and financial efficiency.

Why it matters: It shows how effectively the nonprofit converts funding into mission impact, which is key for donor relationships and grant renewals.

While the Statement of Activities explains performance on an accrual basis, it doesn’t show actual cash movement. That clarity comes from the Statement of Cash Flows.

Statement of Cash Flows

Statement of Cash Flows example

The Statement of Cash Flows shows actual cash inflows and outflows over the fiscal period, organized by operating, investing, and financing activities. This is essential for understanding whether the nonprofit's accrual-based surplus or deficit translates into actual cash availability for operations.

Nonprofits may use either the direct method (reporting actual cash receipts and payments) or the indirect method (reconciling net income to operating cash flow).

Operating activities

These include inflows and outflows tied to daily operations:

• Cash donations received
• Program fees collected
• Payments for operating expenses
• Grant reimbursements based on allowable costs

Operating cash flow helps leaders evaluate whether core activities sustain themselves.

Investing activities

Activities involving long-term assets:

• Purchases or sales of property or equipment
• Investment purchases or withdrawals from long-term portfolios

Large outflows here may signal capital investment or facility expansion.

Financing activities

Funding sources related to debt or restricted spending:

• Loan proceeds or repayments
• Release of donor-restricted funds
• Endowment activity transfers

Why it matters: It reveals potential liquidity crises even when accrual statements show surpluses, and demonstrates the organization's ability to fund operations and mission activities with available cash.

The Statement of Functional Expenses provides additional detail on how expenses align with the nonprofit's mission and operations.

Statement of Functional Expenses

Statement of Functional Expenses example

Required under FASB ASC 958-720-45, this statement is unique to nonprofits and is a key part of IRS Form 990 for organizations with over $200,000 in gross receipts or more than $500,000 in assets. It categorizes all expenses by both natural category (salaries, rent, supplies) and functional category (program, management & general, fundraising). It helps show stewardship of donor funds and operational efficiency.

ASC 958-720-45 requires expenses to be classified by both their natural category (what you spent money on) and functional category (what the spending supported). For example, a staff person's salary must identify both that it's a "salary" expense and whether it should be allocated to "program," "management & general," or "fundraising."

Program expenses

Mission-related costs, such as:

• Direct service delivery: the core activities that fulfill the organization's charitable mission
• Program staff salaries: compensation for employees directly involved in delivering programs
• Supplies and materials used in mission activities: resources consumed in delivering services

Program expenses represent the direct and allocated costs of activities that achieve the organization's charitable purpose.

Management & General

Administrative costs necessary to operate the organization:

• Finance and accounting: financial reporting, budgeting, and accounting functions
• Governance: board oversight, legal compliance, and organizational management
• HR and compliance: human resources functions, payroll, and regulatory compliance

These expenses support the organization's infrastructure and must remain in this category (they cannot be allocated to program or fundraising activities under ASC 958-720-45-25).

Fundraising expenses

Costs related to donor outreach and resource development:

• Campaign materials: printed materials, digital advertising, and promotional content
• Events: fundraising galas, donor appreciation events, and community events with a fundraising component
• Fundraising staff compensation: salaries for development and donor relations staff

Why it matters:

Stakeholders, including donors, foundations, and the general public, often review the program expense ratio (program expenses as a percentage of total expenses). This metric significantly influences ratings on platforms like Charity Navigator, which gives full credit to organizations maintaining a program expense ratio of 70% or higher. Financial information is also available through GuideStar/Candid, which operates a Seal of Transparency system rather than star ratings, though both platforms track these financial metrics.

The functional expense statement directly demonstrates how efficiently the nonprofit converts donor dollars into mission impact, making it critical for fundraising success and public trust.

Together with the Statement of Financial Position, Statement of Activities, and Statement of Cash Flows, the Statement of Functional Expenses creates a complete financial picture. 

Understanding how nonprofits use these reports differently than for-profit entities is the next step to mastering nonprofit financial literacy.

How Nonprofit Financial Statements Differ From For-Profit Statements

Although nonprofits and for-profit businesses both follow U.S. GAAP, their financial statements serve different purposes, follow different presentation rules, and communicate different types of accountability. 

These differences are driven by mission-focused operations, donor expectations, and regulatory requirements specific to charitable organizations. Understanding these distinctions helps nonprofit leaders interpret their statements correctly and explain results clearly to boards, auditors, and funders.

1. Focus on net assets instead of equity

For-profit entities report equity, which reflects ownership, retained earnings, and shareholder value. Nonprofits have no owners, so they report net assets, which show resources available to support the mission.

Under FASB ASC 958, nonprofits must report net assets in two categories:

• Without donor restrictions: funds the nonprofit can use at its discretion
• With donor restrictions: time-restricted, purpose-restricted, or endowments

This classification is central to nonprofit reporting because organizations must track donor-imposed limitations and demonstrate that restricted gifts are used as intended. For-profit companies do not face this level of donor accountability.

2. Statement of Activities vs. Income Statement

A for-profit income statement focuses on profitability and returns for shareholders. It measures success by how much value the business generates beyond its expenses.

A nonprofit uses the Statement of Activities, which shows how revenue supports programs, how funds are spent, and how net assets change. Instead of profit, the emphasis is on mission results and stewardship of contributions. Key terminology reflects this difference:

• “Support and revenue” instead of “sales”
• “Change in net assets” instead of “net income”

The goal is not to maximize profit but to show whether the organization is financially sustainable while advancing its mission.

3. Statement of Functional Expenses (unique to nonprofits)

For-profit businesses report expenses by natural category only (salaries, rent, utilities). Nonprofits must present expenses two ways, as required under FASB ASC 958-720-45:

• By natural category: what the money was spent on

• By functional category:

• Program services: costs directly supporting mission activities
• Management and general: administrative and governance costs
• Fundraising: costs related to donor outreach

This requirement is reflected in IRS Form 990 and applies to nonprofits with over $200,000 in gross receipts or more than $500,000 in assets. Functional reporting allows donors and grantmakers to see how resources support mission-related work versus overhead. For-profit companies are not required to provide this level of segmentation.

4. Different reporting and regulatory requirements

For-profits report to shareholders, lenders, and, if publicly traded, the SEC. Their primary compliance obligations relate to tax filings and investor reporting.

Nonprofits report to multiple stakeholders with distinct accountability requirements:

• IRS via Form 990: filed annually by organizations with $200,000+ gross receipts or $500,000+ in assets; publicly accessible for the past three years
• State charity regulators: vary by jurisdiction but typically require registration and periodic financial reporting
• Grantmakers and foundations: require detailed financial documentation and compliance reporting for grant awards
• Donors and the general public: through publicly accessible filings (IRS Form 990 is available online via the IRS and aggregated on platforms like GuideStar/Candid)

Because nonprofits rely heavily on public trust, their statements must reflect a higher degree of transparency, particularly around restricted funds, fundraising activity, and program efficiency.

5. Use of fund accounting principles

Nonprofits often use fund accounting to manage resources by purpose. Each fund represents assets set aside for a specific program, activity, or donor restriction, helping teams monitor how restricted gifts are used.

It’s important to note that fund accounting is a management approach, not a GAAP requirement. FASB ASC 958 requires nonprofits to present net assets with and without donor restrictions in their financial statements. It does not require organizations to maintain internal fund structures. Many nonprofits meet GAAP requirements through a centralized chart of accounts with donor-restriction coding instead of separate funds.

For-profit organizations may use cost centers to manage internal reporting, but they do not separate resources based on external restrictions. Their accounting systems track all activity together because they have no donor-restriction requirements.

Regardless of whether a nonprofit uses internal fund accounting, the Statement of Financial Position must present net assets by donor-restriction status. This gives stakeholders clarity on which resources are restricted and which are available for general operations.

Together, these differences show how nonprofit reporting supports stewardship, accountability, and clear communication with donors and the public. They also reflect the mission-driven nature of nonprofit work and the level of transparency expected from charitable organizations.

Now that the differences are clear, the next step is understanding how to create financial statements for nonprofit organizations using a structured, repeatable process.

How to Prepare Nonprofit Financial Statements

Accurate nonprofit financial statements require a structured, repeatable process rooted in proper documentation, timely reconciliations, and GAAP-compliant reporting practices. While accounting software automates portions of the workflow, the quality of each statement ultimately depends on how well financial data is gathered, coded, and reviewed. A consistent preparation process also strengthens audit readiness, improves board reporting, and reduces year-end stress for finance teams.

Here’s the proven six-step process successful nonprofits follow:

Step 1: Collect and organize financial data

Gathering complete documentation is the foundation of accurate reporting. Finance teams should collect bank statements, donation receipts, grant agreements, pledge confirmations, payroll records, invoices, and credit card statements for the reporting period. Creating organized folders by month and transaction type makes it easier to locate support during audits or grant reviews.

Flag restricted gifts, capital purchases, in-kind donations, and any conditional grants that may require special recognition under ASC 958. Identifying missing documentation early prevents delays later.

Pro tip: Collect documents monthly, not just at year-end.

Step 2: Categorize and code transactions

Each transaction must be coded accurately within the chart of accounts. This includes assigning natural categories (salaries, supplies, travel), functional categories (program costs, management, fundraising), and donor restriction status (with or without donor restrictions).

Complex items, such as multi-year grants, in-kind contributions, or capital purchases, should be documented clearly to support the correct treatment in the financial statements. In-kind contributions must be recorded at fair market value when they meet GAAP recognition criteria.

Step 3: Reconcile all accounts

Reconciliation is central to producing reliable statements. Bank accounts, credit cards, investment accounts, loans, and petty cash funds should all be reconciled to external statements. Any discrepancies must be resolved before reports are finalized.

This step also includes checking restricted fund balances, verifying pledge receivables, and confirming that outstanding items (such as uncleared checks) are documented. Accurate reconciliations ensure that every figure in the statements can be traced back to verified activity.

Pro tip: Use a reconciliation checklist with preparer and reviewer sign-offs to support audit documentation.

Step 4: Generate draft statements

Once transactions are coded and reconciled, the accounting system can generate draft versions of the four required GAAP financial statements. Drafts should include comparative prior-year amounts and any supporting schedules for major accounts such as grants receivable, fixed assets, and net assets with donor restrictions.

At this stage, finance teams should confirm that statements tie together mathematically. For example, ending cash should match the Statement of Financial Position, and changes in net assets should agree with the Statement of Activities.

Step 5: Review and validate

Draft statements should go through multiple levels of review. The preparer verifies calculations, coding accuracy, and reconciliations. The finance director or CFO performs analytical reviews, comparing results to the budget, prior periods, and program activity.

Boards or finance committees may also review drafts, especially for year-end reporting. Reviewers look for common issues such as incorrect functional allocations, missing restrictions, incomplete disclosures, or cutoff errors affecting revenue or expenses.

Step 6: Finalize and distribute

After incorporating all feedback, the finance team finalizes the statements. Reports are formatted for different audiences: board members, auditors, grantmakers, and public platforms like GuideStar.

Final statements require formal approval and must be archived with all supporting records for at least seven years, in line with nonprofit best practices. These archives provide essential documentation for audits, grant compliance reviews, and IRS inquiries.

Establishing a clear process makes financial statement preparation more predictable and helps nonprofits maintain compliance over time. Modern financial platforms can automate data consolidation, reduce manual coding, and streamline the reporting cycle.

While this manual process works, the right tools can reduce preparation time by up to 75% and significantly improve accuracy. Let’s explore what systems nonprofits rely on to generate GAAP-compliant financial statements.

Tools for Preparing Nonprofit Financial Statements

Preparing accurate nonprofit financial statements requires transaction-level accounting systems, not spreadsheets or budgeting tools. GAAP statements can only be produced reliably by nonprofit accounting software that captures debits, credits, fund balances, restrictions, and reconciliations in real-time. These systems automate journal entries, enforce FASB ASC 958 classification rules, and generate audit-ready reports directly from the underlying ledger.

Below are the primary accounting platforms nonprofits use to create compliant financial statements:

QuickBooks Nonprofit

QuickBooks nonprofit accounting software

QuickBooks is widely used among small and mid-sized nonprofits because of its familiar interface and accessible pricing. The nonprofit edition supports fund tracking through classes, produces all four GAAP statements, and generates donor acknowledgment reports. It also includes basic grant tracking and integrates with many donation platforms. While it can support organizations with moderate complexity, larger nonprofits may outgrow its segmentation and multi-entity capabilities.

Sage Intacct

Sage Intacct nonprofit accounting software

Sage Intacct is an enterprise-grade financial management system built with deep nonprofit functionality. It supports multi-entity consolidation, dimensional reporting, and robust grant, project, and fund accounting.

Sage Intacct is endorsed by the AICPA as a preferred financial management solution, and it generates customizable GAAP financial statements suitable for audit, board presentation, and grant compliance. It is often adopted by nonprofits with multiple funding sources, complex restrictions, or high-volume transactions

Aplos

Aplos nonprofit accounting software

Aplos offers a streamlined accounting system designed specifically for small nonprofits and churches. It provides true fund accounting, donor management, and built-in tools for Form 990 preparation. Aplos generates the four core GAAP statements without requiring advanced accounting expertise, making it a strong fit for smaller organizations with limited finance staff.

Blackbaud Financial Edge NXT

Blackbaud Financial Edge NXT nonprofit accounting tool

Blackbaud Financial Edge NXT is built for mid-size and large nonprofits that need advanced fund accounting, grant management, and extensive reporting capabilities. It supports complex donor restrictions, project-level tracking, and integrations with Blackbaud’s broader fundraising ecosystem. The system generates detailed financial statements and audit-ready schedules tailored to nonprofit requirements.

Alongside these accounting systems, nonprofits often use financial statement templates, spreadsheets for ad hoc analysis, dashboard tools for data visualization, and IRS and FASB guidance to maintain compliance with regulatory updates.

It is important to emphasize that accounting platforms generate the required GAAP financial statements. Budgeting and forecasting tools cannot replace them. Excel-free FP&A platforms like Limelight works alongside these systems by providing planning, analysis, and real-time visibility on top of the data maintained in the core accounting ledger.

These accounting systems generate your required GAAP financial statements. For strategic financial planning and analysis beyond standard reporting, nonprofits turn to specialized FP&A tools.

Common Mistakes to Avoid in Nonprofit Financial Statements

Nonprofit financial reporting requires adherence to GAAP, careful tracking of donor restrictions, and clear presentation of program-related costs. However, many organizations encounter recurring issues that affect accuracy, compliance, and stakeholder confidence. Below are the most common pitfalls and practical steps to avoid them.

Misclassification of restricted vs. unrestricted funds

Restricted funds are contributions with donor-imposed limitations. These restrictions may be purpose-based (e.g., a scholarship fund), time-based, or permanent (such as endowments). Unrestricted funds are available for general operations. Under FASB ASC 958, nonprofits must distinguish between net assets with donor restrictions and net assets without donor restrictions in their financial statements.

Misclassification often occurs when donations are recorded without reviewing donor correspondence, when multi-year grants are booked incorrectly, or when purpose-restricted gifts are spent without releasing the restriction. These errors can lead to inaccurate net asset balances, compliance issues, and erosion of donor trust.

How to avoid this mistake:

• Track restrictions from the moment contributions are received
• Maintain documentation for every restricted gift (grant agreements, donor letters)
• Use fund accounting software that separates restricted and unrestricted activity
• Review release-from-restriction entries at month-end

Inaccurate functional expense allocation

Nonprofits must allocate expenses across program services, management and general, and fundraising. This is required under FASB ASC 958-720 and central to IRS Form 990. The challenge lies in allocating shared or indirect costs such as rent, utilities, insurance, and salaries of administrative or partially program-related staff.

Incorrect allocations can distort program efficiency ratios, raising concerns for donors, grantmakers, and charity evaluators. Over-allocating to programs may inflate program impact, while under-allocating can make overhead appear too high.

How to avoid this mistake:

• Establish a written allocation policy approved by the board
• Distinguish direct costs from shared costs
• Use reasonable allocation methodologies (e.g., square footage, time studies, headcount)
• Review allocations quarterly to confirm they align with actual operations

Lack of transparency and insufficient documentation

Transparency in nonprofit financial reporting involves presenting clear information that explains how resources were received, used, and restricted. This includes detailed note disclosures, explanations of significant transactions, and clarity around accounting policies.

Auditors and grantmakers require a complete audit trail linking financial statements to source documentation. Missing receipts, incomplete grant files, or undocumented journal entries can delay audits and weaken confidence in the financial process.

How to avoid this mistake:

• Maintain organized digital or physical records for an organization’s financial activities
• Document significant or unusual transactions (e.g., conditional grants, large in-kind donations)
• Include thorough note disclosures describing accounting policies, restrictions, contingencies, and allocation methods
• Review documentation monthly instead of waiting until year-end

Timing and recognition errors

Revenue recognition is one of the most complex areas in nonprofit accounting. Multi-year grants, pledges, conditional contributions, and in-kind donations all require careful analysis under FASB ASC 958-605.

Common errors include recording conditional grants as revenue too early, recognizing pledges without sufficient evidence of donor intent, or misclassifying restricted grants as unrestricted. Period cutoff mistakes also occur when expenses or revenues are recorded in the wrong fiscal period.

How to avoid this mistake:

• Follow FASB guidance for conditional contributions and multi-year revenue
• Document revenue recognition policies and review them annually
• Reconcile receivables and deferred revenue monthly
• Perform period-end cutoff reviews to ensure proper accrual accounting

These mistakes are often the result of manual processes and outdated tools. Modern FP&A platforms can eliminate these errors while saving your team hundreds of hours annually.

How Limelight Helps You Plan Beyond the Financial Statements

Limelight FP&A solution for nonprofits

Accounting software produces the required GAAP financial statements, but nonprofit leaders also need forward-looking tools to interpret results, test scenarios, and plan for changing funding conditions.

Limelight supports this work by integrating directly with systems such as QuickBooks, Sage Intacct, NetSuite, and Blackbaud, creating a connected planning environment on top of the financial statements your accounting software generates.

Limelight’s integration and fund tracking capabilities give finance teams real-time visibility into restricted and unrestricted fund balances. Because data flows automatically from the accounting system, organizations can track grants, monitor spending against program budgets, and evaluate remaining funding across initiatives without manual exports. This reduces errors and strengthens oversight of donor-restricted activity.

For strategic planning, Limelight includes pre-built nonprofit templates for annual budgeting, grant budgeting, multi-year forecasts, and program-level planning. Department leaders can collaborate within the platform, and finance teams can run scenario models to evaluate revenue fluctuations, staffing changes, or grant expirations. This helps organizations test financial sustainability before making operational decisions.

Limelight also enhances reporting through customizable dashboards tailored for board meetings and internal reviews. Finance teams can produce budget vs. actual reports, analyze trends, and export visual summaries for presentations. This allows leadership to understand financial drivers and align decisions with the organization’s goals.

Organizations using Limelight have reported a 75% reduction in budget cycle time, along with more reliable reporting. Limelight works alongside your accounting system to help you plan proactively, manage restricted funds, and communicate financial health clearly to stakeholders.

Ready to enhance your nonprofit’s financial planning and analysis? Schedule a demo to see how Limelight integrates with your existing accounting system to provide strategic insights, streamlined budgeting, and real-time fund tracking.

FAQs 

What are the 4 main financial statements nonprofits must prepare?

Nonprofits prepare the Statement of Financial Position, Statement of Activities, Statement of Cash Flows, and Statement of Functional Expenses. Together, these GAAP-required reports show financial health, an organization’s mission performance, cash activity, and how expenses support programs.

How can nonprofit financial statements help build donor trust?

Financial statements demonstrate how contributions are used, whether restrictions are honored, and how efficiently programs operate. Clear reporting reassures donors that funds support mission priorities and strengthens confidence in the organization’s stewardship.

How does the IRS regulate nonprofit financial reporting?

The IRS requires annual Form 990 filings, which disclose revenue, expenses, governance, and program activity. These filings, combined with GAAP financial statements, support compliance, public transparency, and verification that the organization operates for charitable purposes.

What tools should nonprofits use to prepare financial statements?

Nonprofits should use accounting software, such as QuickBooks Nonprofit, Sage Intacct, Blackbaud Financial Edge NXT, or Aplos, to produce GAAP-compliant statements. These systems record transactions, track restrictions, and generate audit-ready reports directly from the general ledger.

How can nonprofits ensure transparency in their financial reporting?

Transparency improves when nonprofits maintain clear documentation, provide detailed note disclosures, track restrictions accurately, and present expenses by both natural and functional categories. Regular reconciliations and consistent reporting practices also help stakeholders understand how resources are managed.