While the cash flow worksheet gives a month wise break up of cash surplus or cash deficit, the organization still needs to know its annual cash flow position. This is where a cash flow statement (also called the ‘statement of activity’) is drafted.
The figures for the cash flow statement can easily be obtained by comparing the beginning balance sheet and the ending balance sheet data for the given period. The change in balances for each of the components for the nonprofit organization is arrived by subtracting the beginning balance sheet figures from the ending balance sheet figures.
As per US GAAP requirements, all restricted net assets of the nonprofit organization are to be segregated and reported separately from the unrestricted or temporarily restricted funds.
What follows is a sample statement of cash flow for a typical nonprofit organization.
Cash Flow statement for XYZ nonprofit organization
|Cash Flow from Operating Activities|
|Cash Received from Unrestricted|
|Temporarily restricted Contributors|
|Cash Received from Service Recipients|
|Cash paid to Employees and Supplies|
|Interest and Dividends Received|
|Net Cash from Operating Activities (sum of above)|
|Cash Flows from Investing Activities|
|Purchase of Investments|
|Fixed Asset Purchases|
|Net Cash Used for Investing Activities (sum of above)|
|Cash Flows from Financing Activities|
|Addition to Endowment|
|Issuance of Long Term Debt|
|Net Cash from Financing Activities (sum of above)|
|Net Increase/ decrease in Cash|
|Opening Cash Balance|
|Closing Cash Balance|
|II. Reconciliation of change in net assets to net cash
provided by operating activities
|Change in Net Assets|
|Restricted Contributions to Endowment|
|Increase in Pledges Receivable|
|Increase in Refundable Advances|
|Increase in Grants Payable|
|Decrease In Accounts Payable|
|Increase in Prepaid Expenses|
|Unrealized Gains in Long-Term Investments|
|Net Cash Provided by Operations|
As can be seen, the cash flow statement is divided into two segments –
1) The main cash flow statement – which states the temporarily and unrestricted cash income.
2) The net asset reconciliation – which indirectly uses the change in net assets figures from the Income/Operating Statement and converts these amounts from the accrual method to cash basis of accounting.
Meaning of terms used here –
Cash Flow from Operating Activities: This section includes cash flow generated from the core operating activities of the organization. (i.e. activities related to the core mission of the organization.)
Thus it includes cash inflows and outflows resulting from the unrestricted and temporarily restricted funding of the nonprofit organization.
Cash Flows from Financing Activities – This section records the cash inflows/outflows that result in changes of permanently restricted funds. (such as cash inflows/outflows from receipts and payments made from/to donors or creditors with certain permanent underlying stipulations for their usage – like that in endowment funds).
Cash Flows from Investing Activities – Records all cash flows related to Purchase of Investments or fixed assets for the nonprofit organization.
Net Increase/Decrease in cash – The net increase/decrease in cash obtained at the end indicates the changes in cash position for the nonprofit organization during the given time period.