By Brandi McGrath Kong, Director of Member Services & Conferences
Financial statements are some of the most important documents when it comes to the business of your Sertoma club. Unfortunately, they are also among the most misunderstood. As a leader in your club, it is your fiduciary responsibility to ensure that your club is consistently and accurately communicating its financial results to members, donors, government agencies and any other required stakeholders.
Why is this important? In short, it is because it is legally required. It ensures that your club is meeting obligations to the public and providing transparency to your donors by communicating how funds are acquired, managed and allocated to accomplish your club’s goals, according to the American Society for Association Executives (ASAE).
There are six common types of nonprofit financial statements. These include:
- Statement of Financial Position
- Statement of Activities
- Statement of Cash Flows
- Statement of Net Assets
- Statement of Functional Expenses
- Annual Reports
Both the Statement of Financial Position and Statement of Activities are typically required of all clubs. The Statement of Functional Expenses may be used by some of our larger, more active clubs. If there is another entity ran by your club, like a clinic or separate 501(c)(3) charitable program, you may also want to consider releasing a public annual report.
In the for-profit world, the Statement of Financial Position is known as the balance sheet. This statement offers a financial overview of your club at any given point in time. Its goal is to help you monitor your club’s financial risk and sustainability. It is typically prepared at the end of the fiscal year, but some clubs may opt to do it on a monthly or quarterly basis.
The Statement of Activities (sometimes known as Statement of Support) is typically called the income statement in the traditional business realm. This required financial statement reports revenue, expenses, investment results and other gains and losses like the sale of property or equipment. It is often best to distinguish between operating and nonoperating activity to keep things appropriately clear. The report should also show the resulting change in net assets for the financial reporting period, says ASAE.
The primary role of a Board is to ensure the viability of the organization through sound strategic, governance and financial planning. This can only be accomplished when we have and utilize the information that we need to make decisions, including our nonprofit financial statements. You can learn more about this important topic in our on-demand session, “A Guide to Your Club’s Financial Statements.”