July 14, 2005 -- One of the best ways that a not-for-profit organization can share its mission and market itself to funding sources is through its financial statements. Just as your vehicle requires an annual maintenance check and inspection, the organization should annually “inspect” and evaluate the information presented in its financial statements.  An organization’s financial statements provide relevant information to the readers or users of the information.

Consider the users of your financial statements:

• Are they banks, funding sources, donors, or members?
• Are your statements clear and user friendly?
• Are you telling the reader what they want and need to know about the organization?

Usually, questions about your statements are a hint that someone isn’t getting the information that they need from your financial statements. 

Each not-for-profit organization is required to present the basic financial statements: a statement of financial position, a statement of activities, and a statement of cash flows. Review these statements to see if they present the level of detail that you want to provide to the users.  Information regarding the organization’s performance, service efforts, and ability to continue providing services should be clear and tell the story of the organization.

Evaluate the footnotes that accompany your organization’s financial statements:

• Do you have the basic requirements and level of detail? 
• Do the existing footnotes make sense?
• Do the footnotes clearly convey your organization’s mission?

A good tool to use in evaluating the organization’s footnotes is the auditor’s disclosure checklist. Be sure to request a copy of this checklist from your auditor in order to determine what is required to be disclosed at a minimum. 

After reviewing your organization’s financial statements, take some time to tune-up the organization’s other “road maps,” the organization’s Form 990 as well as the Annual Report.  Remember that financial reporting is not just for reporting numbers. If you consider the users of your information and evaluate the usefulness of your “road maps,” you will be on your way to mapping a clear path to your organization.

For more information, contact Elizabeth Pilacik at 215-564-1900 .

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