Financial Reports

Annual Report

An annual report includes financial statements (or a summary thereof) (see below for more info on financial statements), but also addresses how the organization has achieved its mission over the year. 

We have not prepared an annual report each year - but our fundraising letter that we send out in December does a pretty good job of providing some of the relevant information. One key metric is the number of people served. See this spreadsheet for a rollup of participants over time; data actually comes from within this operating manual here.

As of February 2024, annual reports for 2020, 2021 and 2022 have not been issued; rather we relied on the 990 for financial reporting and the end-of-year newsletter for progress toward mission. 

Going forward, we should use this template for preparing annual financial reports; it is available in our Google docs template gallery under "Basics".

Financial Statements - Types and purposes

There are typically four main nonprofit financial reports

• Statement of Activities. In the for-profit world, this is equivalent to the Income and Expense Statement. The statement summarizes the transactions over the course of a period like a year. However, the non-profit report also distinguishes between restricted and unrestricted income. Restricted income means donations and grants that are for a particular purpose and may also have a time restriction, and must be spent on that purpose within any stated time constraints, or else returned to the giver.

• Statement of Functional Expenses. Here we break down how we spent our money between Program, Fundraising and Administration buckets. Within Program, we further break down into at least the top 3 program areas, and further as may be useful to the Board or administration in its decision making.

• Statement of Financial Position. In the for-profit world, this is equivalent to the Balance Sheet. It describes our assets at a given time point, and distinguishes between restricted and unrestricted assets.

• Cash Flow Statement. This statement helps determine whether an organization has enough liquidity to pay its expenses. We have not generated these in the past because all our cash is in our bank account, and we generally can see that we have enough to pay for our expenses (mainly salaries).

Good references:

• Guide to Nonprofit Accounting from Jitasa

• Nonprofit Coach

• Standards for creating these reports are published by FASB (Financial Accounting Standards Board). Unfortunately, we don't have direct access to all their documents at their website because they want you to pay $1200. However, there is a free Basic view, and documents may be available elsewhere. We have collected key information from FASB's standards on this page. Here are some key docs:

Accounting Standard Update No. 2016-14 (downloaded to our Google Drive)

Our annual financial statements

Our financial year is the calendar year. In some ways our 990 serves as our financial report of record. However, we also want to prepare standard financial reports (Statement of Activities and Statement of Functional Expenses) in order to:
(1) capture non-GAAP/non-990 activities such as volunteer time
(2) track restricted donations correctly
(3) determine how each program type is faring financially and make better decisions. 

The 990 is made available publicly on other nonprofit tracking sites; the financial statements are not necessarily as public (though we should assume they are). While the end-of-year newsletter is not a financial document, for years where we don't have solid annual reports, it provides information about progress toward mission and in some cases financial summaries

990s (federal tax returns) are stored in our Administration google drive here. 

Navigation Games Financial Reports

• 2023: 990 Annual Report Annual News

• 2022: 990 Annual Report Annual News

• 2021: 990 Annual Report Annual News

• 2020: 990 Annual Report (not completed) Annual News

• 2019: 990 Annual Report Annual News

• 2018: 990 Annual Report Annual News

• 2017: 990 Annual Report Annual News

• 2016: 990 Annual Report (this document covers income and expenses for 2015, 2016)

• 2015: 990

Background Information for NG Financial Statements

Goals

We have several goals:

• Create Statements of Activities with restricted grants broken out.

• Create Statements of Functional Expenses at 3 levels: 

  • (1) Program/Fundraising/Administration; this is important for our reporting to the IRS and for grantors and other stakeholders who want to see that we are spending most of our money on our mission.

  • (2) Program category (class); this is important for the Board to make decisions on 

  • (3) Detailed program (project); this is useful for our operations, to know. It is also helpful in ensuring that we are spending restricted grant money fully. Sometimes a project is fundable by a grant, but we must first subtract the income we received for that project as we can't double bill the client and the grant for the same work.

Tracking transaction categories

Our transactions are recorded in Quickbooks (QB). QB allows income and expenses to be labeled in various ways. We use QB labeling as follows:

• Accounts (defined in the chart of accounts) are used to identify income, expenses, assets, liabilities, and subcategories thereof. 

• Classes are used for program category, including the distinction between Program, Fundraising and Administration.

• Projects are used for detailed programs, which are subcategories of the classes.

• Location is used for restricted grant tracking. [NG may not have correctly / successfully used this.]

Attributing staff costs to programs

We had agreed with BooksTime that they would do an adjustment periodically to distribute the salary and contractor expenses across the various programs, based on how people are tracking their time using Gusto Projects. However, we also have the challenge that program costs not attributed to a particular project should also be distributed in some proportionate way across the projects. 

One hope was that we'd be able to see the profitability of individual projects. Looking at the Projects tab, it is clear that there are some issues, and this detailed accounting is not something we've used to date to assess profitability because (a) I don't trust that all costs are really included, and (b) I don't trust that all costs are correctly attributed.

Individual project cost accounting felt more important when we had more employees and wanted to make sure that we stayed within budget for a given project. Currently the Projects tab is useful to get a rough idea of profitability, and also to catch errors. 

Example of possible error 

As one example of a potential error (found by looking through Projects), I see that we are showing a total of $20,000 in income for project "2021 04-06 Roger Clap"

• $4000 10/22/21 invoice 1266 in accounts receivable

• $4000 10/31/21 invoice 1266 (journal entry)

• $6000 2/25/22 invoice 1288 (journal entry)

• $6000 2/25/22 1288 accounts receivable

Why are the invoices counted twice (once in AR and once as invoice)? Is this double counting also showing up in our P&L statement? Looking at the P&L program income transactions, I do see (in 2021) $4000 on 10/22 in AR, and an additional $4000 on 10/31/21. And in 2022 I see $6000 showing up twice as well. 

Invoice 1266 is for the spring; service date is 6/7/21. Invoice 1288 is for the fall of 2021 (9/25-11/23), so should be a different project: "2021 09-12 Roger Clap"

Now I'm thinking that it might make more sense for Gusto Projects to be sub-accounts in the classic Chart of Accounts, because getting reports by Project is not easy in the

Cost of programs: Volunteer vs paid workers

A challenge we have is that the apparent cost of a program (mainly employees and contractors) does not reflect the true value being provided to the client, due to our heavy use of volunteer labor. Moreover, some work done by paid staff is applicable across programs - examples include equipment maintenance and website updates (our website is central to our mission of educating others about orienteering). 

In a nonprofit whose main route to accomplishing their mission is grantmaking, it is appropriate to ask how much is spent on salaries vs. how much money is distributed. In our case, our output is program design, program delivery, outreach and education -- and we spend very little on non-program-related expenses, which might include HR functions, Board operations, bookkeeping, financial reporting, legal and nonprofit paperwork. Everything else is program related.

[MORE HERE - this is very rough draft]

The main point is that when we determine the cost of a program, we need to include the cost of program-related work that applies across all programs. We also may, depending on the purpose of the cost assessment, include the value of volunteer time.

• When we might include volunteer time: in determining the fair value to charge clients; in financial reports for the board; in making an assessment of tradeoffs of managing volunteers vs hiring paid workers (non-GAAP). This will allow a clearer picture of the true financial health of the organization.

• When we might not include volunteer time: in determining the discount/"grant" to give clients; in reporting actual dollars spent, and in preparing our official financial reports (GAAP)

There are additional non-GAAP contributions made to Navigation Games (like housing for volunteers) that might be useful to include in board financial reports, again to understand the true scope of how we are able to function.

Note that the IRS (form 990) does not exactly follow GAAP. For example, donated professional services are considered a contribution & expense in GAAP, but not on the 990. (You can include these in narrated form on the 990.) 

Process to Create NG Financial Statements

Generally, we start from the Profit & Loss, and Balance Sheet reports. However, we often need to carefully check how transactions are labeled, and with all the adjustments, these can be hard to read from the P&L report.

The Expense Report can be a useful way to check how expenses have been attributed. You can add Class and Account to the reporting. However, this does not reflect how costs are ultimately categorized in Quickbooks, because (for example) salary costs are all in 700Admin Class. And I don't see salaries showing up there. Only $11,257 shows up for 2021 - so not useful.