Budget Basics
The financial document that projects expected income and expenses for a specific time period.
What is a budget?
The financial statement that shows an organization's income and expenses over a period of time.
What is the Statement of Activities (or Income Statement)?
Tax-deductible financial contributions made by individuals or organizations to nonprofits.
What are donations or charitable contributions?
The IRS form that tax-exempt organizations must file annually.
What is Form 990?
The financial ratio that measures how efficiently a nonprofit spends on its programs versus administration.
What is the program expense ratio?
This type of budgeting links strategic objectives to specific financial resources.
What is program-based budgeting?
This financial statement shows what a nonprofit owns (assets) and owes (liabilities).
What is the Statement of Financial Position (or Balance Sheet)?
Revenue earned by nonprofits through selling goods or services related to their mission.
What is program service revenue?
The designation for organizations exempt from federal income tax under section 501(c)(3).
What is a public charity or charitable organization?
The accounting method that recognizes revenue when earned and expenses when incurred, regardless of when cash changes hands.
What is accrual accounting?
The financial cushion that ensures a nonprofit can weather unexpected financial challenges.
What are operating reserves?
The distinction between funds that can be used for any purpose versus those restricted for specific uses.
What is unrestricted vs. restricted funding?
The practice of developing diverse income streams to reduce financial vulnerability.
What is revenue diversification?
Rules that prevent nonprofits from substantially engaging in activities to influence legislation.
What are lobbying restrictions?
The practice of independently reviewing a nonprofit's financial statements to ensure accuracy and compliance.
What is an audit?