Routine maintenance helps you get the most mileage out of your vehicle, and as the vehicle that represents your not-for-profit’s financial position, your financial statements may need periodic tune-ups. Reviewing your financial statements for ways to improve them helps ensure they accurately reflect your organization to the public, your board and current and potential donors. There are a number of ways you can better the preparation and presentation of your financials, and we’ve gathered a short list of four best practices and tips you may find useful. Whether or not you implement the best practices outlined below, keep in mind that small improvements and maintenance to your financial statements can be a rewarding way to bring value to your organization.

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Mayer Hoffman McCann P.C. – An Independent CPA Firm
A publication of the Professional Standards Group
MHMMessenger
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Routine maintenance helps you get the most mileage
out of your vehicle, and as the vehicle that represents
your not-for-profit’s financial position, your financial
statements may need periodic tune-ups. Reviewing
your financial statements for ways to improve them
helps ensure they accurately reflect your organization
to the public, your board and current and potential
donors.
There are a number of ways you can better the
preparation and presentation of your financials, and
we’ve gathered a short list of four best practices
and tips you may find useful. Whether or not you
implement the best practices outlined below, keep in
mind that small improvements and maintenance to
your financial statements can be a rewarding way to
bring value to your organization.
1. Review peer organizations’ financial statements
for best practices
A review of other organizations’ financial statements
is a great place to start when updating your own.
Spend some time examining peer organizations’
financial statements and look for best practices you
can implement and incorporate. The AICPA also
produces guides and tools to assist in identifying
best practices in financial statement presentation and
disclosures.
April 2014
Four Ways for Nonprofits to Improve Financial Statements
2. Examine the format of your financial statements
Though it may seem like a minor detail, the format
of your financial statements is critical to the ease
with which they’re consumed and used. Some
organizations use a multi-column statement of
financial position (balance sheet) while others prefer
a single column; however, we have found that most
organizations use a single column approach. This
approach has emerged largely to serve the needs of
board members who commonly view a commercial
company’s financials in this format.
While this seems to be the best choice for
most organizations, many of you may have had
conversations with bankers and others who like to drill
down into the liquidity position of the entity. In the case
of the statement of activities (income statement), we
have found that organizations overwhelmingly use a
multi-column approach. Some organizations also use
a “stack” approach where the changes in unrestricted,
temporarily restricted and permanently restricted net
asset classes are literally placed below each of the
other categories. Though less common, this format
might be worth considering in determining whether
there are any compelling reasons for a change.
3. Include an operating / non-operating
presentation
Yetanotherareaofflexibilityisintheuseofanoperating/
non-operating presentation within your statement of
activities. Many organizations already use this with
great results. This approach is more common among
organizations with endowments; however, that is not

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the only item you can present in the non-operating
section. Bequests, capital campaign activities (both
revenues and expenses), non-recurring items such
as gains or losses from asset sales or retirements
and a host of other items can be reflected in the
non-operating section. If organizations choose this
presentation, they must disclose within the footnotes
what they put in the operating/non-operating sections
— a small price to pay if this helps create transparency
on the financials.
4. Rework your footnotes
On that note, examining your footnotes can be a
simple way to update your financial statements and
ensure readability and transparency. A number of
areas within your footnotes should be examined for
improvement:
• Language: Sometimes historical information may
not be as important for the years the financial
statement is being presented. Review your
footnotes for terminology that refers to a timeframe
older than the past two years and reword or
remove any information that is no longer relevant
to the financials being presented.
• Sequencing and Order: New disclosures are often
added to the end of your disclosures. Compare the
order and flow of your core financial statements
to your footnotes and ensure that your footnotes
follow a consistent and logical flow of sequence.
Do the same for the order of your organizational
policy note and adjust it accordingly.
• Duplication: Common areas where duplication of
information occurs include fair value, investments,
endowments and net assets disclosures. Review
these areas, and if there is duplication, determine
where the information is best presented.
• Investments and Net Assets: A best practice in
disclosures of investments and net assets is a “roll
forward” approach. In the case of investments,
such a roll forward can clarify how much new
money came into the organization, how much was
investment return and how much was withdrawn
for operations. These numbers have long been
disclosed, but they have not often been disclosed
in this manner, which led to questions from
board members and more work for the financial
statement users to understand the data.
We have seen a similar “roll forward” approach to
temporarily and permanently restricted net assets.
Such a table would show new contributions by
restriction type, use of funds, and income added due
to investment returns that are not always clear in most
financials.
• Organizational Description Disclosure: Review
your current disclosure to determine if it accurately
reflects what your organization currently does.
Compare the list you have disclosed to your
organization’s current activities and update the
organizational description disclosure to reflect the
current locations of the operations, programmatic
activity and major sources of revenue.
It is also a best practice to review the 990 for any
additional information that could be relevant to
disclose in the financial statements.
• Revenue Recognition Policy: Revenue sources
may grow and become more material to your
organization, so you should periodically review
your revenue recognition policy for accuracy and
completeness. Review each significant revenue
line item on the statement of activities and compare
it to the corresponding revenue recognition policy
disclosure to determine if the existing disclosure
is adequately describing the current activity. Add
in any additional information necessary to your
policy disclosures.

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The information in this MHM Messenger is a brief summary and may not include all the details relevant to your situation.
Please contact your MHM auditor to further discuss the impact on your audit or audit report.
• Financial Statement Caption Policies: Double
checkthatthesignificantlineitemsonyourfinancial
statements align with their corresponding policy
disclosures and add any missing disclosures.
• Related Party Disclosures: These disclosures
should be reviewed and updated to help clarify
the interrelationships of the organization. Make
sure you adequately describe the nature of related
party relationships and disclose the transaction
activities during the year. Be sure to include the
balances due to/from (receivables and payables)
in the disclosures.
Small changes, big difference
Simple changes to the way you present and prepare
your financial statements can make a big difference
in your organization’s financial transparency and thus
the confidence your donors, funders, and bankers
have in your financial position.
For More Information
If you have any specific questions, comments
or concerns, please contact Michelle Spriggs of
MHM’s Professional Standards Group or your
MHM service professional. You can reach her at
mspriggs@cbiztofias.com or 774.206.8336.