The Statement of Financial Position

The Statement of Financial Position (SOFP) is the correct nonprofit term for the balance sheet. The concept and the equation are essentially the same as any business balance sheet or statement of personal net worth, with the key difference being that for nonprofits, what’s left when you subtract liabilities from assets is not considered “equity” belonging to an individual or a business, but rather “net assets” that remain with the nonprofit entity.

  Assets  (what you have or what others owe you or hold on your behalf)
  Minus Liabilities (what you owe to others or hold on their behalf)
  Equals Net Assets (what’s left over)

The SOFP reflects the overall financial position of your organization at a given moment in time. It shows the accumulated results of all the individual years of your organization’s operations put together.

It is important to learn how to read and understand your organization’s SOFP report. This report can help you monitor cash balances and liquidity. It can tell you how much is receivable, which is especially important when managing reimbursable grants and multi-year pledges. It shows the level of payables and borrowing. It differentiates net assets with donor restrictions from those without restrictions. It shows the cumulative operating surplus or deficit.

Here is an illustration of the Statement of Financial Position components:

Return to the Internal Reports Introduction page using the link below for greater detail on how to read various reports as well as recommended formatting.