A financial report is crucial for nonprofit transparency. In Texas, it’s your duty to earn trust from donors, board members, and regulators. From complying with state and federal laws to proving your impact, preparing a nonprofit financial report in Texas is a vital communication tool that portrays your mission in figures.
If you do not know where to begin or want to avoid mistakes, this article takes you through everything you need to know.
- A Texas nonprofit financial report should include declarations of financial level and activities.
- Get your data and file the required forms, like Form 990. Extend the report to stakeholders for transparency and compliance.
Know the Purpose of The Report
Before going into spreadsheets or software, clarify why you are creating this report in the first place. A financial report serves multiple stakeholders:
- Donors and foundations want clarity and proof that their contributions are wisely spent.
- Board members require it for planning.
- State and federal regulatory bodies demand specific forms for compliance.
Step 1: Know What to Include
A nonprofit financial report should include the following sections:
1. Statement of Financial Position
Known as a balance sheet, this shows your assets, liabilities, and net assets at a given point in time. It is a picture of your organisation’s financial wholesomeness.
2. Statement of Activities
This section shows your revenue and expenses over a financial year. It breaks down your unrestricted, temporarily restricted, and permanently restricted funds. All in all, it provides crucial distinctions in the nonprofit endeavours.
3. Statement of Functional Expenses
Peculiar to nonprofits, this categorises your expenses by function, e.g., program services, management, fundraising, e.t.c. Texas donors often demand it to assess your program-to-overhead ratio.
4. Statement of Cash Flows
It tells the story of your cash transactions, how money comes in, and how it flows out. It shows whether you can sustain the nonprofit or not.
Step 2: Gather Your Data
Gather financial documents such as:
- Bank statements
- Payroll records
- Grant and donation documentation
- Expense receipts
- Previous financial reports for reference
This can be made easy with bookkeeping software such as Wave Accounting. These types of platforms help you to generate reports and reduce human error.
Step 3: Prepare IRS and State Papers
Texas nonprofits must be compliant with federal and state-level filings. The two most relevant being:
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IRS Form 990
File either Form 990 or 990-N. This document covers income, expenditures, and governance practices. Missing three consecutive years will result in the loss of tax-exempt status.
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Texas Secretary of State Filings
You must file your periodic report to keep in good standing. You need to renew any charitable solicitation registrations if you fundraise outside of the state.
Step 4: Check for Audit Triggers
Texas doesn’t require audits, but you will need one if:
- You receive significant government funding,
- A foundation or grant requires it, or
- Your board requests it for openness and clarity.
You should obtain a third-party CPA audit if your gross receipts exceed $500,000 or if you are applying for large grants.
Step 5: Share your Final Report
Extend the report to important stakeholders:
- Present it at board meetings
- Upload it to your website for transparency
- Submit it to any required agencies or platforms like GuideStar
Conclusion
Texas nonprofits grow when they combine mission-oriented work with financial openness. Apply this approach to develop your financial report, and you will comply with legal requirements.
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