Lesson 3 – Nonprofit Budget Types

In December, 2017, the Financial Accounting Standards Board (FASB) issued changes for simplifying classification of nonprofit net assets. While the nonprofit budget is not subject to these standards, it will be easier if these changes are implemented to remain consistent moving forward. To summarize, contributed revenue, such as donations, contributions and grants, are simply classified as contributed revenue with or without restrictions.

• Net Zero Budget: Revenue = Expenses – Necessary for Grants. Spend it or lose it.
• Net Operating Loss Budget: Expenses exceed Revenue: Loss is covered by prior year net asset carryover, or unrestricted revenue.
• Net Surplus Budget: Revenue exceeds Expenses. Surplus must come from unrestricted revenue or grants.