(Click here to read Part 1 of this glossary.)
Full-time equivalent (FTE)
The number of full-time positions at an organization, for example, two fulltime staff people and two half-time staff people equals a total of four employees, but three FTE.
Functional expense classification
The presentation of expenses by function: program, administration, and fundraising.
Grants receivable
See accounts receivable.
Internal controls
A set of policies and procedures to prevent deliberate or misguided use of funds for unauthorized purposes.
Liabilities
The debts of the organization, for example, accounts payable, unpaid employee salaries and vacation leave, and loans.
Line of credit
A means of short-term borrowing from a bank to meet cash flow challenges. Should be used for income timing problems, not for profitability problems.
Liquidity
Refers to having assets that are cash or quickly convertible to cash. See also assets.
Liquid operating reserve
Unrestricted money that the organization has accumulated over time beyond what it needs to pay its immediate bills and other commitments.
Matching principle
Presenting related income and expenses together in the appropriate period. A benefit of accrual basis accounting.
Net assets
The resources ultimately available to the organization (Assets – Liabilities = Net Assets). Found on the Statement of Financial Position. See also reserve.
Output/outcome
These are evaluation concepts. Outputs are the direct results of your efforts (e.g., shelter nights), while outcomes are the longer-term impacts (e.g., injury/deaths of battered spouses avoided).
Overhead activity
The combination of administrative and fundraising activities.
Overhead rate
The percentage calculated by comparing total overhead expenses (administration plus fundraising) to total expenses.
Permanently restricted contributions
Contributions whose principle is to be invested indefinitely according to the donor’s wishes.
Program activity
The mission-related work of a nonprofit organization that is not administration or fundraising activity.
Projection
An updated forecast of income and expense.
Ratio
The comparison of two numbers to create a financial indicator. See also current ratio.
Releasing funds from restriction
Spending temporarily restricted funds in accordance with an approved work plan/budget and/or in a specified time frame.
Reserve
The accumulated unrestricted net assets available for the organization’s use. See also net assets.
Segments
The unique elements of a chart of accounts. See also chart of accounts.
Specific activity costs
Costs that can be directly associated with a single activity. See also activity.
Statement of activities
Also known as the income statement or profit and loss statement, this statement reports the financial activity of the organization by function over a period of time.
Statement of financial position
Also known as the balance sheet, this statement summarizes the assets, liabilities, and net assets of the organization as of a specific date.
Statement of functional income and expense
This report matches income and expense by function, for example, key programs, administration, and fundraising. Used to evaluate surplus/deficit status of each activity.
Temporarily restricted contributions
Grants and contributions that are to be spent for a specific purpose or during a restricted period of time.
Unrealized gains/losses on investments
The amount by which the market value of an asset exceeds or is less than the original cost of that asset.
Unrestricted contributions
Grants and contributions given by the donor without reference to a specific purpose or use within a specific time period.
Variance
Difference between planned and actual financial performance.
Photo: from telegraph.co.uk
