A comprehensive glossary of 53+ terms used in nonprofit accounting, fund accounting, donor management, and compliance. Key terms include expanded guides.
If you came here for nonprofit accounting terms, start with the practical guides behind the definitions: fund accounting, nonprofit accounting software, donor management, and SYBUNT donor reports.
For receipt language, donor records, and annual statements, see the tax receipt guide and the year-end giving statements guide.
A section of the U.S. Internal Revenue Code that grants tax-exempt status to nonprofit organizations organized for charitable, religious, educational, scientific, or literary purposes. Donations to 501(c)(3) organizations are tax-deductible for donors.
An accounting method that records revenue when earned and expenses when incurred, regardless of when cash is received or paid. Required by GAAP for nonprofits with over $500K in annual revenue. Contrasts with cash-basis accounting.
An independent examination of a nonprofit's financial statements and internal controls. Required by many states for nonprofits above certain revenue thresholds. Can be a full audit, review, or compilation depending on requirements.
A financial statement showing a nonprofit's assets, liabilities, and net assets at a specific point in time. Also called the Statement of Financial Position under FASB standards.
The governing body of a nonprofit organization responsible for oversight, strategic direction, and fiduciary duty. Board members are typically unpaid volunteers who serve fixed terms.
A financial statement showing how cash moves in and out of a nonprofit over a period. Categorized into operating, investing, and financing activities. Required under GAAP.
A structured list of all accounts used in a nonprofit's general ledger. Organized by category: assets, liabilities, net assets, revenue, and expenses. Alignmint includes a 79-account chart of accounts pre-mapped to Form 990 line items.
A state registration many nonprofits must complete before asking for donations from residents of that state. Requirements, fees, exemptions, and renewal dates vary by state, so nonprofits that fundraise across state lines should track deadlines carefully.
Adherence to laws, regulations, and standards governing nonprofit operations. Includes tax compliance (Form 990), financial reporting (FASB), grant compliance, and state registration requirements.
A voluntary, unconditional transfer of assets (cash, securities, property, or services) to a nonprofit. Contributions can be unrestricted, temporarily restricted, or permanently restricted based on donor intent.
The process of distributing shared costs across multiple programs, grants, or funds. Common methods include direct allocation, step-down allocation, and activity-based costing.
A charitable giving vehicle administered by a public charity. Donors make irrevocable contributions, receive immediate tax deductions, and recommend grants to nonprofits over time.
A written statement nonprofits provide to donors confirming a gift amount and whether goods or services were received in return. IRS rules require acknowledgments for cash gifts of $250 or more and for quid pro quo contributions above certain thresholds. Year-end summaries help donors document deductible gifts.
Customer Relationship Management software designed for nonprofit donor management. Tracks donor profiles, giving history, communication, and engagement. Alignmint includes a donor CRM with 9 donation types and automatic tax receipting.
A self-service web interface where donors can view their giving history, download tax receipts and annual statements, update payment methods, and manage recurring gift schedules.
The percentage of donors who give again in a subsequent period. The average nonprofit donor retention rate is approximately 45%. Improving retention is typically more cost-effective than acquiring new donors.
An accounting system where every transaction affects at least two accounts - a debit and a credit - ensuring the accounting equation (Assets = Liabilities + Net Assets) always balances.
A permanently restricted fund where the principal is invested and only the investment income is available for spending. Endowments provide long-term financial stability for nonprofits.
Financial Accounting Standards Board. The independent organization that establishes Generally Accepted Accounting Principles (GAAP) in the United States. Key nonprofit standards include ASC 958 (Not-for-Profit Entities) and ASU 2016-14.
An accounting standards update that simplified nonprofit financial reporting by reducing net asset classifications from three to two (with donor restrictions and without donor restrictions) and requiring enhanced disclosures.
A 501(c)(3) organization that provides its tax-exempt status to projects or organizations that don't have their own. The sponsor handles financial administration while the sponsored entity focuses on its mission. Fiscal sponsor management software like Alignmint provides one account for multiple sponsored organizations, separate data for each organization, consolidated reporting, and automatic fee allocation.
The annual information return filed by tax-exempt organizations with the IRS. Reports revenue, expenses, assets, liabilities, and program activities. Variants include 990-EZ (gross receipts < $200K) and 990-N (gross receipts < $50K).
The IRS application organizations file to obtain recognition of tax-exempt status under section 501(c)(3). Requires articles of incorporation, bylaws, a narrative of activities, financial data, and a Pay.gov user fee. Smaller organizations may qualify for Form 1023-EZ instead.
The streamlined online IRS application for certain small organizations seeking recognition of 501(c)(3) tax-exempt status. Applicants must complete the eligibility worksheet before filing through Pay.gov; organizations that do not qualify use the full Form 1023.
A self-balancing set of accounts used to track resources designated for a specific purpose. Nonprofits use funds to separate restricted gifts, grants, endowments, and operating resources.
An accounting system that tracks resources by fund (restricted, temporarily restricted, unrestricted) rather than by profit. The standard for nonprofit financial management. Ensures donor restrictions are honored and compliance requirements are met. Alignmint includes true fund accounting with 38+ fund balances.
The net assets within a specific fund - the difference between fund assets and fund liabilities. Represents the resources available for spending within that fund's restrictions.
Generally Accepted Accounting Principles. The standard framework of accounting rules and standards used in the United States. Nonprofits follow GAAP as established by FASB.
The master record of all financial transactions in an organization. Contains every journal entry organized by account. The source of truth for all financial reports.
A financial award given by a government agency, foundation, or corporation to a nonprofit for a specific purpose. Grants typically have reporting requirements, spending restrictions, and defined time periods.
The process of requesting and receiving grant funds from a funder. Many grants are reimbursement-based, meaning the nonprofit spends first and requests reimbursement. Others allow advance drawdowns.
A non-cash donation of goods, services, or use of facilities. Under FASB ASC 958-605, certain in-kind contributions (especially specialized services) must be recognized as revenue on financial statements.
A financial statement showing revenue and expenses over a period. Also called the Statement of Activities for nonprofits. Shows whether the organization had a surplus or deficit.
A record of a financial transaction in the general ledger. Each entry includes a date, accounts affected, debit and credit amounts, and a description. Can be manual or automatic.
Last Year But Unfortunately Not This year. A donor segmentation term identifying donors who gave in the previous fiscal year but have not yet given in the current year. Donor management software should track LYBUNT lists automatically so fundraising teams can follow up with lapsed donors before year-end.
A corporate giving program where an employer matches an employee's charitable donation, typically dollar-for-dollar. Effectively doubles the donor's impact.
The nonprofit equivalent of equity. Calculated as total assets minus total liabilities. Under FASB ASU 2016-14, classified as either 'with donor restrictions' or 'without donor restrictions.'
A fund where the donor has stipulated that the principal must be maintained in perpetuity. Only the investment income can be spent. Under FASB ASU 2016-14, now classified as 'net assets with donor restrictions.'
A written or verbal promise by a donor to make a future contribution. Under accrual accounting, unconditional pledges are recognized as revenue when made, not when cash is received.
Activities that directly further a nonprofit's mission. Program service expenses are reported separately from management/general and fundraising expenses on Form 990 and financial statements.
The process of comparing two sets of records to ensure they agree. Bank reconciliation compares the general ledger cash balance to the bank statement balance and identifies discrepancies.
A fund containing resources that can only be used for a specific purpose designated by the donor. Restrictions can be temporary (time or purpose) or permanent (endowment). Proper tracking is essential for compliance.
The accounting principle governing when revenue is recorded. For nonprofits, contributions are recognized when received (or pledged, if unconditional). Exchange transactions follow different rules than contributions.
A rigorous audit required for nonprofits that expend $750,000 or more in federal awards in a fiscal year. Governed by the Uniform Guidance (2 CFR 200). Tests compliance with federal grant requirements.
The nonprofit equivalent of an income statement. Shows changes in net assets over a period, categorized by those with and without donor restrictions.
The nonprofit equivalent of a balance sheet. Shows assets, liabilities, and net assets at a specific point in time.
A financial statement required for nonprofits that shows expenses categorized by both nature (salaries, rent, supplies) and function (program, management, fundraising). Required by FASB ASU 2016-14.
Some Year But Unfortunately Not This year. A donor segmentation term identifying donors who gave in any previous year but not in the current year. Broader than LYBUNT, and useful for reactivation campaigns when donor management software can filter by last gift date and giving history.
A written acknowledgment provided to donors for tax-deductible contributions. Required by the IRS for single contributions of $250 or more. Must include the amount, date, and whether goods or services were provided in exchange.
A fund where the donor has imposed time or purpose restrictions that will be met in the future. Once restrictions are satisfied, funds are reclassified as unrestricted. Under FASB ASU 2016-14, now classified as 'net assets with donor restrictions.'
Income from a trade or business regularly carried on by a nonprofit that is not substantially related to its exempt purpose. Subject to Unrelated Business Income Tax (UBIT) reported on Form 990-T.
A fund containing resources that can be used for any purpose at the organization's discretion. Also called the general fund or operating fund. Under FASB ASU 2016-14, classified as 'net assets without donor restrictions.'
The process of recording volunteer service by person, date, program, activity, and approval status. Nonprofits use volunteer hour tracking for grant reports, recognition, impact summaries, in-kind valuation, and scheduling decisions.
Alignmint handles fund accounting, donor management, volunteer tracking, and more - free for small nonprofits.