Net assets and reserves: reading a charity's balance sheet
Part X of Form 990 is the balance sheet: assets, liabilities and net assets (assets minus liabilities) at the start and end of the fiscal year. Each charity page here shows net assets at year end and expresses them in months of the year's expenses.
With and without donor restrictions
Net assets with donor restrictions can only be used as donors specified: for a purpose, after a date, or never (endowments, where only the earnings are spent). Net assets without donor restrictions are available for general use, though the board may have designated some of them for a purpose.
Months of expenses
Net assets divided by one month of total expenses. Across covered charities the median is 9.0 months. It includes buildings, equipment and restricted endowments, so it isn't a measure of cash on hand. Universities and hospitals with large endowments or campuses show years rather than months.
Reading it carefully
- Large net assets can be an endowment donors created on purpose.
- Small or negative net assets can reflect pension liabilities or debt-financed buildings.
- One year's figure can include a large pledge recorded as revenue before the cash arrives.
The filing's Part X and the audited financial statements (which many charities post on their websites) give the detail.