Operating revenue pays the everyday expenses of running your organization. It comes from both earned and contributed sources. It can be restricted by donors for a specific time period or purpose, or generally available for use.
Non-operating revenue is income generated episodically from activities that fall outside of your organization’s core business and programs. It can be saved or invested to strengthen your balance sheet or be expended on efforts that improve, transform or grow your organization’s business and cultural activities. Non-operating revenue is often raised through special fundraising for an extraordinary purpose. Like operating revenue, it can be restricted by donors, or not.
Examples of non-operating revenue include:
- Capital campaign contributions for a facility (or other fixed asset) purchase, renovation, or improvement
- Grants and contributions earmarked for savings, such as the gift of a cash reserve
- A one-time bequest
- The proceeds from the sale of a facility or other fixed asset
- In-kind contributions of unusual capital items, such as a building or leasehold improvements
- Interest and realized or unrealized gains and losses on investments that are not part of an annual distribution to operations
While it can be tempting to spend non-operating revenue on day-to-day activities, try to resist. Your organization does not want to find itself in the position of relying on unreliable or special-purpose money to pay its recurring bills. If you raise or generate unrestricted non-operating revenue, consider setting it aside as savings.
How to find Non-Operating Revenue in an Audit
All revenue, including non-operating revenue, is listed on the Income Statement or Statement of Activities. Non-operating revenue may be listed separately from operating revenue and expenses on your audit. Non-operating revenue may be located toward the bottom of the statement below revenue, expenses, and change in net assets. Items listed below change in nets assets, or what can be considered the operating change in nets assets, are called below the line items.
However, auditors are not required to separate operating from non-operating revenue, and it may not be clear what is non-operating revenue on your audit. We suggest having a conversation with your auditor to determine if your organization has non-operating revenue and which items are non-operating.