7 Key Financial Statements That an NGO Must Have According to INPAS in Kenya
Susan Maina is a content writer at Mugo and Company, where she simplifies Accounting, Auditing, and Forensic Audit services with her finance expertise.
LinkedIn >>Estimated read time: 5 minutes
If you run or manage an NGO, foundation, charity or other non-profit organisation in Kenya, you may be wondering: What financial statements does an NGO need to prepare under INPAS?
You may have also heard about INPAS, the new accounting standard for non-profit organisations in Kenya, and wondered what it means for your organisation.
The key financial statements that an NGO must have according to INPAS in Kenya are designed to help organisations clearly show where their resources came from, how they were used, what they own and owe, and how their financial position changed during the year in a standardised manner.
INPAS is important because non-profit organisations have different reporting needs from ordinary businesses.\
Donors, boards, regulators and other stakeholders need clear information on how funds are managed, including whether donor restrictions have been followed.
In this guide by Mugo & Company, we explain the 7 key financial statements that an NGO must have according to INPAS, what each statement covers and how your organisation can prepare for INPAS adoption in Kenya.
So,let’s get started!!
What Is Considered an NPO in Kenya According to INPAS?
As part of INPAS adoption in Kenya, a non-profit organisation (NPO) refers to an entity established primarily to pursue a public-benefit or other non-profit purpose rather than generate profits for owners or shareholders.
In the context of INPAS in Kenya, NPOs may include NGOs, charities, foundations, community-based organisations, associations, public benefit organisations (PBOs) and other not-for-profit entities.
These organisations may receive grants, donations, membership contributions and other funding to support social, charitable, educational, religious, environmental or other public-benefit activities.
The adoption of INPAS in Kenya is therefore important because NPOs need financial reporting that clearly shows how resources are received, managed and used.
INPAS provides a framework for presenting this financial information in a way that promotes transparency, accountability and consistency across non-profit organisations.
Want to learn more about INPAS in Kenya?
|
Is your NGO ready for INPAS adoption in Kenya?
Mugo & Company can help you understand the new reporting requirements, review your current accounting processes, and identify what your organisation needs to do to prepare for INPAS.
Book a Free INPAS Consultation with Mugo & Company TodayWhatsAppKey Financial Statements That an NGO Must Have According to INPAS in Kenya
Now let’s get to the main question: What financial statements does an NGO need to prepare under INPAS in Kenya?
As part of INPAS adoption in Kenya, non-profit organisations will need to present financial information that clearly explains their financial position, financial performance, movement of funds and use of resources.
The key financial statements and reporting components under INPAS include:
- Statement of Changes in Net Assets
- Statement of Income and Expenses
- Statement of Movement of Funds
- Statement of Financial Position
- Statement of Cash Flows
- Narrative Report
- Notes to the Financial Statements
Let’s look at each of these reporting components and understand what they mean for NGOs preparing for INPAS adoption in Kenya.
1. Statement of Changes in Net Assets
The Statement of Changes in Net Assets shows how your organisation’s net assets changed during the reporting period.
Think of it as a simple story: where you started, what changed and where you ended.
For Example
|
The statement shows how these activities affected your net assets and helps you distinguish between Restricted and Unrestricted Funds.
Why Is This Important?
Having KES 5 million in net assets does not necessarily mean you can spend all of it freely. For example:
- KES 3 million may be restricted funds to a specific health project; and
- KES 2 million may be unrestricted funds and available for general use.
Under INPAS in Kenya, this distinction helps you clearly show how your resources have changed and whether they are available for general use or subject to donor or other restrictions.
2. Statement of Income and Expenses
The Statement of Income and Expenses is one of the key financial statements that an NGO must have according to INPAS in Kenya.
It shows the income your organisation recognised and the expenses it incurred during the reporting period.
Your income may include:
| Your Income may include: | Your expenses may include: |
|---|---|
|
|
Unlike a traditional business profit and loss statement, this statement helps you and your stakeholders understand…
- How much income your NGO recognised,
- How those resources were used, and whether you ended the year with a surplus or deficit.
A Simple Example
Suppose your organisation recognises KES 20 million in income and incurs KES 18 million in expenses during the year:
| Your Income may include: | Your expenses may include: |
|---|---|
Grants – KES 12 million | Programme costs – KES 10 million |
Donations – KES 5 million | Salaries – KES 5 million |
Other income – KES 3 million | Office and other costs – KES 3 million |
Total: KES 20 million | Total: KES 18 million |
This gives your organisation a surplus of KES 2 million.
However, a surplus does not necessarily mean that you can spend all the funds freely. Some of your income may be restricted to specific projects or purposes.
As part of INPAS adoption in Kenya, appropriate fund accounting and disclosures help you clearly show how your resources were received, used and accounted for according to their intended purpose.
3. Statement of Movement of Funds
The Statement of Movement of Funds is one of the key financial statements that an NGO must have according to INPAS in Kenya.
It is particularly useful if you manage multiple grants, projects or restricted funds.
Similar to a Statement of Changes in Equity, it shows how your different funds have changed during the reporting period, including amounts received, spent and remaining.
A Simple Example
Imagine your NGO manages the following funds:
| Fund | Opening Balance | Closing Balance |
|---|---|---|
Education Project |
|
|
Health Project |
|
|
Unrestricted Fund |
|
|
This gives your board, donors and other stakeholders a clearer picture of what happened to each fund during the year.
It helps answer important questions such as:
- How much did you have at the beginning of the year?
- How much did you receive and spend?
- How much remains?
- Which funds are restricted or unrestricted?
Why Is This Important?
- Having KES 10 million in your bank accounts does not necessarily mean you have KES 10 million available for general use.
- For example, KES 7 million may be restricted for specific donor-funded projects, leaving only KES 3 million available for general organisational purposes.
As you prepare for INPAS adoption in Kenya, the Statement of Movement of Funds helps you demonstrate how each fund has been managed and strengthens transparency and accountability in your financial reporting.
4. Statement of Financial Position
The Statement of Financial Position, commonly known as a balance sheet, is another of the key financial statements that an NGO must have according to INPAS in Kenya.
It gives you a snapshot of your organisation’s financial position at a specific date.
It shows three main areas:
| Area | What it Shows | Examples |
|---|---|---|
Assets | Resources your organisation owns or controls | Cash, bank balances, equipment, vehicles and receivables |
Liabilities | Amounts your organisation owes | Supplier bills, loans, unpaid salaries and taxes payable |
Net Assets | What remains after deducting liabilities from assets | Assets less liabilities |
In simple terms:
Assets – Liabilities = Net Assets
This statement helps you, your board, donors and other stakeholders understand what your organisation owns, what it owes and its overall financial position at the reporting date.
As part of INPAS adoption in Kenya, presenting this information clearly is important for transparent and accountable financial reporting.
5. Statement of Cash Flows
The Statement of Cash Flows is one of the key financial statements that an NGO must have according to INPAS in Kenya. It shows how cash moved into and out of your organisation during the reporting period.
This is important because income is not always the same as cash in your bank account. For example, you may recognise grant income before you actually receive the related funds.
The statement helps you and your stakeholders understand:
| Cash Flow Area | What it Shows |
|---|---|
Operating activities | Cash received and spent on your day-to-day activities |
Investing activities | Cash used to buy or received from selling assets or investments |
Financing activities | Cash movements relating to financing arrangements |
6. Narrative Report
The Narrative Report is an important part of INPAS reporting in Kenya, although it is different from the primary financial statements.
It provides the context behind the figures and helps you explain what your organisation did, what it achieved and how its resources were used.
For example, your financial statements may show that you spent KES 10 million on a programme, but the numbers alone may not explain what the programme achieved, who benefited, the challenges you faced or how the funds were used.
Your narrative report can provide information on:
- Your organisation’s activities and achievements
- Programme outcomes and impact
- How you used your resources
- Significant challenges or events during the year
- Governance and management matters
- Your plans and ability to continue operating
The report can also help provide context where restricted funds were not used as intended or where there were significant issues affecting the use of donor or project funds.
It allows you to explain what happened, why it happened and the steps taken to address the issue.
Simply put:
- Financial statements show the numbers; the Narrative Report explains the story behind them.
As you prepare for INPAS adoption in Kenya, your narrative reporting will therefore be an important part of providing a complete and transparent picture of your organisation’s activities and use of resources.
7. Notes to the Financial Statements
The Notes to the Financial Statements provide additional information that helps you and your stakeholders understand the figures presented in your primary financial statements.
Think of the notes as the explanation behind the numbers.
For example, if your financial statements show KES 5 million in grants, the notes can explain:
- Where the grants came from and their nature
- How you accounted for the grants
- Whether the funds are restricted
- The accounting policies you applied
- Significant balances and commitments
- Other information needed to understand the financial statements
The notes are particularly important for NGOs because they provide greater clarity on how your funds are managed and whether they are available for general use or restricted to specific purposes.
As part of INPAS adoption in Kenya, clear and appropriate disclosures in the notes help your donors, board, auditors and regulators better understand your financial statements and assess how responsibly you have managed your resources.
Not sure whether your NGO's financial reporting is ready for INPAS?
We can review your financial statements, fund accounting processes and reporting systems to identify potential gaps and help you prepare for INPAS adoption in Kenya.
Book a Free INPAS Consultation with Mugo & Company TodayWhatsAppPreparing for INPAS Adoption in Kenya
Now that you understand the key financial statements that an NGO must have according to INPAS in Kenya, the next step is preparing your organisation and finance team for the transition.
Mandatory adoption of INPAS in Kenya is expected to take effect in 2027, making early preparation important for non-profit organisations.
INPAS training in Kenya can help your accountants, finance managers, programme teams, management and board members understand the new reporting requirements, including fund accounting, grant accounting, restricted and unrestricted funds, and preparation of INPAS financial statements.
At Mugo & Company, we help non-profit organisations prepare for INPAS adoption in Kenya through:
- INPAS readiness assessments
- INPAS training
- Review of existing financial statements and accounting systems
- Grant and fund accounting support
- Preparation of INPAS-compliant financial statements
- Financial reporting and audit support
Our goal is to help you understand not only what INPAS requires, but also how it affects your accounting, reporting and day-to-day financial processes.
If you are unsure whether your NGO is ready for INPAS adoption in Kenya, speak to Mugo & Company to assess your current reporting processes and identify what you need to change.
Book a free consultation with us today!!
Recommended Articles
FAQs About INPAS in Kenya
1. What is INPAS in Kenya?
- INPAS (International Non-Profit Accounting Standard) is a financial reporting standard designed specifically for non-profit organisations, covering areas such as grants, donations, fund accounting and financial reporting.
- In Kenya, ICPAK is playing a key role in the adoption process and has been working with the IFR4NPO technical and governance groups.
2. When Will INPAS Adoption Take Place in Kenya?
- INPAS adoption in Kenya is being implemented in phases, with mandatory adoption expected in 2027. NGOs should use the preparation period to review their accounting and reporting processes.
3. What Key Financial Statements Must an NGO Have According to INPAS in Kenya?
- Under INPAS in Kenya, NGOs will need to prepare key financial statements including the Statement of Financial Position, Statement of Income and Expenses, Statement of Cash Flows, Statement of Changes in Net Assets and Statement of Movement of Funds, together with relevant notes and narrative reporting.
4. What Is the Difference Between Restricted and Unrestricted Funds according to INPAS in Kenya?
- Restricted funds must be used for a specific purpose, such as a donor-funded project.
- Unrestricted funds can generally be used for your organisation’s activities, subject to applicable requirements.
5. Does INPAS replace IFRS in Kenya?
- INPAS is specifically designed for non-profit organisations, while IFRS applies more broadly to businesses and other entities. The appropriate reporting framework depends on your organisation and the applicable Kenyan requirements.
Want to learn more about IFRS in Kenya? Read our simple guide on Types of IFRS Standards in Kenya.
6. Can Mugo & Company Help With INPAS Adoption in Kenya?
- Mugo & Company provides INPAS training in Kenya, readiness assessments and adoption support to help NGOs understand the new requirements and prepare their financial reporting processes.
Final Thoughts: Is Your NGO Ready for INPAS?
The key financial statements that an NGO must have according to INPAS in Kenya help you clearly show where your resources came from, how they were used, what remains and your organisation’s overall financial position.
As INPAS adoption in Kenya approaches, now is the time to review your accounting systems, fund tracking, financial reporting and staff readiness.
Mugo & Company can help you with INPAS training, readiness assessments and adoption support to make the transition easier.
Additionally, At Mugo & Company, we provide professional accounting services in Kenya tailored to hospitals, clinics, medical centres, diagnostic laboratories, and other healthcare providers.
Contact Mugo & Company today to discuss how we can help your organisation prepare for INPAS.
Would you like us to assist you with:
Adoption of INPAS for your Kenyan NGO?
Click the WhatsApp button to book your free consultation with Mugo & Company now.
Or email us at info@mugo-co.com
WhatsAppDisclaimer
This article is for general information only and does not constitute accounting, audit, legal or regulatory advice.
INPAS adoption in Kenya is subject to the latest applicable guidance and implementation framework.
Organisations should seek professional advice based on their specific circumstances.
- Institute of Certified Public Accountants of Kenya (ICPAK) – INPAS adoption and technical work.
- IFR4NPO – Development of International Non-Profit Accounting Guidance and INPAS.
- International Non-Profit Accounting Standard (INPAS).
- Public Benefit Organizations Regulatory Authority (PBORA).
- https://www.google.com/search?q=inpas+ifr4npo&sca_esv=eac7a41f8d67447c&ei=8meVaou4Eu_pi-gPn4fgSQ&biw=604&bih=624&oq=inpas+if&gs_lp=Egxnd3Mtd2l6LXNlcnAiCGlucGFzIGlmKgIIADIGEAAYFhgeMgYQABgWGB5InyFQqAVY-Q9wAXgBkAEAmAGYAqABnQWqAQUwLjIuMbABALgBAcgBAPgBAZgCBKACrgXCAgoQABhHGNYEGLADwgINEAAYgAQYigUYQxiwA8ICBRAAGIAEmAMA4gMEGAAgXeIDBBgAIF7iAwQYACBf4gMEGAAgYOIDBBgAIGHiAwQYACBiiAYBkAYLkgcFMS4yLjGgB4MGsgcFMC4yLjG4B6gFwgcFMC4zLjHIBwmACAE&sclient=gws-wiz-serp
- International Non-Profit Accounting Guidance – Transition provisions.
-
7 Key Financial Statements That an NGO Must Have According to INPAS in Kenya
-
5 Key Financial Documents that a Hospital Must Keep in Kenya -
Accounting for Hospitals in Kenya: 5 Essential Rules Every Hospital Should Follow -
Key Financial Documents that an Insurance Firm Must Have in Kenya (Simple Guide) -
Audit of an Insurance Company in Kenya: Simple Guide for Insurance Firms -
FORENSIC AUDIT FOR SACCOS IN KENYA -Simple Guide -
Key Financial Documents That a SACCO Must Have in Kenya (Simple Guide) -
Auditing SACCOS in Kenya – Complete Guide for Tier 3 SACCOs (2026) -
Qualified Audit Opinion in Kenya – Simple Guide for Beginners (2026) -
Types of IFRS Standards in Kenya: A Beginner’s Guide
