The financial rule states that total profits equal grants and/or loans, financially referred to as equity capital, which includes recurring expenses as well as the purchase of equipment and infrastructure. Most donors allow institutions to retain ownership after the project's life. Direct costs equal all expenses associated exclusively with the project, and to determine these costs ask yourself the following question: Will my organization necessarily spend money on this after the project's completion? Do not forget to include the cost of preparing project reports and financial statements.

General costs equal the operating expenses of the organization that has been tasked with the project, and to determine the value of these costs, you only need to specify the expenses incurred by the organization to carry out essential administrative functions. Generally, they are expressed as a percentage of the organization's total budget. Nonprofit organizations use the term balance to describe the positive or negative cash results for a specific period; if the result is positive, it is termed a surplus, and if it is negative, it is called a deficit.

The following example will better illustrate the principles of accounting for financial sustainability:

A generous organization agrees to grant $100,000 to a very good organization to reforest an area in the suburbs with a rate of one million trees over one year.

15% of the project's general expenses is allocated for this reforestation operation, where the organization will contract a forestry company to oversee the technical aspects of the project and a volunteer coordinator to organize the remaining volunteers who offer to help in this task, in addition to purchasing seedlings for planting and providing weekly transportation for both volunteers and estimating the plants expected to be planted each week throughout the year.

Since this is a weekly activity, it has been decided to purchase a pickup truck due to its cheaper cost compared to renting one, and since the organization's total revenue is $100,000, direct costs are limited to the salaries of the foresters, the volunteer coordinator, the seedlings to be planted, the pickup truck, and gas for transportation.

Indirect costs or overhead expenses concern providing the necessary infrastructure for the task, such as offices, computers, fundraising expenses for the project, public relations if necessary, quality control, and so on.

Assuming that all general costs are precisely included in the 15% ratio, which amounts to $15,000, the balance of this project will show a surplus in the form of assets represented by a pickup truck, which becomes part of the organization's equity. However, if not all overhead costs are covered, for example, a percentage of the salary of an accountant for financial reporting, the organization should utilize other resources to cover these expenses.

As a result, it will incur a deficit represented by its inability to cover all the necessary costs to implement the project, as most organizations are unwilling to dispose of property assets like the pickup truck, or the law does not allow them to do so. Some accountants may wonder why they do not sell the pickup truck to cover the deficit? The answer is that nonprofit organizations wishing to dispose of real estate assets are required to go through extremely complex procedures and permits.

If we apply this example to the financial situation of nonprofit organizations, we discover that a large percentage of them aspire to achieve a "0" balance or to increase their equity through asset purchases, meaning that there is no surplus or deficit at the end of a certain period; the organization has spent all revenues and grants on its productive operations from projects and overhead expenses to achieve its results.

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