For nonprofits, year-end is not just about closing out financials; it's about ensuring compliance, demonstrating impact, and preparing for the upcoming year's fundraising and mission-driven activities. Accurate and transparent accounting is crucial for donor trust and regulatory compliance.
General Guidance
Nonprofits have specific accounting rules, such as the need to track restricted and unrestricted funds. Year-end financial tasks also offer an opportunity to share the organization's success with donors and stakeholders while preparing for IRS compliance.
Pre-Year-End Checklist
Prepare for the year-end by ensuring the accuracy of financial records and addressing outstanding tasks.
- Ensure All Donations and Grants Are Recorded: Review your donation and grant tracking to ensure all contributions are accurately logged and restrictions are properly categorized.
- Review Restricted Funds: Verify that restricted funds were used according to donor specifications. This is crucial for IRS reporting and for maintaining donor confidence.
- Reconcile Accounts and Expenses: Complete a final reconciliation of all bank and financial accounts to catch any discrepancies and prepare for a smoother tax filing.
- Verify IRS Compliance: Double-check tax-exempt status and prepare for IRS filings such as Form 990. Ensure payroll taxes and any other required taxes are accounted for.
- Prepare a Budget for Next Year: Draft next year's budget, ensuring that anticipated expenses align with your organization's goals and available funding.
Post-Year-End Checklist
Once the fiscal year is complete, focus on these tasks to ensure compliance and readiness for the new year.
- Complete Financial Statements: Prepare the final statement of activities, statement of financial position, and statement of cash flows. These reports will be used for donor transparency and IRS reporting.
- Prepare for Form 990 Filing: Gather all financial data and ensure accurate reporting for the IRS. Fines can be levied for late or incorrect filings.
- Generate Donor Reports: Create a year-end summary report for donors, detailing how their contributions were used and the impact of your organization's work.
- Evaluate Fundraising Performance: Review how well your fundraising efforts met the year's goals. Use this data to improve campaigns and donor engagement next year.
- Schedule an Audit (if required): Some nonprofits must undergo an audit, especially if receiving significant grant funding. Prepare all relevant financial documentation.
