All nonprofit organizations, even the smallest of nonprofits, benefit from having a well-defined year end closing process. The first step is to determine the procedures to be performed at year-end. Once the procedures have been identified they should be ordered chronologically into a checklist. Procedures performed too early or not on time can result in confusion and delays for the accounting department. These delays can increase audit fees if the nonprofit auditor has to prepare schedules and closing entries that are expected to be performed by the organization’s staff.
The checklist should include procedures for payroll, cash balances, accounts receivable, accounts payable, loans payable, general ledger reconciliations, etc. See our full considerations for the checklist here.
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Management and those charged with governance should then determine the timing for the final financial statements. The timing can coincide with the year-end board meeting or the target start date of the audit. Consideration needs to be given to when the accounting department will receive the information needed to prepare the schedules, account analysis, reconciliations, closing entries, trial balance, and other reports needed by management and the auditors. For instance, brokerage statements may not be received until the middle or end of the month following year-end. The accounting department will need time after the statements are received to perform their year-end work.
The closing schedule should include the due date for each procedure to be performed as well as the responsible party for performing the procedure. Management should monitor the due dates to ensure the year-end closing procedures are completed on time.
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