Nonprofit organizations have many financial and compliance-related components that can change from year to year. An annual review of key accounting, governance, and compliance items helps ensure accuracy, transparency, and continued tax-exempt status. The following items should be revisited at least annually.
Policies & Governance
- Financial and Governance Policies – Review existing policies and consider adopting additional policies recommended by the IRS and best practices (e.g., expense reimbursement, reserves, investment policy).
- Conflict of Interest Policy – Review annually and obtain signed disclosures from board members and key personnel.
- Form 990 Board Review Policy – Confirm the organization has a documented process requiring board or designated committee review of Form 990 prior to filing.
- Whistleblower Policy – Review annually to ensure it remains current and effective as a fraud-prevention safeguard.
- Document Retention and Destruction Policy – Confirm the policy complies with IRS expectations and is being followed in practice.
- Compensation – Verify that the process of determining compensation remains reasonable.
- Board and Committee Minutes – Ensure all meetings are documented and minutes are retained permanently, including financial approvals and oversight actions.
Financial Reporting & Accounting Review
- Endowment and Restricted Funds – Confirm donor restrictions, spending policies, and related disclosures.
- Net Asset Classifications – Review classifications and terms (with and without donor restrictions) for accuracy and required reclassifications.
- Accounting Policies and Procedures Manual – Confirm procedures are documented, current, and consistently applied.
- Internal Controls – Review controls over cash receipts, disbursements, journal entries, and financial reporting.
- Bank Accounts and Reconciliations – Confirm all accounts are reconciled timely and reviewed.
Contracts, Obligations, and Risk
- Insurance Coverage – Review coverage levels and policy types for adequacy.
- Debt and Bank Covenants – Review loan agreements and confirm compliance.
- Lease Agreements – Review lease terms and ensure proper accounting treatment.
- Grant Agreements – Review grant cycles, reporting requirements, restrictions, and revenue recognition.
- Other Contracts – Review material vendor, service, and partnership agreements.
Contributions & Revenue
- Donation Acknowledgements – Confirm required donor acknowledgements have been sent timely and match accounting records.
- Revenue Recognition – Review contribution and grant revenue recognition for consistency with accounting standards and donor intent.
Several of these items are required by the IRS and accounting standards. Failure to review and maintain them annually may increase audit risk and could jeopardize an organization’s tax-exempt status. An annual accounting review helps ensure financial integrity, compliance, and long-term sustainability.
Please contact the Not-for-Profit Niche team at Gilliam Bell Moser LLP for further guidance.
