A consistent and well-documented month-end close process is essential for maintaining accurate financial records, ensuring compliance with accounting standards and donor restrictions, and providing timely financial information to management and the board.
The following checklist outlines key accounting procedures nonprofit organizations should complete each month.
General Review
- Confirm the accounting period is open and all transactions for the month have been recorded.
- Review the general ledger for unusual, duplicate, or misclassified transactions.
Cash and Bank Accounts
- Reconcile all bank accounts to the general ledger.
- Investigate and document outstanding checks, deposits in transit, and reconciling items.
- Ensure reconciling items are resolved timely.
Credit Cards
- Reconcile all credit card statements to the general ledger.
- Verify transactions are coded to the appropriate expense accounts and programs.
- Review for personal or unallowable charges and confirm required approvals.
Accounts Receivable and Contributions
- Review outstanding receivables and follow up on past-due balances.
- Confirm all donations, grants, and other receivables earned during the month have been recorded.
- Review pledge receivables for accuracy and collectability.
Accounts Payable and Accruals
- Verify all vendor invoices received have been entered into the accounting system.
- Identify and record accrued expenses for goods and services received but not yet invoiced.
- Review prepaid expenses and record monthly amortization as needed.
- Revenue Recognition and Net Assets
- Ensure revenue is recognized in accordance with grant agreements, donor restrictions, and accounting standards.
- Confirm restricted revenue is recorded correctly and released when donor conditions are met.
- Update tracking of net assets with donor restrictions, including additions and releases.
Grants and Fund Tracking
- Review grant activity by fund and program.
- Confirm expenditures are allowable and aligned with grant requirements.
- Identify unspent grant balances and ensure they are properly reported.
Payroll
- Verify all payroll entries for the month have been posted.
- Record payroll accruals and related liabilities, including payroll taxes and benefits.
- Review payroll allocations by program and function.
Journal Entries
- Prepare and post recurring and month-end journal entries, including depreciation, amortization, and accruals.
- Ensure all journal entries are reviewed and approved in accordance with internal control policies.
Internal Controls and Approvals
- Confirm required approvals were obtained for significant or unusual transactions.
- Review compliance with segregation of duties and internal control procedures.
Financial Reporting
- Prepare monthly financial statements, including statement of financial position and statement of activities.
- Review allocation of expenses among program services, management and general, and fundraising.
- Compare actual results to budget and investigate significant variances.
Fixed Assets and Other Accounts
- Review fixed asset activity for additions, disposals, or impairments.
- Ensure depreciation schedules are current.
- Reconcile other balance sheet accounts as applicable.
Documentation and Close-Out
- File and retain supporting documentation (invoices, receipts, contracts, loan and lease agreements).
- Update supporting schedules and workpapers.
- Confirm net asset and restriction tracking schedules are complete and accurate.
- Communicate finalized financial results to management and appropriate committees.
A timely and thorough month-end close supports accurate financial reporting and provides reliable information for decision-making within nonprofit organizations.
Please contact the Not-for-Profit Niche team at Gilliam Bell Moser LLP for further guidance.
