Year-End Readiness for Nonprofits: Accounting Close and Financial Planning That Withstands Audit, Board, and Donor Scrutiny

Year-end is a defining moment for nonprofit organizations. It is when operational activity becomes auditable financial information, grant obligations are measured with precision, and liquidity decisions shape the organization’s ability to deliver programs in the year ahead. The quality of a nonprofit’s year-end close directly affects audit outcomes, board confidence, donor trust, and forward-looking financial planning.

For nonprofit leadership and finance teams, year-end is most effective when it is treated as a structured financial process rather than a compliance obligation. A disciplined close, paired with thoughtful financial planning, strengthens transparency, supports informed decision-making, and reinforces organizational sustainability. Nonprofits that take this approach are better positioned to produce timely financials, minimize audit friction, and move into the next fiscal year with plans that are realistic, fundable, and mission aligned.

1) Start with a Year-End “Close Architecture.”

Build a close calendar backwards from your external deadlines

Key deadlines that should drive your schedule include:

• Form 990 due date: the 15th day of the 5th month after fiscal year-end; an automatic extension is available via Form 8868.
• Single Audit submission window (if applicable): the reporting package is due earlier of 30 days after the auditor’s report(s) are received or nine months after year-end.
• 1099-NEC filing deadline (if you pay reportable contractor compensation): generally January 31.
• Donor substantiation cadence: donors need “contemporaneous written acknowledgment” for contributions of $250+, typically satisfied by acknowledgments delivered by January 31 for calendar-year giving (timing rules apply).

Your internal close deadlines must be earlier than these external dates, so Finance is not “closing” while simultaneously responding to auditors, preparing 990 support, and triaging donor receipt issues.

Create a centralized “audit-ready” structure

Even if you do not have an audit, the discipline pays dividends:

• Trial balance (final and pre-close)
• Reconciliations (bank, AR, AP, payroll, restricted net assets, fixed assets, leases)
• Revenue support by stream (donations, grants, program service, memberships, events)
• Board designations and approvals (reserves, quasi-endowment, budgets)
• Significant contracts and grant agreements
• Policy memos (revenue recognition positions, capitalization policy, allocation methodology)

2)  Revenue: Get Classification and Timing Right

For nonprofits, revenue is where most year-end complexity lives: contributions vs exchange transactions, conditional vs unconditional grants, restrictions, multi-year pledges, and special events.

• Apply the contribution framework consistently (especially for grants)
  If your organization follows U.S. GAAP, grant and contract accounting often turns on whether an arrangement is a contribution (nonreciprocal) or an exchange (reciprocal) transaction and, if a contribution, whether it is conditional or unconditional.
• Net assets and restrictions: prove the “with donor restrictions” story
  Financial reporting for nonprofits requires clarity on donor restrictions and liquidity – two areas that frequently draw board questions.

Special events and donor benefits: avoid over-recognizing contribution revenue

For fundraising events, memberships, and sponsorships:

• Document the fair value of donor benefits (meals, seats, tangible items) and separate the exchange component from the contribution component, as applicable.

• Ensure receivables reflect collectible amounts and write-offs are considered (especially after year-end appeals).

Donor acknowledgments: treat substantiation as a finance control

Donor substantiation is often housed in Development, but it has Finance implications:

credibility, donor retention, and audit support.

IRS guidance emphasizes contemporaneous written acknowledgment requirements for donors claiming deductions of $250 or more, with timing rules tied to the donor’s filing date.

3)  Expenses and Functional Allocation

Common items that are often missed include:

• Professional services incurred but not invoiced
• Grant pass-through commitments earned by subrecipients
• Occupancy and shared service allocations not posted consistently

Stakeholders increasingly scrutinize functional expenses (program vs management vs fundraising). Year-end is the time to:

• Refresh allocation drivers (headcount, time studies, square footage, direct assignment rules).
• Ensure consistency month-to-month; large “true-up” entries can create credibility issues with auditors and boards.

4)  Federal Compliance

If you receive federal awards (directly or as a subrecipient), confirm whether you meet the Single Audit threshold. Updated Uniform Guidance increased the threshold to $1,000,000 in federal awards expended in a fiscal year.

5)  Turn to the Forward-Looking Financial Plan

A year-end close is not merely retrospective. It is the clean dataset you need for next-year decisions. After close (or during late-stage close), rebuild the next-year forecast using:

• Last 6–12 months actuals by department and natural expense category
• Known step-changes (staffing plan, lease changes, program expansions, IT contracts)
• Revenue realism: renewal likelihood, grant pipeline stage, donor concentration risk

Year-End Outputs You Should Aim to Produce

1. Final trial balance with clean support for each material
2. Revenue position memos (especially for grants/contracts) documenting classification and timing under applicable
3. Restricted net asset rollforward tied to underlying releases and
4. Liquidity analysis usable for both disclosures and internal cash
5. Scenario forecast with explicit operating levers and board-approved

A strong year-end close is not merely a retrospective accounting exercise—it is the foundation for credible financial reporting, effective governance, and informed planning. When financial information is timely, well-supported, and clearly aligned with grant requirements and donor restrictions, organizations are better equipped to answer board questions, withstand audit scrutiny, and make confident decisions about the future.

By approaching year-end with intention and structure, nonprofits can transform the close process into a strategic advantage. Clean financial data supports realistic forecasts, thoughtful resource allocation, and transparent communication with stakeholders. With the right preparation, year-end becomes not just a conclusion to the fiscal year, but a launching point for the one ahead.