Non Profit Checklist: Ten Things to Do Before Year End

Nonprofit Year End

The end of the year is a busy time for all nonprofits. Because of this, some obligations tend to slip through the cracks. Since the consequences can devastate a nonprofit, it is vital to ensure certain responsibilities are met by year-end. The following are ten things all nonprofits should do before the end of the year. 

Non Profit Checklist By Year End Close

1. Ensure Corporate Compliance.

Nonprofits should always meet the minimum requirements under the laws of their state of incorporation and any other state where they are authorized to do business. Ongoing compliance requires Boards to file their annual reports with their home state and any other state where the nonprofit is doing business. It also means ensuring your registered agent information is up to date. 

The end of the year is also a great time to review and update the nonprofit’s Bylaws and pertinent corporate governance policies. The nonprofit’s Conflict of Interest disclosure form should be circulated at least annually. The end of the year is also the perfect time to review the nonprofit’s Document Retention Policy to see what items can be discarded. 

2. Hold the Annual Meeting.

Most states require nonprofits to hold an annual meeting each year. Many nonprofits with calendar years hold their annual meetings in December. Typically, the director and officer vacancies are filled at the annual meeting, and the budget for the upcoming year is reviewed and approved. The annual meeting is also the appropriate time to remind Board members about expectations for them to participate in fundraising and other Board responsibilities.

non profit board governance mistakes

3. Prepare for Tax Reporting.

Each year, nonprofits are responsible for reporting certain information to the IRS. The end of the year is an excellent time to make sure federal tax information is up to date, and the nonprofit is prepared to file a timely Form 990 in the following year.

Because most nonprofits’ fiscal years align with the calendar year, a critical year-end activity should be finalizing finances, reconciling accounts, and assembling documentation in preparation for filing Form 990. A thoughtfully prepared Form 990 presents an opportunity for nonprofits to showcase their accomplishments and the strength of their internal controls. 

Timely filing of Form 990 is crucial, as failing to file for three consecutive years will result in the automatic revocation of the nonprofit’s tax-exempt status. Nonprofits can make this process easier by keeping their CPA informed throughout the year and maintaining complete and accurate records. We also recommend having the nonprofit’s attorney review Form 990 because the attorney will often be aware of changes and transactions that the CPA is unaware of. 

4. Review Solicitation Registrations.

Nonprofits soliciting donations should confirm that their solicitation registrations are up to date in each state where they solicit funds or from which they receive substantial or ongoing contributions. Most jurisdictions require annual renewals making year-end an excellent time to determine whether the nonprofit’s registrations are up to date in all the jurisdictions where it plans to fundraise in the upcoming year.

Read about strategies for registration, which we discussed more in that blog post. Growing nonprofits should also be aware of the states that require an audit so that they are able to obtain an audit in advance of their renewal deadline.

5. Perform Contract Reviews and Renewals.

Every nonprofit, regardless of size, must be diligent in tracking contract expiration dates and terms, such as automatic renewals, terminations, and notice requirements. The nonprofit should have a designated corporate officer or board member responsible for calendaring and keeping track of contract expiration dates and termination windows.

The nonprofit must also be aware well in advance of any critical deliverables and deadlines in order to follow through on actions necessary to comply with its contracts.

nonprofit contracts

6. Perform Grant Reporting.

All too often, nonprofits successfully receive grant funding but fail to properly track their expenditures and make timely reports to the grantmaking agency. Failure to follow through with grant reporting jeopardizes future funding and, in some cases, can even result in funds being clawed back. Most funders require reporting before or shortly after the end of the year.

In-house or outsourced bookkeeping tasks should include tracking grant funds upon receipt as well as assigning and categorizing grant-related expenditures to make grant reporting easier. 

7. Conduct Performance Evaluations.

Many nonprofits adopt a Compensation Policy requiring annual performance evaluations of key employees. Often, these evaluations are overlooked or forgotten. However, regardless of whether the nonprofit compensates key employees, each year, executive officers should undergo a performance evaluation.

nonprofit employee Performance evaluation

December is an excellent time for the Board of Directors to assess the CEO and other key employees’ performance throughout the year. The Board should review potential conflicts of interest and adjust compensation annually. Evaluations give the executive an opportunity to report on their goals and invite the Board of Directors to assess the nonprofit’s overall performance under the executive’s leadership.

8. Renew Insurance Coverages.

Most insurance policies must be renewed by the end of the year. Accordingly, nonprofits should ensure renewal applications are submitted in time to extend insurance coverage before the policies expire. Consider also meeting with the nonprofit’s insurance broker to discuss any changes to programs or assets that could alter the nonprofit’s risk profile and coverage needs.  

9. Plan for End-of-Year Contributions and Donor Acknowledgments.

Nonprofits should remind donors of the cutoff for receipt of year-end donations. Tax law requires that contributions be postmarked or delivered by December 31st to be counted as received during that year.

While many nonprofits acknowledge all donations, nonprofits are required to send written acknowledgments to donors making donations of $250 or more. Nonprofits can send these acknowledgments upon receipt of the contribution or at the end of the year. The acknowledgment must indicate the following:

  • the full legal name of the origination and its EIN;
  • a confirmation of its status under 501(c)(3);
  • a recital of the amount given or items donated; and
  • whether any benefits were provided in return for the donation and, if so, the amount of the gift that is deductible. 

10. Create a Yearly Report.

A yearly report is a great way to update donors, partners, and other stakeholders on the nonprofit’s program accomplishments during the year. The report should reflect the most recent year as well as identify and discuss trends in the nonprofit’s industry and area of focus. 

board meetings

Ideally, the nonprofit should draft an internal and public version of the yearly report. The internal version can address staffing challenges, financial updates, and internal barriers and goals, whereas the public version should provide a more high-level overview of operations, goals, and achievements.

See our updated checklist for 2023.

Yearly reports should be disseminated to donors, grant funders, contract partners, and key stakeholders in the nonprofit’s service area. The nonprofit’s Board of Directors and key staff members should be asked to comment before publication. 

Kyler Mejia is an associate with Caritas Law Group, P.C. Caritas Law Group advises nonprofit and socially responsible businesses on corporate, tax, and fundraising regulations nationwide as well as donors with regard to major gifts. To schedule a consultation, call 602-456-0071 or email us through our contact form

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