A Nonprofit Santa's Wish List: What Your Accountants Need for Year-End Engagments

By Peggy E. Topel-Jennings, CPA
Bryan Mogg, CPA

Accountants do not usually look forward to the annual audit or tax preparation process. In addition to an already demanding workload, you must take on the added responsibility of assisting the outside CPAs. Requests for information may seem to be never-ending and the process can be frustrating.

Yet, it is easy to forget that assisting the outside CPAs helps the organization. The more cooperation they receive, the quicker they will finish. This in turn results in fewer days of disruption to your schedule and a lower fee. Cooperation benefits both the outside CPAs and the organization.

As the accountant of a nonprofit organization, your experience is ideally suited to help the outside auditors and tax preparers because of your in-depth knowledge of the accounting system and records. This knowledge enables you to readily locate source documents, prepare workpaper schedules, and explain general ledger entries. While CPA assistance can become somewhat burdensome at times, it is the most effective way accountants can help the organization control fees. But often, information is difficult to retrieve, hard to find, or missing; which compounds the frustration the accountant might feel when confronted with year-end deadlines.

Below, we list the most important information and documents that will help your organization meet its year-end deadlines, aid the engagement in proceeding smoothly and provide readily available information to your board members, if requested. While accumulating this information at year-end might be regarded as burdensome, rather look upon it as an informal review that allows you to proactively identify any issues before the tax preparer or auditor even begin their procedures.

Year End Checklist for financial statement engagements:

1. Copies of approved minutes of Board meetings
2. New or amended lease agreements
3. New or amended agreements with grantor agencies
4. New loan agreements and their amortization schedules
5. Final adjusted trial balance
6. Copy of internal financial statements
7. Bank reconciliations and bank statement for last month of year
8. Investment statements for year
9. Aging of accounts receivable
10. Aging of promised or conditional receivables
11. Copy of year-end inventory with extended prices
12. Calculation of prepaid expenses
13. Fixed asset listing including depreciation calculations
14. Listing of accounts payable
15. Calculation of accrued payroll and vacation
16. Schedule of year’s activity through notes payable
17. Budget to actual comparison for the year
18. Functional allocation methodology and computation
19. Analysis of legal fees for the year
20. Schedule of related party transactions for the year

Year End Checklist for 990 preparation:

1. Lists of substantial cash and non-cash contributors ($5,000 or more)
2. Amount of interest on savings and temporary cash investments
3. Income from rents of real estate, and related expenses
4. Schedule of realized and unrealized gains and losses on securities
5. Schedule of sales of fixed assets
6. Summary of income and expenses from special events and activities
7. Schedule of gross profits from sales of merchandise inventory
8. Schedule of contract revenue for royalties, mailing list sales and otherfees
9. A list of payments to affiliates
10. Statement of functional expenses (with attachment of other expenses). 501 (c) (3) and (c) (4) must break out program, support and fundraising
11. Information on grants and allocations paid by the organization
12. A description of benefits paid to or for organization members
13. Statement of program service accomplishments
14. A list of receivables and other loans due from officers, directors, trustees, and key employees
15. The details of loans from officers, directors, trustees, or key employees.
16. A schedule of officers, directors, trustees, and key employees total compensation (including benefits). Include list of non-compensated board members
17. A conformed copy of any changes to the organizing or governing documents that haven’t previously been given to the IRS.
18. Signed statement about excess benefit transactions - 501(c)(3) and (4) only
19. List of states where Form 990 is filed (generally, states where registered as a charity).
20. Lobbying expenditure information of 501(c)(4), (5) and (6) organizations including dues, invoice notice involving an outside CPA in the audit, review or compilation of financial statements, as well as in the preparation of Form 990, is an important function of fiduciary oversight.

The CPA has an objective view and often has a wide range of exposure to how other nonprofit organizations perform similar functions. By anticipating their requests for information and documents, you can focus your interaction with the CPA on operational suggestions, and this important interaction will not seem so burdensome.