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2021 Year-End Planning for Nonprofits

December 07, 2021

Nonprofits, are you ready to close out the year on a good note? Make sure you address year-end compliance to set the tone for success in 2022.

Year-end is a busy time for nonprofit organizations, as most charitable donations come through between Thanksgiving and Christmas. So how can nonprofits best prepare for the year-end to ensure a successful New Year? We explore seven year-end compliance tips here.

7 Year-End Compliance tips for Nonprofits

  1. Schedule your annual meeting: The annual meeting serves multiple purposes, including the board of director elections, evaluating and assessing progress towards achieving its mission, reviewing financials, setting the budget, and setting goals for the upcoming year.
  2. Renew or elect new officers and directors- Your officers' and directors' terms may be up for renewal, and you might want to elect new leaders. Here are a few questions to consider: Has the Organization considered diversity in recruiting new members? Are there specific skill sets or advisors that would assist the Organization to achieve its upcoming goals for 2022? Does the board represent or have representation for the community that it serves?
  3. Review your by-laws - It is an excellent practice to review the by-laws annually to ensure that the Organization is in compliance with its governing documents. A couple of governance matters to consider: Should the Organization consider term limits? Does the board of directors need to change the frequency of its meetings? Does the Organization need to increase or decrease the size of the Board of Directors?
  4. Prepare/approve next year's budget- The annual budget is the financial summary of significant planned policy decisions. It sets the Organization's programmatic, personnel, and other priorities into motion. The budget is the plan that provides the bridge between the mission objectives and the programs and activities designed to achieve those objectives. The board must ensure that the Organization updates and maintains the budget and financial projections throughout the year as circumstances develop and change. Check out for more information on proper budgeting.

    After the budget and planning process is complete, the next part of providing financial oversight is to monitor the actual financial results and compare them to the budgeted goals. Analysis of the differences will help you learn what happened and determine how best to react to these variances. When budget vs. actual differences are significant and impact future actions, it is time to revise the budget. Some people mistakenly believe that the annual budget is cast in stone and should never be modified.

    In 2020, the COVID-19 pandemic changed how many organizations operated and interacted with the community, causing a significant shift in the Organization's financial results requiring several budget revisions. When the original budget no longer functions as the road map for operations, it is time to adjust the map to have an appropriate tool to monitor progress.
  5. Prepare for form 990 filing- Form 990 informs the public about crucial aspects of your nonprofit. Most of the pages and tables are available for public inspection, including those describing executive compensation and program expenditures. In addition, Form 990 provides the IRS with information about your nonprofit's activities and financial status to demonstrate that your nonprofit still meets the qualifications for tax exemption. Form 990 is due May 15th every year for calendar organizations. Check out our 990 blog series here.
  6. Renew your charitable solicitation license- Are you hosting a drive or charity auction? If you use a professional fundraiser or a professional auctioneer, you will need to make sure they are registered with your state's attorney general's office before the auction or event.
  7. Review donor receipts and solicitations- Donors are required to obtain a letter or receipt for any contribution of $250 or more. However, many organizations provide thank you letters to donors at all levels. Donors must have substantiation of donations to include those donations on their itemized federal tax returns. A letter from the non-profit Organization is the clearest document they can have to prove their donation. Your donor receipts should include the following items:
  • The full legal name of your Organization,
  • Donor name,
  • Amount of a cash donation,
  • Description of any non-cash donations (but not the value), and
  • Statement of whether or not benefits (goods or services) were provided, and if so, a good faith estimate of the value.

    Questions? Contact us.

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