Your Year-end Nonprofit Checklist

By Frank Cornett, CFP®, Senior Client Manager, and Natalie Roderick, Vice President

The holiday season is rapidly approaching, with turkey, apple pie, gifts, and stressful Christmas shopping all right around the corner. I remember late nights spent coupon hunting with family after Thanksgiving dinner, scouring the papers and meticulously planning purchases at each store for Black Friday. Now, as an adult and financial professional, I see that it is equally important to take the time to make a list (and check it twice) of my end-of-year financial tasks.

Organizational year-end activity is no different, so here are 8 financial “to-do’s” to complete and remind employees about before December 31st:

1. Remind employees about retirement plan contributions.

   • While Roth and traditional IRAs have until Tax Day of the following year to fund contributions, your 403(b) or other employer sponsored retirement plan ends by December 31st. Remind your staff that contributing more to their employer-sponsored plan is an excellent way to reduce their taxable income or get more money into their Roth savings (tax-free on withdrawal after specific retirement ages). If your organization is considering a holiday or year-end bonus, employees might consider earmarking as much as they can towards their retirement account,  especially if your organization matches contributions.

2. Remind employees about other benefits, such as FSA or HSA utilization.

   • Most organizations begin their open enrollment period, when employees can select or change their employee sponsored benefits for the upcoming year, in the final quarter of the preceding year. Encourage your staff to consult with your human resources team to get all open enrollment and insurance information for the coming year. Additionally, remind employees to take advantage of any 2022 flexible savings account (FSA) dollars unused and/or any additional health savings account (has) savings potential, if applicable.

3. Review employee information for gaps or updates.

   • The holiday season is busy for all employees and employers alike, but do not miss a good chance to complete your payroll, bonus, or benefits package checklist. This is also a great time to audit employee information for incorrect phone numbers and addresses or to update statuses for new and former employees.

4. Reconcile accounts payable and accounts receivable

   • Does your organization have a list of pledges that are unfulfilled? We understand that many entities do not use the calendar year to mark their fiscal year, but year-end is a great seek out individual and corporate donors who are looking for their end of year tax deductions. The end of the year is an excellent time to evaluate or boost incoming dollars, especially on Colorado Gives Day, which is December 6th this year.

   • Closing out owed invoices can also provide peace of mind heading into a new calendar year.

5. Encourage charitable donations.

   • Donors can give appreciated stock and mutual fund holdings, an often overlooked opportunity. Encourage and educate your donors on the benefit of giving appreciated securities. If your nonprofit does not currently accept such donations, consider setting up a brokerage account. Instead of writing a check to you, remind donors that they can potentially be forgiven of capital gains taxes, receive the same tax deduction, and give your organization an asset all by donating appreciated securities. A tax professional should always be consulted to ensure correct application to individual circumstances.

   • Giving directly from an Individual Retirement Account (IRA) is another way to encourage giving while saving your donors tax dollars. Under the ruling for Qualified Charitable Distributions (QCD), donations made directly from an IRA (for individuals over age 70 ½) to a charitable organization is a non-taxable event. This includes required minimum distributions after age 72.

6. Verify vendor information.

   • What changes has your nonprofit seen this year? Use this time to verify that phone numbers, email addresses, and contact names are still correct for each of your vendors. Purge online systems of any inactive or inaccurate information. If time allows, evaluate your relationships and look for opportunities to negotiate better deals in the new year.

7. Analyze the calendar year.

   • The end of the year is a great time to assess where you stand financially and how your current financial situation compares to previous years. If cash inflow and reserves are higher than expected, it might be a good time to consider putting your operating reserves to work. Like any investment portfolio, there are a variety of factors to think about, not least of which is the asset liquidity necessary to make funds available when needed and the inflows and outflows of reserves. The objectives and downside risk are two additional key factors to consider when investing operating reserves. Innovest can guide you in deciding whether investing your operating reserves makes sense and how to move forward if it does.

8. Start the new year off with a bang.

   • Colorado and many other states have programs that nonprofit organizations can take advantage of.  When individuals file their tax returns, they can choose to donate to a nonprofit organization that is enrolled in a state program. There is no cost for nonprofits to be a part of this program, so it is a free way to gain additional contributions from donors. In Colorado, additional information is can be found at:  https://www.coloradogives.org/p/givesday/about.

We hope you enjoy the upcoming holiday season! Let us know how we can help you achieve your financial goals and set you up for long term success.