EDIT: Originally published on May 20, 2025. Updated to provide additional information.

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What Is a Clean Nonprofit Year-End Close?

A clean year-end close means your nonprofit’s financial records are complete, accurate, and ready for review by auditors, regulators, and stakeholders. All activity for the fiscal year is recorded in the correct period, key balances are fully supported, and documentation is organized and accessible.

At a minimum, a clean close includes:

• Reconciled bank, investment, and credit card accounts
• A complete and supportable Statement of Financial Position and Statement of Activity
• Revenue and expenses recorded in the appropriate period
• Clear documentation supporting restricted funds, grants, receivables, payables, and reserves

In short, every number in your financial statements can be traced back to reliable source documentation, with no unanswered questions lingering after year-end.

Why a Clean Year-End Matters for Nonprofits

A disciplined year end close signals responsible stewardship to donors, grantors, and stakeholders. Contributors want confidence that funds are tracked properly and used in accordance with donor intent and grant restrictions. Clear, well-supported financials help reinforce trust and encourage continued giving.

In addition, reliable financial data strengthens internal decision-making by supporting better forecasting, grant applications, program planning, and sustainability.

If your nonprofit’s fiscal year ends on June 30, the clock is ticking. A clean year-end is a sign of good stewardship, strong governance, and financial transparency. In the nonprofit world, where financials are public and every dollar must be accounted for, that matters.

Whether you’re an executive director, a board member, or part of the finance team, this guide outlines the six steps your organization can take to close the year with confidence and clarity.

1. Start with a Backward Plan

A successful year-end close begins by working backward from your board meeting. Ideally, your financials should be finalized at least two weeks before your board convenes. Map out a detailed timeline:

• When will cash be reconciled?
• When are receivables and grant information due?
• What’s the deadline for fundraising data?

Align all teams early and assign deadlines so that everyone is clear on expectations and avoids last-minute scrambles.

2. Coordinate with Auditors Early

Before your year-end audit begins, reach out to your audit firm for a Prepared by Client (PBC) list. This checklist is useful for auditors and excellent for internal project management. Assign each item to a team member with a specific due date. This level of preparation reduces stress, cuts down on audit adjustments, and builds trust with your auditors.

3. Confirm Your Cut-Off Dates

Cut-off testing can be a pain point if not handled properly. Make sure all teams understand which services and expenses fall into the current fiscal year.

• Accrue invoices for services performed before June 30.
• Prepaids and payroll liabilities should be reviewed and posted accurately.
• Check that revenue is recognized based on the timing outlined in your contracts and grant agreements.

Getting this right protects the integrity of your financial statements and minimizes audit findings.

4. Tighten Up Grant and Revenue Tracking

Meet with the development team to review outstanding pledges, contracts, and grants.

• Have all committed funds been received?
• Are restricted grants being spent according to plan?
• Are there any grants with a “use it or lose it” deadline approaching?

Plan spending in advance so there are no surprises in June. All earned and contributed revenue must be recognized in the proper period to align with nonprofit accounting rules.

5. Present a Clear Story to the Board

The board is looking for insights. Prepare a clear and compelling presentation that includes:

• Budget-to-actual comparisons
• Variance explanations
• Visuals like charts and graphs to aid understanding

Consider holding a prep session with key staff to walk through the materials before the meeting, which allows everyone to be aligned and speak confidently about the results.

6. Think Beyond Year-End: Plan for the Year Ahead

Year-end is the perfect time to plan for the upcoming fiscal year. A quarter before year-end, begin projecting next year’s budget, staffing, and funding needs.

Since nonprofit leaders are accountable to donors, boards, and the public, the financial information that ends up in your Form 990 is a direct reflection of how well you manage the resources entrusted to you.

Frequently Asked Questions

When should nonprofits start year-end close planning?

Nonprofits should begin year end close planning at least one month before the end of the fiscal year, typically alongside the prior month’s close. Organizations with audits, complex grant activity, or capacity constraints often benefit from starting even earlier.

What documents do auditors request from nonprofits?

Auditors typically provide a Prepared by Client (PBC) list outlining required documentation. Common items include reconciliations, accounts receivable and payable schedules, grant agreements, payroll records, debt documentation, board minutes, and key policies.

How do restricted grants affect year-end close?

Restricted grants require careful tracking and proper period recognition. At year end, nonprofits must confirm compliance with donor restrictions, properly match expenses, and classify any unspent balances appropriately.

What are common nonprofit year-end audit issues?

Common issues include incomplete reconciliations, cut off errors, inconsistent grant documentation, and missing support. Addressing these areas proactively throughout the year (not just at year end) supports a smoother close and audit.

We Can Help

At Elliott Davis, we work with nonprofits that are ready to elevate their financial operations and build stronger, more resilient teams. Whether you’re aiming to close your books more consistently, improve budget management, or simplify the audit process, we bring clarity, structure, and relief.

Here’s how we can support you:

• Streamlining month-end closes so your team stays on track year-round.
• Building proactive budget strategies to help you spend wisely and with confidence.
• Bridging communication gaps with auditors by translating what they need and why.
• Providing capacity and support so your finance team can focus on strategy.

We make the complex feel manageable, so you can focus on your mission while we help keep the numbers audit-ready.

See our related article: Making the Most of Year-End Giving: A Practical Guide for Mission-Driven Nonprofits

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The information provided in this communication is of a general nature and should not be considered professional advice. You should not act upon the information provided without obtaining specific professional advice. The information above is subject to change.

The Centers for Medicare & Medicaid Services (CMS) Rural Health Transformation (RHT) Program is one of the most significant federal–state healthcare funding initiatives in decades. Authorized under the One Big Beautiful Bill Act, the program commits $50 billion over five years (FY2026–FY2030) to support new approaches to improving access, sustainability, and outcomes in rural healthcare.

Once a state releases its Notice of Funding Opportunity (NOFO), organizations often have a short window, sometimes as little as six weeks, to assemble partnerships, design projects, and submit applications.

The organizations best positioned to benefit are those that treat RHT not as a grant-chasing exercise, but as a five-year transformation effort that requires planning well before funding announcements are released.

What Is the CMS Rural Health Transformation Program?

The RHT Program is federally authorized and implemented by states, making it distinct from traditional Medicare or Medicaid funding models and signaling a possible evolution in how public healthcare gaps are addressed.

• Medicare operates as a fully federal program
• Medicaid functions as a federal–state joint partnership
• RHT introduces a third model: federal funding paired with broad state discretion over priorities, allocation, and oversight

This structure allows RHT to pick up where Medicare and Medicaid leave off, enabling states to direct funding toward access challenges that existing programs do not fully address. Rural communities often face fewer providers, longer travel distances, and limited care options. With roughly 20% of the U.S. population living in rural areas, RHT focuses on workforce investment, technology adoption, care delivery redesign, and regional collaboration to close persistent access gaps.

RHT funding also reflects broader federal fiscal dynamics. Reductions in federal healthcare spending have increased pressure on states to deploy RHT dollars thoughtfully and defensibly. As a result, the program is not only a near-term funding vehicle, but a policy experiment that may inform how future federal–state healthcare initiatives supplement core entitlement programs.

How State-Level Control Defines RHT Funding and Strategy

Although RHT is federally authorized, it is designed and implemented at the state level. Each state develops its own priorities, funding structures, and application processes.

For rural hospitals and healthcare providers, this means strategy must account for:

• State-defined focus areas, such as workforce development, technology investment, or regional partnerships
• The organization’s role within broader regional or statewide initiatives
• Clear alignment between proposed projects, community needs, provider initiatives, and state objectives

Successful applicants position their proposals as part of the broader transformation agenda the state is advancing.

It’s also important to recognize that funding is not required to flow directly to rural providers, and there is no single national playbook governing how funds are awarded. As a result, success depends on understanding state intent and translating those priorities into well-aligned, defensible proposals.

Signals from Early State Activity

States that have already released RHT guidance or early NOFOs provide important clues about how funding decisions are likely to be made.

• Iowa has issued multiple targeted NOFOs with funding ranges that vary widely by initiative, from smaller workforce and equipment awards to multi-million-dollar investments in cancer prevention.
• Pennsylvania has organized its RHT strategy around regional care collaboratives supported by layered governance and reporting. The state is pairing near-term stabilization investments with longer-term workforce, technology, and maternal health initiatives tied to performance metrics.
• Georgia is prioritizing time-bound, operationally feasible projects that advance value-based care without creating long-term state obligations, supported by significant investment in centralized program management.
• Delaware is directing RHT dollars into state designed programs, including the state’s first four-year medical school, initiatives integrating nutrition into clinical care, and efforts to advance value-based care.

Cross-State Takeaways

Across early adopters, several themes are emerging:

• State-specific priorities matter more than national program language
• Multi-year transformation initiatives are favored over one-off investments
• Reporting capability, data integrity, and post-grant viability influence funding decisions
• Many states are delegating fund selection and distribution responsibilities to regional partnership networks

Preparation Matters: Why Waiting for the NOFO Creates Risk

Organizations that wait for the NOFO often underestimate the internal control, compliance, and reporting infrastructure required to responsibly manage RHT funding.

Many state RHT requests for proposals are expected to open April–June, often with 45–60 day submission windows. Once a NOFO is released, organizations may have only weeks to:

• Identify partners
• Design compliant projects
• Secure executive approval
• Prepare financial and operational documentation

That timeline limits strategic decision-making. Some choices simply cannot be made well in six weeks, particularly those involving multi-year operating models and workforce capacity.

Planning Before Applying for RHT Funding

RHT funding is time-limited. Strategic planning should extend beyond award and implementation to how programs will be funded after grant dollars expire. Organizations should evaluate whether new services generate ongoing revenue or measurable cost savings, and how workforce and technology investments fit within long term operating models.

Treating RHT as a multi-year transformation arc, rather than a one-time funding opportunity, helps reduce the risk of post grant instability.

Before applying, organizations should have clarity on:

• Which initiatives genuinely advance long-term financial and operating models
• Which programs can scale within a five-year window
• Whether leadership and staff can support sustained reporting and oversight

Internal alignment accelerates decision-making once state guidance is released. Without it, even strong opportunities stall. Failure to align projects with how states ultimately measure success may also expose providers to funding reductions or clawbacks.

Think Like an Investor, Not a Grant Applicant

RHT funding can materially change the financial profile of an initiative and how it should be prioritized. Ultimately, strategic decisions come down to how an organization allocates its time and money. When those resources are misallocated, the consequences can be significant.

For example, consider a project that initially ranked low as an organizational priority because it delivered a 10% internal rate of return (IRR). If that same project receives RHT funding over five years, even after accounting for added compliance costs, its projected IRR could increase to 25%, elevating it to a top-tier priority. See the illustrative example below.

This reframes prioritization decisions as lower-priority initiatives may become financially compelling, and “shovel-ready” projects can take on new urgency. For the leadership team, RHT should alter how initiatives are evaluated, not simply which grants are pursued.

The Compliance Reality: Where Funding Is Won or Lost

RHT compliance requirements are often underestimated. Each grant carries its own reporting cadence, performance metrics, and repayment provisions for noncompliance. If required data is incomplete or reported outcomes fail to meet defined thresholds, grant funds may be subject to repayment, even if services have been delivered.

In many cases, organizations face structural gaps that heighten the risk:

• Providers are not currently collecting all required data
• Internal controls around data accuracy are inconsistent
• Executive leaders certify information without full confidence in its reliability

For multi-state healthcare systems participating in hundreds of state-specific grant programs, these challenges compound quickly, increasing exposure and straining already limited administrative capacity. Underestimating the compliance costs will overstate expected ROI and could result in poor allocations of capital that put the organization at risk and strain finances.

We Can Help

Early engagement can influence outcomes when approached with intention. A proactive strategy may include participation in regional collaboratives, state-level outreach to understand priorities, and early conversations with potential partners.

Elliott Davis works with rural healthcare providers across the full RHT lifecycle, including:

• Strategic planning and initiative prioritization
• Identifying and evaluating RHT funding opportunities
• Compliance, governance, and internal control design
• Multi-year reporting support and monitoring
• Post-grant closeout validation

We help organizations decide which opportunities to pursue, prepare to respond quickly, and support the operational discipline required to retain funding and deliver lasting value.

Contact us to start the conversation.

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The information provided in this communication is of a general nature and should not be considered professional advice. You should not act upon the information provided without obtaining specific professional advice. The information above is subject to change.

Edit: Originally published on December 15, 2025. Updated to reflect recent developments.

Internal Controls over Financial Reporting (ICFR) remain a cornerstone of financial integrity, even with the significant changes for reporting requirements. With the FDIC’s finalized rules adjusting regulatory thresholds, community banks should revisit audit plans in light of the new compliance standards to balance oversight with operational relief.

On January 1, 2026, new thresholds under Part 363 took effect, redefining reporting requirements for hundreds of banks.

These updates, driven by inflation adjustments and a commitment to reduce unnecessary burdens, will be reviewed every two years starting October 2027. While the changes simplify compliance for smaller institutions, they don’t negate the importance of robust internal controls for effective risk mitigation in institutions of all sizes.

What’s Changing?

The FDIC’s recent revisions significantly raise key compliance thresholds:

• Annual reporting now required at $1 billion in total assets (up from $500 million)
• ICFR attestation now required at $5 billion in total assets (up from $1 billion)
• Audit committee independence requirements rise in line with these regulatory changes
• Independent director compensation increased to $120,000 annually (up from $100,000)

Who Benefits?

The threshold changes create a clear divide between institutions that gain reporting relief and those that maintain higher compliance obligations:

• 778 banks under $1 billion in assets will see reporting relief
• 727 banks between $1 billion and $5 billion will experience reduced ICFR obligations

Ultimately, these changes result in lower compliance costs and fewer audit complexities for smaller institutions.

Impact on ICFR

Previously, banks with over $1 billion in assets faced stringent ICFR assessments and auditor attestations. Under the new rule:

• Below $1 billion in assets: Part 363 generally does not apply
• $1 billion – $5 billion: Annual, independent audit and management report remain, but ICFR attestation is no longer required
• Over $5 billion: Full ICFR requirements continue, including management assessment and auditor attestation

Despite relief for smaller banks, approximately 95% of industry assets remain under Part 363 oversight, and roughly 89% remain subject to ICFR requirements, preserving systemic stability.

Why Controls Still Matter

Don’t toss your risk control matrix just yet. ICFR exists for a reason: mitigating risks like fraud, cyberattacks, and material misstatements to maintain accurate, reliable financial statements. Without proper checks, risks can escalate quickly. While no system can eliminate risks entirely, strong controls significantly reduce their likelihood and the impact of potential issues. ICFR plays a vital role in supporting sound business decisions.

The FDIC’s recent threshold adjustments signal a broader trend toward simplifying compliance while maintaining accountability. For banks, this is an opportunity to rethink risk management holistically and build resilience across departments.

Breaking Down Silos: A Strategic Opportunity

Historically, ICFR, Internal Audit, and Enterprise Risk Management (ERM) have operated in silos. That’s changing. Leading organizations are moving toward a more collaborative approach that leverages the interconnections among these functions to build a unified, cross-functional risk strategy. To achieve this:

• Align ICFR with ERM by:
  
  • Mapping ICFR risks to enterprise-level risks
  • Adopting a common risk taxonomy for consistency
  • Incorporating ICFR into risk appetite and tolerance discussions
• Embed ICFR into audit planning by:
  
  • Including ICFR risk assessments in annual audit planning
  • Prioritizing audits based on control effectiveness and materiality
  • Using ICFR walkthroughs and testing results to inform audit scope and timing
• Enhance cross-functional collaboration by:
  
  • Fostering cooperation between Finance, Internal Audit, and IT
  • Holding joint planning sessions to agree on key risks and controls
  • Sharing findings and insights across teams to drive unified action

When ICFR is woven into audit planning and ERM frameworks, institutions can more effectively prioritize audits, anticipate control deficiencies, reduce duplication, and adapt quickly to change—leading to a more resilient and agile organization.

We Can Help

Strong internal controls are necessary for trust, transparency, and long-term success. Our Financial Services Group helps institutions:

• Evaluate the current ICFR framework
• Identify gaps in risk assessment, control activities, and monitoring
• Enhance reporting processes and reduce manual effort
• Align oversight mechanisms with business goals and regulatory expectations
• Support leadership with actionable insights and practical solutions

Contact us today to get started.

The information provided in this communication is of a general nature and should not be considered professional advice. You should not act upon the information provided without obtaining specific professional advice. The information above is subject to change.