Month-End Close Checklist for Canadian Charities and NPOs

A month-end close is the discipline that makes your year-end boring. Twelve closes done properly produce an annual return that is an extraction exercise; twelve months of unclosed data produce a June reconstruction project. Here is what the close covers, in the order it should happen, and what should land on your desk at the end of it.

One note before you start. References below to the T3010 and to official donation receipts apply to registered charities only. A non-charity NPO uses the same close mechanics against different annual filings, so read those two items as charity-specific and everything else as applying to both.

Why does a charity need a month-end close at all?

Because errors are cheap to fix in the month they happen and expensive to fix eleven months later. A coding error found in March is a two-minute correction while the invoice is still findable and the person who authorized it still remembers why. The same error found the following June is an investigation.

There is a second reason specific to charities. Your restricted fund balances are a live obligation to funders, not a year-end calculation. A charity that only computes fund balances annually can overspend a restriction for months without knowing, and unwinding that is much harder than preventing it.

This is different from your year-end close, which is heavier: accruals get finalized, the annual statements get built, and the file goes to your accountant. Month-end is the lighter cycle that makes the heavy one manageable.

What do you close first?

Cash, always. Nothing downstream is reliable until every account holding money agrees with its statement.

Reconcile each bank account to its statement. Reconcile each credit card. Reconcile each payment processor and donation platform, which means agreeing the platform's own settlement report to the deposits that actually landed in the bank, net of fees.

Chase anything unreconciled before moving on. A single unexplained difference in the cash section will propagate into every report you produce from that month. Our guide to double-entry bookkeeping for Canadian charities covers the underlying mechanics.

How do you close restricted funds each month?

Roll each fund forward and prove the closing balance. Opening balance, plus receipts, less eligible expenditures, equals closing balance, for every restriction separately.

Three checks are worth doing every month. Confirm that every restricted receipt has been coded to the right fund rather than to general revenue. Confirm that expenditures charged to a fund were actually eligible under that agreement. Confirm that no fund has gone negative, which usually means expenditure has been coded to the wrong restriction.

The output is a fund schedule you could hand a funder without editing. If you cannot produce that in ten minutes, the month is not closed. Our guide to fund accounting for charities covers the structure this depends on.

What do you check on the revenue side?

That your donation records and your ledger tell the same story, and that receipted and non-receipted gifts are separated.

Agree the total of donations recorded in your donor database to donation revenue in the ledger, and investigate the difference rather than assuming it will come out in the wash. Confirm that gifts for which you issued official receipts are recorded separately from gifts for which you did not. That split feeds directly into your annual return, and reconstructing it later is painful.

Check how restricted and future-period contributions are being recognized, and confirm it matches your stated accounting policy. Canadian accounting standards for not-for-profit organizations permit two approaches: the deferral method, under which a restricted contribution for a future period is deferred and recognized as revenue in the period the related expenses are incurred; and the restricted fund method, under which restricted contributions reported in a corresponding restricted fund are recognized as revenue of that fund when received or receivable. The two produce different statements from identical facts.

What matters at month end is consistency. Confirm the contribution-recognition method your organization has adopted, document it, and apply it the same way every period. This is an accounting policy rather than a monthly election, and changing it later is an accounting-policy change with its own consequences. Organizations that recognize restricted income inconsistently report a surplus one year and a deficit the next for no operational reason, and the inconsistency is what an accountant will question.

What do you check on the expense side?

Functional allocation, accruals and payroll, in that order.

Every expense should be coded to a function. The main functional categories on the T3010 are charitable programs, management and administration, and fundraising, and the return also carries separate lines for other activities, for grants to non-qualified donees and for gifts to qualified donees. Doing this monthly is a five-minute review. Doing it annually across twelve months of transactions is a day's work and produces worse answers.

If your charity reports on an accrual basis, accrue what belongs to the month: an invoice received in April for March work belongs in March. The T3010 accommodates both cash and accrual reporting, so check which basis your financial statements use before applying this. Either way it matters for charities with grant reporting periods, because a misplaced cost can fall outside the eligible window.

Confirm payroll has posted correctly and that source deduction liabilities agree to what your payroll provider reported. Your bookkeeper records payroll, and your provider may process it, but the employer remains legally responsible to CRA for deducting, remitting and reporting payroll deductions. Checking that remittances actually went out is therefore part of your close, not somebody else's problem.

What should the close package contain?

Five outputs, delivered on a predictable date.

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The reconciliation summary is the one most charities skip and the one an auditor will ask for first. It is the evidence that the close actually happened.

How long should a close take, and when?

Target completion within ten business days of month end, on a fixed date.

The date matters more than the number. A close that happens on the tenth of every month becomes routine. A close that happens "when there is time" is the same as no close, because it will not survive a busy month.

Ten business days is realistic for a small charity with reconciled feeds and a clean chart of accounts. Charities running many concurrent grants or high donation volumes may need longer, and that is fine as long as it is consistent.

If you want to see how the monthly cycle sits inside an ongoing engagement, our scope of service page sets out what is included, and our charity bookkeeping service page covers the annual cycle around it.

Frequently Asked Questions

How long should a nonprofit month-end close take?

Aim to finish within ten business days of month end. What matters most is that it happens on the same date every month. A predictable close that takes twelve days beats an unpredictable one that sometimes takes five.

Do small charities really need a monthly close?

Yes, though the package can be lighter. Even a charity with fifty transactions a month benefits from monthly bank reconciliation and a fund roll-forward, because those are the two things that are painful to reconstruct later.

What is the difference between month-end and year-end close?

Month-end confirms that cash is reconciled, funds are tracked and coding is correct. Year-end finalizes accruals, produces annual financial statements, prepares the file for your accountant and supplies the data for your T3010. Month-end is what makes year-end manageable.

What if we find an error from a previous month?

Document the error and follow your accounting policy. Immaterial errors are commonly corrected in the current period with a clear description. Material errors, or amounts already reported externally to a funder, a board or CRA, may require a prior-period adjustment or professional advice. Record what happened and why either way, because that note is what an auditor will look for.

Who should sign off on the close?

Someone other than the person who prepared it. For most small charities that is the treasurer or the executive director. The review does not need to be exhaustive, but the reconciliation summary and the fund schedule should be read by a second person every month.

This article provides general information about bookkeeping practice and Canadian charity compliance. It is not accounting, tax or legal advice. Speak with a qualified adviser about your organization's circumstances.

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