The audit starts long before the auditor arrives. The year-end close is the point where you turn twelve months of entries into records you can hand over with confidence. This guide is a step-by-step checklist for an NGO finance team, from the last transaction to the day the auditor gets access.
For a wider checklist of what an auditor looks for, read the NGO audit preparation checklist. This guide covers the close itself.
Before you start
- Agree the cut-off date with everyone who enters transactions. After it, nothing is posted to the old year.
- Tell project managers the deadline for bills and claims.
- Choose one person to own the close.
The close, step by step
1. Finish the entries
- All bills received up to the cut-off are entered.
- All payments and receipts are entered.
- Petty cash is counted and recorded.
- Payroll for the last month is posted.
- Any journals you plan to post (accruals, allocations, depreciation) are prepared.
2. Reconcile the bank
For every bank account, agree the ledger balance with the bank statement at the cut-off date. List each difference, explain it, and clear what can be cleared. Unexplained differences are the first thing an auditor notices.
3. Check the control accounts
| Account | What to check |
|---|---|
| Accounts payable | Total agrees with the list of unpaid vendor bills |
| Accounts receivable or donor receivable | Total agrees with the list of amounts due |
| Staff advances | Each employee's balance is correct and recoverable |
| Withholding tax payable | Agrees with tax withheld and not yet deposited |
| Salary tax payable | Same |
4. Post year-end adjustments
- Depreciation for the year on fixed assets.
- Accruals for costs incurred but not billed (for example, utilities, audit fee).
- Prepayments for costs paid for next year.
- Allocations of shared costs between projects, using your agreed basis.
5. Review the projects
For each project and donor:
- Run budget vs actual.
- Look at every line that is overspent. Is it a coding error or a real overspend?
- Check that costs are in the right project and activity.
- Compare actual spending with what you reported to the donor during the year.
6. Check the fixed assets
- The register total agrees with the ledger.
- A physical count has been done, or is planned.
- Disposals and transfers are recorded.
7. Review the trial balance
Read it line by line. Look for balances that look wrong: a negative cash balance, a payable with a debit balance, an expense account with a credit. Each one is an error until proved otherwise.
8. Lock the period
Once the numbers are agreed, close the period so that nobody can change them without anyone noticing. If something must change afterwards, it should be a visible adjustment with a reason, not a quiet edit.
9. Prepare the pack for the auditor
| Item | Done |
|---|---|
| Trial balance | |
| General ledger | |
| Bank reconciliations and statements | |
| Fixed asset register and depreciation | |
| Payroll register and payslip summaries | |
| Tax deposit proofs | |
| Donor agreements and approved budgets | |
| Budget vs actual for each project | |
| Schedule of advances and payables | |
| Vouchers, filed and numbered |
10. Make a list of what you will change next year
Write down every problem you found during the close. The best time to improve a process is while the pain is fresh.
Common mistakes
- No cut-off. Transactions keep arriving and the figures move.
- Closing before reconciling. Errors are then locked in.
- Quiet edits after the close. An auditor will find them.
- Project coding fixed at year end. By then nobody remembers.
- Missing vouchers. An entry without a document is a query.
How software helps
The close is mainly a matter of process, but good records make each step faster. In OneAccounts you can run budget vs actual and the overspent report for each project, open any figure down to the ledger, the journal entry and the document, post depreciation with the Fixed assets add-on, lock a closed accounting period so it cannot be changed, and see every change in an audit log.
OneAccounts does not reconcile a bank statement for you, so keep your bank reconciliations alongside the records.
Frequently asked questions
How long should a year-end close take?
For a small NGO, one to two weeks after the cut-off. Monthly closing during the year makes it much faster.
Should we reconcile the bank every month?
Yes. A year-end reconciliation of twelve months of differences is painful and unreliable.
Can we change figures after we lock the period?
Technically sometimes, but you should not. Post a visible adjustment with a reason instead.
Who should review the year-end trial balance?
Someone who did not prepare it, such as the finance manager or a senior accountant.
What is the difference between closing and auditing?
Closing is you finalising your records. An audit is an independent check of them.