Department: Finance & Accounting Process Owner: Controller Last Updated: January 2026
1. Overview and Purpose
Objective: To define the month-end process for preparing, reviewing, and distributing monthly financial statements. This SOP ensures that all close activities are complete before reporting, financial statements tie to the general ledger, key variances are explained, and leadership receives timely, accurate reporting.
2. Scope
This SOP applies to the preparation of all monthly financial reporting packages, including:
- Statement of Financial Position (Balance Sheet)
- Statement of Activities (P&L)
- Cash Flow reporting (if included in package)
- Budget-to-actual summaries
- Restricted vs unrestricted views (as applicable)
- Close narrative and variance explanations
It builds on completion of preceding month-end close procedures.
3. Step-by-Step Process
3.1 Confirm Close Completion
- Verify that all month-end SOPs are complete and signed off, including:
- Bank reconciliations
- Payroll accruals
- Revenue accruals / deferrals
- Accounts payable aging tie-out
- Payment processor reconciliation
- Net asset schedules
- Run a final close checklist review in your document management system
- Confirm no outstanding items remain in accounting system feeds
Reviewer / Back-up: Senior Accountant
3.2 Run Core Financial Reports
- In your accounting system, generate:
- Profit & Loss (Statement of Activities) for the month and YTD
- Balance Sheet (Statement of Financial Position) as of month-end
- Apply correct filters:
- Accrual basis
- Month-end date range
- Fund / program dimensions enabled (if applicable)
- Export to Excel or PDF
- Save output to designated month-end close folder structure
Reviewer / Back-up: Accounting Coordinator
3.3 Review Statement Accuracy and Tie-Outs
- Confirm:
- Cash accounts tie to reconciled bank balances
- Accounts payable and receivable balances align with aging / support schedules
- Payroll, prepaids, fixed assets, leases, and accruals tie to close journal entries
- Net asset totals tie to rollforward schedule
- Investigate any out-of-range balances or unexplained swings
Reviewer / Back-up: Controller
3.4 Prepare Budget-to-Actual and Variance Commentary
- Export budget vs actual report by month and YTD
- Identify variances exceeding internal materiality thresholds
Note: Organizations should establish a formal materiality threshold based on size and budget complexity. Document your threshold in your accounting policies and apply it consistently.
- Draft variance explanations, including:
- Timing variances
- One-time expenses
- Grant reimbursement timing
- Capital project anomalies
- Include program-level notes if needed
Reviewer / Back-up: Finance Director
3.5 Assemble Financial Statement Package
- Combine into a single reporting packet:
- Cover memo / close summary
- Statement of Activities (month + YTD)
- Statement of Financial Position
- Budget-to-actual
- Restricted / capital campaign views (if required)
- Any board or leadership schedules
- Ensure document titles include the month / year and version label
- Save final packet to designated close folder
Reviewer / Back-up: Accounting Coordinator
3.6 Review and Distribute
- Controller performs final review of the full packet
- Once approved, distribute to:
- Executive Director / CEO
- Finance Director
- Program leadership / board finance committee (as applicable)
- Archive distributed version in document management system and note distribution date
Reviewer / Back-up: Controller
4. Key Roles and Responsibilities
| Role | Responsibilities |
|---|---|
| Accounting Coordinator | Runs reports, exports outputs, assembles packet |
| Senior Accountant | Supports tie-outs, prepares budget-to-actual drafts |
| Controller | Final GL tie-out, variance review, signoff and distribution approval |
| Finance Director | Reviews key variances and leadership-ready narrative |
| Executive Director / CEO | Receives and reviews final monthly package |
5. Key Files and Systems
- Accounting System – Source of financial reports and general ledger data
- Budget File (Excel) – Official budget for budget-to-actual comparison
- Close Checklist (Excel / Document Management System) – Confirms all tasks complete
- Variance Commentary Template (Excel / Word) – For narrative explanations
- Document Management System / Financial Statement Folder – Archive of all monthly packages
6. Exceptions and Special Cases
- Late Adjustments After Distribution: Re-issue statements with "Revised" label and note changes in memo
- Board Reporting Months: Include expanded schedule set (net assets, capital campaign, grant summary)
- Audit Months: Provide additional support package if requested (trial balance, journal entry list, reconciliations)
- Grantor-Specific Reporting: May require customized statements by fund or program dimension
7. Risks and Controls Summary
| Step | Risk | Control |
|---|---|---|
| 3.1 Confirm Close Completion | Preparing statements before close completion can result in misstated or incomplete reporting | Financial statements are not generated until close checklist is fully complete |
| 3.2 Run Core Financial Reports | Incorrect report settings may cause missing transactions or misaligned periods | Standard report settings (accrual + month-end cutoff) are used consistently each month |
| 3.3 Review Statement Accuracy and Tie-Outs | Undetected errors may pass into leadership reporting and audits | Controller tie-out review ensures all major balances reconcile to close support |
| 3.4 Prepare Budget-to-Actual and Variance Commentary | Lack of variance context reduces usefulness and may lead to misinterpretation | Material variances are documented monthly with finance leadership review |
| 3.5 Assemble Financial Statement Package | Missing key schedules may weaken reporting completeness | Standardized monthly package checklist ensures consistent contents |
| 3.6 Review and Distribute | Distributing unreviewed statements may harm trust and cause decisions based on errors | Controller approval required prior to any internal or board distribution |
