“Finish strong” is a common phrase used to encourage someone to end a task on a good note. This concept also applies when preparing your books to close out your fiscal year. The accuracy of your financial reports will depend on the strength of your financial records. Year-end processing can be overwhelming and tedious, but it is critical in fulfilling your fiduciary duty as a financial officer and provides for a smooth transition for the next fiscal year. If you are uncertain where to begin, no need to fear for the National Office is here to provide you with guidance on the key elements of this process; therefore, keep reading!
Step one is knowing your fiscal year. Every Local and Council does not follow a calendar year (January 1st – December 31st etc.), but you can find this information in MyLocal3 or on a prior year financial report. Step two is ensuring you have a complete financial ledger accounting for all transactions (revenue and expenses) for that twelve-month period. It’s imperative because this information must be reflected on the Department of Labor’s Labor-Management report and the Internal Revenue Service’s Form 990.
Once your ledger is up-to-date, the third step is reconciling all accounts which includes any checking, saving, investment, and credit card accounts. Reconciliation is simply comparing the bank statements to the Local’s general ledger to discover any discrepancies. It is highly recommended to reconcile monthly to detect errors, make any necessary adjustments, and process voids in a timely manner. Another good practice is handling any outstanding vouchers, bills, and reimbursements that pertain to the current fiscal year prior to closing the books. I know we’ve covered a lot already but stick with me as I discuss the next set of requirements to assist you in remaining compliant with all regulatory bodies.
Reporting is the final phase of year-end processing. The primary forms to consider, if applicable, are Form 1099-Misc and Form W-2 since the due date is January 31st. Form 1099-Misc must be provided to qualifying independent contractors/individuals who received $600 or more in payments, and additionally, Form W-2 must be furnished to individuals who are considered employees of the Local/Council. Please note a summary Form 1096 must also be furnished to the Internal Revenue Service as proof of your due diligence.
Now you can move on to the Labor-Management report which is mandated by the Department of Labor to be submitted electronically. The deadline is 90 days after the close of the Local/Council fiscal year, and there are no extensions. Depending on your revenues for the fiscal year, you will have to complete a LM-4, LM-3, or LM-2.
Next, a Form 990-N, 990-EZ, or 990 should be filed with the Internal Revenue Service by the 15th day of the fifth month after your fiscal year has ended. If you follow a calendar year, then your due date is May 15th. Please be aware Form 990-N is the only report that is required to be submitted electronically. Contrary to DOL, the IRS is gracious enough to give Locals/Councils the opportunity for a six-month extension if you file a Form 8868.
We’ve outlined DOL and IRS requirements, but did you know Locals/Councils must also comply with the National Office requirements too? There are four forms you will need to provide to remain in compliance:
1. Form 41 - is an AFGE internal audit form which should be filed annually within 90 days after year-end. You can obtain a copy of this form from the NST Resources section.
2. An approved budget. Also, please attach the general membership meeting minutes proving the budget was approved.
3. A copy of your LM report.
4. A copy of your Form 990.
All forms can be mailed to the National Office, or you can simply upload copies of the forms in MyLocal3 under the Local Documents Tab.
Year-end processing sounds intimidating, but if you remain consistently organized and maintain accurate records throughout the year, you will be well prepared. Failure to submit these forms by the deadline or inaccurate reporting could result in significant penalties. Remember, you can receive assistance with managing financial records and completing any financial reports from an independent bookkeeper or accounting firm. If at any time during the year-end processing you begin to feel discouraged, think of the words spoken by Gary R. Blair, “If you’re brave enough to start, you’re strong enough to finish.”