From the IRS: (http://www.irs.gov/pub/irs-pdf/p1828.pdf)
To be a tax free organization (501(c)(3)):
? the organization must be organized and operated exclusively for religious, educational, scientific, or charitable purposes,
? net earnings may not inure to the benefit of any private individual or shareholder,
? no substantial part of its activity may be attempting influence legislation, (tests are found on pages 8-15).
? the organization may not intervene in political campaigns, and
? the organization’s purposes and activities may be illegal or violate fundamental public policy.
? Additionally, they may lose their tax exempt status if they provide a substantial benefit to private interests,
o Churches and religious organizations, like all exempt organizations under IRC section 501(c)(3), are prohibited from engaging in activities that result in inurement of the church’s or organization’s income or assets to insiders (i.e., persons having a personal and private interest in the activities of the organization). Insiders could include the minister, church board members, officers, and in certain circumstances, employees. Examples of prohibited inurement include the payment of dividends, the payment of unreasonable compensation to insiders, and transferring property to insiders for less than fair market value. The prohibition against inurement to insiders is absolute; therefore, any amount of inurement is, potentially, grounds for loss of tax-exempt status. Note that prohibited inurement does not include reasonable payments for services rendered, payments that further tax-exempt purposes, or payments made for the fair market value of real or personal property.

I tried to find some information about legal requirements to provide monthly, quarterly or annual financial reports but havent found anything yet. Our auditor, something we do every year, states that it is good practice to do it quarterly.