Nonprofit financial audits are unfortunately a common occurrence. Because nonprofit organizations rely solely on donated funds from the government and private donors, they are more susceptible to financial audits than businesses in the for-profit sector. In addition to ensuring that your organization complies with the various nonprofit financial reporting requirements, nonprofit financial audits can be used as an accountability tool and best practice for nonprofit success.
A nonprofit financial audit – though unwelcome – can highlight your organization’s weaknesses so you can focus on areas to improve over the next year. Keep the following tips in mind as you prepare for your upcoming audit. While it may seem unappealing and stressful now, your nonprofit financial audit can provide significant value to your organization. With the right amount of preparation, you can successfully survive and conquer any nonprofit financial audit thrown your way.
- Choose your auditor carefully.
Just as you would choose any financial service provider, choosing the right auditor is crucial to making the audit process less painful. You need to select a nonprofit financial auditor that you and your team feel comfortable with. Make sure that your auditor understands your organization and can provide valuable recommendations and insight. If they are not familiar with your organization or industry, look for somebody else. Remember that choosing an auditor is essentially choosing a partner for your organization, so choose wisely! - Prepare ahead of time.
Your auditor will send you a list of items to prepare prior to his or her team’s arrival. Make sure that you have all of the items on the list and are fully prepared when the auditors arrive. Preparing these documents ahead of time will allow you to relax and focus on the actual audit, rather than scrambling around trying to find certain documents or information.You should also be prepared for the auditor of your nonprofit financial audit to request additional reports and information based off of the documents you supply. Make a note of any of the items requested during the audit so you can have them prepared in advance for the next nonprofit financial audit. Maintaining your reports and documents throughout the year can also help you come audit time. - Set clear deadlines – and follow them!
Be sure to communicate any deadlines to your audit team early on in the process. These deadlines could include bank submission deadlines, audit committee deadlines, board deadlines, or grant deadlines. If you begin the nonprofit financial audit process communicating clearly, you will be less likely to experience surprises or delays further on in the process. - Set a timeframe for completion.
Your nonprofit financial audit should be completed onsite as much as possible. Talk to your auditor and agree on a set completion goal before you even begin the process. If there are outstanding items after your auditor leaves, agree upon a deadline for open items before they leave your office. The more you know what to expect, the less you will stress over the unknowns. - Incorporate the auditor’s suggestions into your organizational plan.
Nonprofit financial audits are invaluable to nonprofit organizations. At the end of an audit, you should receive a management comment letter. In this letter, your auditor will highlight any areas of deficiency and concern, as well as provide suggestions for improvement. Don’t let your audit (and audit stress) go to waste. Implement the auditor’s suggestions wherever they are appropriate. This will not only improve your organization, but it will also prepare you for future audits.
If you are looking for an accounting firm who specializes in nonprofit financial audits, contact us today. In addition to our accounting services, we also provide nonprofit financial auditing services. Give us a call at (703) 834-0776 extension 8001 to learn more about our auditing and accounting services.