There are a number of steps your nonprofit can take to ensure you are prepared for a smooth audit. One of those things is collecting necessary documentation and getting them ready for the auditors. Unfortunately, this can take days, weeks, even months. Creating an audit process can ease the burden of preparing for an audit and buy back valuable staff hours. With time saved, you can spend your time on what’s most important to your nonprofit organization.
It is a risky effort to attempt to gather information from a variety of disparate sources and systems. Working with data stored in too many different systems typically creates inconsistencies in reporting and makes it very difficult (if not impossible) for an auditor to follow audit trails and replicate reports on a consistent basis.
In the long run, disjointed and inconsistent reporting and data can cost your organization money, extend audit time, increase risk for mistakes, and raise possible compliance issues for your organization. Worst of all, a troubling or failed audit can put an organization at further risk of losing important board and donor trust.
It is possible to avoid this nightmare by being proactive. Better non-profit financial management, tracking, and reporting across the entire organization that ensures you’re always audit-ready is just a few steps away. Take a good, hard look at your accounting software to ensure it’s built to meet the needs of your nonprofit organization and offers true fund accounting capabilities.
Ask yourself:
• Does my current system provide the flexibility needed in the chart of accounts?
• Am I able to track and report out on spending and revenues associated with each of our programs? How much time am I spending in my current system to do so?
• Could my auditor easily review the creation and approval process of any requisition in my system?
• Does my current system allow me to track and allocate revenues and expenses to the right funds?
• Can I be sure that I have maintained financial data that allows me to easily prepare recurring or ad-hoc reports for internal audits, external audits, or board member reviews?
• Do I seek to show accountability and transparency through reliable data and consistent reporting?
When dealing with public funds, accountability and transparency are critical. Organizations have to be able to account for every dollar or risk losing trust from donors and constituents. But, if your reports aren’t consistent, at best it may show an apparent lack of oversight. At worst, your auditor may determine the financial health of your organization is at risk.
An organization’s inability to accurately and consistently produce financial statements and reports that are the same EVERY time is problematic. If you and your team cannot consistently duplicate reports, neither can your auditors.
The risk for exposure is tremendous and can lead to a lack of apparent oversight for the handling of finances, increased potential for mistakes that can cost time and money, misrepresentation or inaccurate portrayal of the organization’s financial health, and greater exposure to potential fraud.
Follow these steps for better nonprofit financial management, tracking, and reporting across the entire organization.
• Take an honest assessment of your current accounting software:
Does my software offer true fund accounting capabilities?
Does my accounting solution offer access to a custom report writer and standard reports that are designed for nonprofits?
Can I produce reports consistently and accurately each and every time with little to no fuss?
Can my auditor easily recreate reporting to ensure accuracy in our organization’s financial statements?
Ensure you can produce financial reports that are accurate, timely, in context, and readily available on a monthly or quarterly basis. They should include a configurable chart of account, year-end donor summaries, and other standard reports.
Evaluate your ability to create reports that match the purpose. Most boards look at financial reports for these reasons:
• To comply with financial standards
• To evaluate effectiveness
• For forward planning
These tips for preparing for an audit will make the audit process more successful and smooth. To find the right auditor for your organization and take advantage of the many audit services Beck and Company Certified Public Accountants and Business Advisors provide, contact us.