Key Takeaways:
- Showcase your organization’s financial health and attract donors and stakeholders by scheduling annual financial statement audits. These audits may be required by state agencies and grant makers.
- Streamline the audit process by implementing proactive planning and preparation strategies. Rather than waiting for the audit, regularly reconcile your accounts on a monthly or quarterly basis.
- Keep auditors informed if any supporting documents are missing during the collection process.
- Anticipate and be ready to explain any significant differences in account balances compared to previous periods.
Annual financial statement audits are crucial for demonstrating your non-profit organization’s financial health to donors and grant makers. However, it’s important to understand that auditors won’t handle everything on their own. With proper planning and preparation, you can make the audit process effective and minimize disruptions for your staff and clients.
Laying the Foundation
One of your top priorities is getting your financial records in order. Don’t wait until audit time to reconcile accounts. Regularly reconcile general ledger balances to supporting schedules such as bank reconciliations, receivables, and payables. Additionally, ensure that database information from non-accounting departments, such as contributions and event revenue, is accurate and up to date.
Gathering all necessary documents is key. If anything is missing, notify the auditors right away and take the necessary steps to obtain the required documentation. This may involve requesting duplicate invoices from vendors or asking donors for copies of contribution restrictions.
Timing is Everything
During the planning process, auditors typically provide you with a list of materials they need from you known as the Provided by Client (PBC) list. This list includes a timeline indicating when each item should be submitted. It’s crucial to meet these deadlines to avoid delays in the audit process.
Before sending the requested information, perform a thorough self-review to ensure accuracy. Be proactive and identify any major fluctuations in your account balances compared to the previous year. Your auditors will inquire about significant variances in revenues, expenses, and budget. Be prepared to explain these promptly and clearly.
Learn From the Past
There’s no need to start from scratch with every audit. Previous audit reports offer valuable insights that can guide you. Check for any recurring errors and make sure they are not repeated this year. Additionally, double-check that all audit entries from the previous audit have been posted to avoid any distortions in your financial statements.
Follow the Guidelines
By taking some time to prepare, you can make the audit process much smoother for you and your staff. Don’t leave it until the last minute. As you record new grants and contracts throughout the year, ensure that you’re following your auditors’ guidelines. If you have any questions or need clarification, reach out to your auditors for guidance.
Preparing for your non-profit audit doesn’t have to be overwhelming. With proper planning, attention to detail, and adherence to guidelines, you can demonstrate your organization’s financial accountability and ensure a successful audit.
