Is Your Nonprofit Ready For The Annual Audit?
At Leone, McDonnell & Roberts, we understand that auditors often have numerous requests and questions during an audit. Being well-prepared can streamline the process, minimize delays, and keep your nonprofit running smoothly. Below are a few steps to help you stay ahead of the game when it’s time for your audit.
Consider Planning a Meeting With Your Auditor
Start by reflecting on any events during the fiscal year that could impact your audit. For instance, consider if there were any changes in key personnel within the fiscal department or if your organization implemented new accounting software.
It’s also important to determine if your nonprofit requires a Single Audit. Non-federal entities that expend $750,000 or more in federal awards during the fiscal year must undergo a Single Audit (this threshold increases to $1 million for fiscal years beginning on or after October 1, 2024). Your auditor needs to know this in advance to adjust the scope and level of testing.
Additionally, if your organization adopted new policies or updated procedures, let your auditor know beforehand so they can adjust their approach as needed. This meeting is also a great opportunity to ask questions and familiarize your team with the audit process.
Utilize the Request List
Most auditors will provide a preliminary request list outlining the documents and information needed for the audit. Items typically include selections like invoices, grant documents, and other supporting materials. Having these items ready before the audit begins can help reduce unnecessary back-and-forth and expedite the audit process.
Pro Tip: Uploading or sending the requested documents a week or more before the audit starts can earn you some very happy auditors!
Confirm Availability for the Audit Period
Auditors dedicate specific, agreed-upon times to work on your nonprofit’s audit. Ensure your organization’s designated points of contact are available and accessible during this time. For on-site audits, also ensure that workspace arrangements, such as booking a conference room, are confirmed in advance.
Reconcile Accounts and Align Workbooks with the Trial Balance
It’s easy to overlook updating internal workbooks and schedules during the busy fiscal year-end, but it’s crucial that any backup sent to the auditors matches the trial balance. For example, if a workbook detailing prepaid expenses doesn’t align with the trial balance, auditors will need to ask more questions and request additional documentation—this could extend the audit process and increase costs.
Before sending any materials to the auditors, double-check that all reconciliations and backup documents align with the trial balance to avoid unnecessary complications.
Planning Ahead is Key to Auditing Success
Planning ahead is essential for ensuring audit preparedness. By following these suggestions, your nonprofit’s audit is more likely to start smoothly, reducing potential stress and ensuring the process runs as efficiently as possible.
