While nonprofit audits can be stressful and tedious, they’re also necessary to comply with different funding requirements and build your reputation for integrity and transparency to your board, donors, and community. These 7 tips will help ensure your 501c3 audit goes smoothly and demonstrate that your financial practices align with your mission.
1. Review Current Reporting Requirements
Funding requirements often trigger an independent 501c3 audit. Nonprofit audits are performed under specific reporting guidelines and conditions. Understand your reporting requirements and keep up-to-date with new standards, state laws, and federal accounting regulations, which may affect your organization’s nonprofit audit.
2. Choose the Right Auditor
Nonprofit organizations can have very complex audit requirements, so it’s critical to hire an independent auditor with relevant experience in nonprofit audits. Work with your board or finance committee to define the important attributes of an auditor. The right auditor will assist you throughout the entire audit process and ensure timely deliverables and actionable solutions for your organization.
3. Hold a Pre-Audit Meeting
Before your auditor arrives, schedule a pre-audit meeting with your audit team. Designate a staff member to be responsible for the 501c3 audit and be available to answer questions throughout the audit process. The nonprofit annual audit will move efficiently if the audit team knows who to go to with their questions.
4. Gather Your Documents
The audit team will provide you with a list of required documents that they will need. While there may be some documents unique to your organization, there are standard documents you can gather in advance.
Have these documents available before the audit:
- Year-end reconciliations and bank statements
- Grand funds received and those expected but not received
- Grant award letters
- Fixed assets and depreciation schedule
- Financial policies
- General ledger summary
- Payroll reports and related documents (W2s, 1099s, etc.)
- Cash-flows
- Statement of functional expenses
- Articles of Incorporation
5. Get Organized
The best way to do a smooth and efficient audit is to be organized. Ask your auditor how they prefer to receive all documentation (e.g., electronic files; pdf; Google Drive) and how it should be delivered to them. Organize your files into a single electronic folder and label documents so they are easy to find.
6. Plan For Your Auditor’s Arrival
Your audit team may be working at your office or remotely while they conduct the audit. If the auditor is on-site, coordinate with the audit team to organize major details, such as where the auditors will sit when reviewing documents and if they will need internet access. If they are working remotely, coordinate touchpoints during the day. Remember to keep your main point of contact as free as possible during the day to answer questions and continue to pull support for requests.
7. Ask Questions
Keep your audit stress-free by having open communications with your auditor and your staff throughout the process. Most nonprofit auditors are generally willing to answer questions, and some may provide suggestions when appropriate. If questions arise during the audit, ask your auditor for clarification to avoid potential delays and additional fees.
What Do I Do After The 501c3 Audit?
Once the fieldwork is done, now is the time to share the opinions with the board, staff, and public. Full transparency instills confidence in donors and provides a nonprofit with confidence in the organization’s financial stability. Discuss what needs improvement and implement an audit plan of action for next year’s audit.
Assurance Dimensions audit professionals work with nonprofits and their boards to better understand their financial resources and the uncertainties they face. Contact us to help you prepare for your next nonprofit audit with our firm. Our knowledge and experience in a wide range of nonprofit industries, fixed fee pricing, and focus on superior audit and assurance service lead to long-lasting relationships with our clients.
