Non-Profit Audit Checklist: Be prepared for your year-end audit
At NPact, we understand the importance of financial transparency, compliance, and accountability for non-profits and community foundations. Year-end audits are a crucial part of this process, ensuring that your organization remains in good standing and maintains the trust of its donors and stakeholders. We've compiled a comprehensive non-profit audit checklist to help guide you through streamlining the process.
Your Non-Profit Audit Checklist
A non-profit audit thoroughly examines your organization's financial records and operations conducted by an independent auditor or audit firm. The primary purpose of a non-profit audit is to assess the accuracy, completeness, and compliance of the organization's financial statements and transactions and its adherence to relevant laws and regulations.
Here is everything you need to prepare for your yearly audit:
Review and update all financial records, transactions, and supporting documentation for accuracy and completeness. This includes the following:
- Ledgers for the fiscal year
- Bank statements and canceled checks
- Payroll records and tax returns showing withholding for employees
- IRS Form 1099s for independent contractors and consultants
- Tax returns (990, 990-T)
- Trial Balance
- Accounts receivable schedule
- Accounts payable schedule
- Depreciation schedules
- Expense account analyses requested by your auditor
- Schedules of prepaid expenses for the upcoming fiscal year
- List of fixed asset additions and dispositions
- Investment activities
As a non-profit organization, you must comply with various laws, regulations, and accounting standards. The audit ensures that the organization has followed these rules, including tax laws and Generally Accepted Accounting Principles (GAAP) for non-profits.
- Corporation or organizational documents
- Policies related to financial management and controls
- Tax exemption letters
- Contracts with vendors
- Equipment maintenance agreements
Auditors will also assess the organization's internal controls and procedures for financial reporting. This includes reviewing processes for managing funds, handling financial transactions, and safeguarding assets. Items you will need to have available include:
- Board or committee meeting minutes
- Grant proposals
- Commitment letters and contracts with funding sources
- Insurance policies
Verification of Transactions
Auditors verify individual financial transactions to ensure they are accurately recorded and supported by appropriate documentation. This helps detect errors or irregularities. Make sure you have:
- An organized detail of the organization's business transactions and affected accounts
- Receipts for invoices and paid bills
- Receipts for credit card transactions
At the end of the audit, the auditor provides an opinion on the accuracy and reliability of your financial statements. This opinion can be unqualified (a clean opinion), qualified (with some exceptions), adverse (significant issues), or a disclaimer (inability to form an opinion due to lack of information). You should rely on audit findings to improve financial management, enhance internal controls, and make informed decisions.
Furthermore, a clean audit opinion can enhance an organization's reputation and credibility, attracting more donors and supporters. Non-profit audits are critical to ensuring the integrity and sustainability of community foundations and non-profit organizations.
How to Prepare Your Team for the Audit
Once you've checked off everything on the audit checklist above, preparing your team internally for the upcoming audit is essential. Here's a brief overview of what to expect and how you can contribute:
- Documentation Review: Ensure that all financial data is up-to-date and reconciled, and review all financial records, transactions, and supporting documentation for accuracy and completeness.
- Compliance Check: Familiarize yourself with relevant regulatory requirements and standards applicable to your department, and make sure all necessary compliance documents are readily available for the audit.
- Meetings and Interviews: Be responsive to requests from the audit team, as timely responses will help expedite the process. Be prepared to participate in audit interviews or meetings as requested and provide any necessary information promptly.
- Audit Timeline: Stay informed about the audit schedule, including the start and end dates. We will provide regular updates on the audit progress and any adjustments to the timeline.
Preparing Audits With Foundation Cloud
Have Foundation Cloud? Here are five things within Foundation Cloud Grants to do specifically for your organizations audit.
What if your auditor requests a report from you? You can easily find and pull a report by using the “Reporting” drop-down menu within Foundation Cloud Grants. Once you click on the drop-down menu all of the different types of reports you may need to pull for your audit will be displayed.
Check Run Logs
Do you need to see the process and more information about your check runs in the last year? In Foundation Cloud Grants you can click “Batch” in the navigation menu then select “Check Run” from the drop-down choices to open a check run you want to see more information about. Within the check run, you can click on the “Logs” tab to view the process time stamp and click on the “View Log” button to see more details.
Need to find and verify an organization’s charity status? You can do that too within Foundation Cloud Grants! To find the status click on “Grants” on the navigation bar then select “Constituents” from the drop-down menu and lastly, open any constituent record to find their charity status and what other labels they may have.
Want to know the grant record’s audit trail? You can find this by clicking on “Grants” on the navigation bar then selecting “Grants from the drop-down menu to look for the “Activity Log” tile. Once located you should have the answer you were looking for.
Integrate With Your Finance System
Looking to streamline audit preparations and enhance overall non-profit management? Then take advantage of Foundation Cloud’s ability to seamlessly integrate with leading financial accounting systems like Blackbaud Financial Edge and Sage to optimize your financial management and reporting.
Work With Team NPact
Preparing for a year-end audit doesn't have to be a daunting task. With the right checklist and support, you can navigate the process smoothly. At NPact, we're here to assist you every step of the way, from providing the tools you need to streamline your financial operations to offering expert consulting services.
If you need dedicated assistance for your audit, we invite you to book a discovery call with our consulting team. We can provide the expertise and staff augmentation required to ensure your audit is a success.