3 Things You Can Do Right Now To Simplify Your Next Nonprofit Audit

Many nonprofit organizations are required to undergo an independent audit on a regular basis. Without the right preparation, nonprofit audits can be frustrating, expensive, drawn-out affairs that consume valuable staff time and resources. Take it from us - as one of the few CPA firms in the country that works solely with nonprofit organizations, we have decades of experience with nonprofit audits and day-to-day financial operations. We know what works.

Fortunately, there are a few things you can do right now and throughout the year that will prevent big headaches when your audit team comes knocking.



One of the biggest time-sucks of a nonprofit audit is gathering the correct documentation. Your auditor will send you a list of items to prepare, including bank statements, payroll tax reports, support for selected transactions, and any other documentation they may need. In the old days, this usually meant digging through dusty boxes of files and crossing your fingers that nothing had been misplaced or rendered illegible over time. (You’d be surprised how many coffee-stained papers the average accountant has to sort through during an audit.) But today, there’s no excuse not to digitize. Electronic documents are faster to locate, safer to store, and easier to forward to your accountant at year-end. If you’re using a cloud-based document portal, you can even provide your audit team with read-only access to everything they need remotely - without your staff having to lift a single finger (or file box).


We’ve all been there. A last-minute expense comes up, a check is quickly mailed out, and it’s only months later that you realize the vendor never gave you an official invoice or receipt, so you have nothing to show your auditors. Or an expense is 1099-reportable, but you never collected the vendor’s tax information. Or you have three different records for the same vendor in your accounting system, and you don’t know which one is correct. Or… It happens. No one is perfect, and maintaining proper accounting records might not be the highest item on your list. The important thing is to catch these mistakes and inconsistencies early on, and continuously evaluate your accounting records over the course of the year. Small mistakes can multiply to cause one big (and expensive) problem during audit season.


A nonprofit audit may not sound like fun, but it’s not something you should take lightly. Many private foundations require your audited financial statements as part of their grant application process. Federal and state dollars can also be contingent on an independent audit. Even if you’re not required to complete an audit by any outside organization, they can provide a crucial level of confidence for your board, your donors, and your community, in addition to detecting and preventing fraud and identifying best practices. If you’re searching for a new nonprofit auditor, start the process early. Your state association of nonprofits or state CPA society can provide a list of known audit firms in your area. Fellow nonprofit organizations may also be able to provide personal recommendations. Once you have identified some potential firms, send out a Request For Proposals (RFP) well in advance of your audit deadline. Be sure to ask for a copy of the firm’s Peer Review Report! (This is essentially an audit of the audit firm itself, and ensures the firm meets professional standards.) Once you have made your choice and scheduled your audit, make sure all your staff members are aware of their responsibilities and important deadlines. By making your nonprofit audit a priority, you’ll be setting your organization up for a smooth and efficient experience.