A smooth audit is possible for your staff and the auditors. Nonprofit best practices, including preparing documents ahead of time, saves time and decreases the potential for distraction. Preparing an engagement letter, (aka: Request for Proposal) is oftentimes used as a roadmap during the audit, however, you may still have questions about exactly what the audit will entail.
Audit prep got you down? RBP Methods can help with our Audit Pocket Guide. Download this valuable resource and make your audit worry-free! To learn more or speak with us directly, give us a call at (503) 648-9051 or contact us online.
Are All Nonprofits Audited?
Depending on your organization and how it is funded, you may be required to perform a federal or state audit. The National Council of Nonprofits provides a list of states requiring an audit. This list changes frequently, so please check back with your state or your accounting firm for the current regulations.
Nonprofits that receive federal funding during a fiscal year that exceeds a certain amount (which can change annually) should keep an eye on whether or not they need an audit. Chances are good that you should have an independent audit conducted. Learn more about this requirement from the National Council of Nonprofits.
Nonprofit Best Practices for Audit Preparation
Preparing for an audit is a combination of common sense and detective work. Your goal should be to provide as much accurate documentation to the auditors as possible, in a timely fashion, so they can go about their work without delay.
To prepare for an audit, you should:
- Draft an engagement letter, which specifies the details of the independent audit that you have commissioned.
- Meet with the auditing firm to ensure mutual understanding of goals, expectations, and timelines.
- Organize documents required for the audit.
- Prepare folders for the auditors that include pertinent documents.
- Read the “prep pack” provided by the auditors, if they include one. A prep pack provides background on what you need to do to prepare for the audit.
- Identify staff contacts for the auditors.
- Schedule a meeting to brief the staff about the audit.
What to Expect After the Audit
Depending upon the timeline you’ve set for the audit, you should receive the auditor’s report within a reasonable amount of time after the audit itself is completed.
The audit review committee, board of directors, and senior staff should meet to review the initial draft of the audit. You can provide consolidated feedback and request clarification of any findings. Then, the final audit can be prepared.
A good audit will identify any internal weaknesses or problems with compliance to generally accepted accounting standards and rules for nonprofits. Review the issues uncovered during the audit, and prepare a plan to respond and correct problems. Operating inefficiencies discussed in the audit documents should also be thoughtfully considered and corrected.
An audit may not necessarily uncover evidence of fraud, although inefficiencies and problems may point to fraud. It’s up to your staff and board of directors to follow through on any issues described in the audit.
A formal presentation of the audit report closes out the process. The board of directors and management may offer suggestions to fix any issues, which can be included in the auditor’s report.
RBP Methods Can Help
RBP Methods knows that audits are an important component for proper nonprofit management yet they can weigh your staff down. Using nonprofit accounting software can streamline your audit prep and bring peace of mind. We understand the importance of selecting a solution that will lead to your financial peace and success. That is why we take a vested interested in each of our customers, uniquely. It is our goal to provide each customer with the solution that best suits their unique needs. For more information on an accounting for nonprofits and software solutions to help ensure you’re ready for your next audit, contact us, today.