A non-profit organization that faces an audit creates potential concern. This concern typically originates from leadership and staff members alike. Accurate records, transparent reporting, and a reliable bookkeeping system all work together to ensure you meet the best practices. Your audits will become easier as a result, and you won’t have to see it as an intimidating thing or something that will cause concern for leadership and staff members.
Complying with audits shows transparency. It gives you a chance to prove to potential supporters that your organization is something they can trust with monetary donations. Let’s go over what you need to know about making audits easier to handle while stressing less.
Why Nonprofits Deal With Audits
Nonprofits can deal with audits at any time. They can happen when it’s least expected. Here is an understanding as to why it occurs, even if it’s done:
- State requirements: Depending on the state, specific laws require non-profit audits. This is assuming that your organization exceeds a revenue threshold. This is one more reason why keeping track of donations, both monetary and in-kind matters a lot. With nonprofit audit preparation, you can comply with the requirements with ease.
- Grant or funder requirements: Major donations and government grants establish requirements that include audited financial statements.
- Board oversight and accountability: Audits mean better transparency and more trust built between the organization and its stakeholders. Donors and volunteers love being part of organizations that have a high level of trust and integrity.
- Internal reviews: Voluntary audits by some nonprofits help with internal controls and strengthen them.
Regardless of whether it’s required or elective, an audit will ensure your nonprofit is trustworthy. It shows financial integrity and responsibility. Your bookkeeping is the first thing auditors review during the process.
Good Bookkeeping In Audit Preparation: What To Know
With good bookkeeping practices, audit preparation is a breeze. If you feel stuck, there is always nonprofit audit support available through a professional bookkeeper with a specialty in nonprofits. Here are some things you’ll need to know about the best bookkeeping practices for smoother audits:
Precise, organized records = Smoother audit flow
Auditors examine your financial records to ensure that they accurately reflect the activities of your organization. Well-documented and neatly categorized transactions will make things easier for an audit team. The review process for them becomes easier and seamless. An audit for them takes less time compared to other jobs they have done in the past.
Make sure you include regular and timely bank reconciliations, document grants, donations, and in-kind contributions, clear segregation of income and expenses, and back up all transactional records. Year-round placement of all of these will make it easier to prepare for an audit, whether it’s planned or otherwise. Gathering information is easy, and procuring it for the auditors will save you both time.
Improved internal controls and fraud prevention
Good bookkeeping is the foundation of protecting your organization from fraud. Specifically, implementing internal controls like dual-approval processes, separation of duties, and regular reconciliations keeps it minimal to non-existent. The controls require regular documentation and enforcement, leading to auditors verifying your compliance. Your organization will face little to no scrutiny as a result. Plus, there is less time dealing with the complex aspect of audits.
Accurate reports for confident stakeholders
Accuracy matters on financial statements. So much so that board members, donors, and grantmakers alike use them to make critical decisions related to your organization. Any report that doesn’t appear consistent or align with accounting standards is a cause for concern. That’s why your bookkeeping must be reliable while compiling reports that:
- Match formats that are audit-ready
- Follows GAAP (or Generally Accepted Accounting Principles)
- Your revenue, expenses, assets, and liabilities are reflected accurately.
All of these will help maintain your best reputation as a non-profit organization. In addition, it will also provide trust from your supporters. It also gets easier to pick up new supporters who consistently donate as well.
When To Hire A Professional Audit Support Service
Even if you have strong internal processes, the complexity of audits still exists. Meaning the idea of hiring a professional audit support service is not always out of the question. Nonprofits turn to these professionals who understand organizations like yours and the reports they need to do. The audit support you receive includes:
- Preparing reconciliations and schedules that fulfill auditor’s requests
- Review and adjust entries
- Put together financial statements appropriate for audits
- Communicate with auditors on your behalf
A professional audit service handles the complexities. That way, it becomes less stressful when the time comes for an audit that leads to good results. You may tackle the audit prep alone and unknowingly overlook something that an auditor might catch. If that is something you worry about, an audit professional double-checks for you.
How To Prepare For Easier Audits With Strong Bookkeeping
Streamlining the process is possible when preparing for easier audits. Strong bookkeeping requires you to do the following on a year-round basis:
- Use accounting software that is specially made for non-profits: Options include QuickBooks for Nonprofits and Aplos, to name a few. Look for features that include donor tracking, fund accounting, and templates that meet GAAP standards. You will be able to categorize everything and prepare for the next audit, even if it’s well in advance.
- Reconcile financial statements every month: Reconcile bank and credit card accounts monthly to ensure that your records match the actual activity. This will deter errors from piling up while simplifying the audit timeline.
- Document everything: This includes each donation, grant, or expense. Receipts, grant agreements, service contracts, and donation letters also apply here. The more organized your records are, the better your audit will go.
- Remain consistent with account coding: Chart-of-account structures that are consistent across numerous programs will make the audit easier. Do not constantly rename or rearrange accounts unless needed based on professional guidance.
- Train your staff: Train team members on internal controls, expense policies, and recordkeeping practices. This involves all kinds of people within the organization.
Let Bookkeeping Experts Like Us Make Audits Easier For You
Stress-free audits for your non-profit organization are possible. The question is: Do you have a professional who can help? If the answer is no, The Quantify Group is happy to help. We have professionals who know the auditing practices of non-profits like the back of their hands. Our team will help you make every audit easy and stress-free. For more information, contact The Quantify Group today, and we will address any questions or concerns you’ve got.
