Like New Years and the Fourth of July, the annual audit is a fact of life for nonprofits. What also seems to be almost required is the near panic that sets in when the annual Engagement letter shows up with a proposed start date. But it’s a terrific opportunity for our organization.
One reason audits feel overwhelming is that we wait until the day after the fiscal year ends to think about it. Take a moment soon after your last audit is complete (if possible) and review the list of all the things you collected. You may have noticed that these are pretty much the same items you were asked for last year, right? Pull out a piece of paper (or word doc) and organize the requests by Personnel, Professional Services (Insurance, Legal, etc), Tax documents, etc. I’m a visual person: I like to see the list in black & white!
What items do you receive throughout the year? Make a mental note (and/or save this list on your desk top) to save copies of these files to an Audit File (which should be created on the first day of your new fiscal year). No need for organization: just as if it was a paper folder in your file cabinet, “throw” it in there: this could include quarterly payroll reports, bills from insurance, and attorneys. Even minutes of board meetings (or create a link).
Second task for the first day of your new fiscal year.
Step 1: Look at your calendar. Fiscal year end June 30? Circle September 30 on your calendar: this is your target date to be done.
Step 2: Talk to your auditor and schedule the dates: think you can get it done sooner? Great. If not, getting an extension is not the end of the world. But get those dates. While you’re talking to the auditor, ask for a Checklist and how many days they expect to be on site.
Step 3: Pull out that checklist and copy it onto a spreadsheet. Create columns to identify who will get the info (bookkeeper, treasurer, ED, etc). One column should be labeled “Done”. You may also want to list where the info is saved (hopefully most is electronic files).
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We pay good money to have the auditors review our books. Take advantage of their expertise before, during and after the audit process. Make sure your auditor meets with your full board with and without your executive director. Don’t be afraid to ask questions. You’re not the expert, they are!
Audits are our chance as nonprofits to show our members, funders and larger community that we are good stewards of their funds and support. Just as we review our employees each year review job performance and make plans for the future, the audit reviews our organization to help us make the most of our limited resources while meeting our mission. IT’s the most important activity of the year, a test of our fiduciary responsibility.