Do not fear! Use this checklist to cover your bases
By Anna Wooton, VP Finance
Ah, year-end reporting… lately, my inbox has been extra busy with questions from colleagues and BDI client partners, asking for help to navigate the often confusing world of financial documentation.
What form do I need? Where do I find my W-2? Is my documentation in compliance?
Having the proper reporting is important not only for personal finances, but also for nonprofits. Organizations face increased scrutiny from both donors and auditors when it comes to questions about how charitable revenue is used.
Is your nonprofit audit ready? Read on for my audit checklist to ensure you have peace of mind and follow accounting best practices at audit time.
Nonprofit Audit Checklist
Audits are meant to ensure the accuracy of your organization’s financial reporting and to measure its financial health. These insights can help you discover areas for improvement and offer financial transparency to help build credibility and trust with your donors.
Follow these accounting best practices to make sure your nonprofit is audit ready and reap the full benefits of an audit (without any fear of the process!)
1. Choose a dedicated Accounting Team for your nonprofit audit.
When it comes to nonprofit work – including preparing for an audit – trying to do it all is a surefire way to burn out. Choose a dedicated Accounting Team with the financial skill set and capacity needed to grow with your organization.
2. Establish solid internal controls to help catch mistakes.
Whether accounting is a shared duty or individual responsibility within your team, make sure you have a tested and tried process you follow.
Here are a few areas to consider:
- Cash Receipts: Are checks you receive endorsed “for deposit only” deposited immediately upon receipt?
- Cash Disbursements: Are bank statements and canceled checks reviewed?
- Petty Cash: Do you have a petty cash fund custodian?
- Payroll: Are timesheets signed by employees and signed by their immediate supervisor?
- Fixed Assets: Do you conduct a physical inventory annually?
- Accounting Policy & Procedures: Are accounting records up to date and monthly financial statements prepared in a timely manner?
3. Reference your budget frequently.
Carefully and regularly assess whether your organization is on track to meet your strategic goals. If adjustments are needed, this regular check-in will ensure you have the latest data to make wise decisions and pivot.
4. Conduct regular internal audits or audit readiness assessments.
Don’t wait for the pressure of an outside firm to make sure your nonprofit is audit ready and that you have the proper financial documentation on hand. I recommend choosing a time every year to treat as “audit season.” Set aside time to internally review and assess any areas where you lack reporting or need to make revisions.
5. Use specialized accounting software.
Keep your financial information secure with the right accounting software. These platforms can also help you streamline bookkeeping, expense reporting and other accounting processes.
Do not fear… prepare for the future!
No doubt nonprofit accounting (or fund accounting) differs from for-profit business accounting. However, by following the same accounting best practices, organizations in any industry can strengthen their audit readiness.
Audits don’t need to be your worst fear if you are working year-round to prepare for them with these accounting best practices. And these preparations will provide you with valuable insights into opportunities for your organization’s financial stability and growth. Discovering the best financial decisions to make is a positive outcome from any audit!