As we approach the end of 2024, many nonprofit organizations are wrapping up their fiscal year and turning their attention toward preparing for 2025. One crucial task that often arises this time of year is the audit process. Whether your nonprofit is required to undergo an audit or you’re choosing one as part of your commitment to transparency, good preparation is essential for a smooth experience. Baldwin CPAs is here to guide you through the process. Follow these key steps to make your audit efficient and stress-free.
1. Gather Essential Documents
Start by collecting all relevant financial records, including:
- Financial Statements: Ensure your balance sheets, income statements, and cash flow reports are accurate and up to date.
- Receipts, Invoices, and Grant Agreements: Organize documents for all transactions, especially those related to donations and grants, and ensure compliance with any restrictions on funding.
- Tax Filings and Compliance Documents: Gather filings such as IRS Form 990 and any other required regulatory documents.
Tip: Create a folder structure—either physical or digital—that categorizes documents by type and year for quick access during the audit. This will help auditors review your finances more efficiently.
2. Set a Realistic Timeline
Establish a timeline that outlines key steps and deadlines leading up to the audit. Start several months in advance to allow time for organizing records, scheduling meetings, and addressing any discrepancies.
- Internal Reviews: Conduct an internal review to catch any issues early and ensure your financials align with your budget and cash flow projections.
Tip: Work backwards from the audit deadline and set milestones to keep yourself on track, avoiding last-minute stress.
3. Understand the Audit Process
Familiarize yourself with the audit process to reduce stress and ensure effective communication with the auditors. Nonprofit audits generally include:
- Initial Planning: Auditors will collaborate with your organization to define the audit’s scope, focusing on areas of financial risk, regulatory compliance, or concerns raised by the board. Understanding the audit’s objectives is essential for anticipating which documents and processes will be examined.
- Fieldwork: Auditors will perform fieldwork, either on-site or remotely, where they will review your financial records, transactions, and internal controls. They may also interview staff members to gain insight into how your organization manages its financial processes.
- Report Generation: After completing the fieldwork, the auditors will compile their findings into a formal audit report. This report will include an evaluation of your financial statements, any recommendations for improvements, and an opinion on whether the financial statements accurately represent your organization's financial position in accordance with standard accounting principles.
Tip: Make sure key staff members are available to promptly address any questions or provide additional documentation during fieldwork.
4. Consult Early with Your CPA
Engaging Baldwin CPAs early allows us to help identify and address any potential issues before the audit begins. Regular check-ins will ensure your financial records and internal controls are in order.
- Pre-Audit Consultation: Meet with our team ahead of time to review your documents and procedures, identifying any gaps before the audit starts.
Tip: Encourage open communication between your CPA, internal team, and auditors to prevent misunderstandings and ensure a smooth, efficient audit process.
By following these steps, your nonprofit can stay organized, minimize disruptions, and ensure a streamlined audit experience. For more personalized assistance, contact Baldwin CPAs—we’re here to support you every step of the way!
