A Valentine for your Auditors?

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It’s February, which means that Valentine’s Day is around the corner. For many nonprofits that operate on a calendar fiscal year, it also means that a visit from your accountant(s) for your annual financial audit and Form 990 preparation is coming up. As someone who wears the finance and compliance hats in the organization, this used to be a stressful time for me; working with our bookkeepers to close out last year’s books, gathering copies of organizational policies, and making sure every “t” is crossed and every “i” is dotted. But with more experience, I have come to realize that a visit from our auditors is also a time of great opportunity. In this month’s issue of Nonprofit Knowledge Matters, we’d like to share a few tips on how to make the audit process easier and why you should show your auditors a little love this Valentine’s Day.

Tip #1: Get a head start by gathering key documents throughout the year

More and more accounting firms are turning to electronic or “paperless” audit systems, requiring their nonprofit clients to upload requested documents to a secure online portal, rather than providing a tall stack of paper-based policies, check copies, statements, and timesheets. This makes it easier than ever to be preparing for an independent financial audit year-round. Just create a file folder on your computer with shortcuts to key documents that auditors often ask for: new contracts signed, revisions to bylaws or other control policies, payroll records, etc. Creating these shortcuts throughout the year will cut down on the time you spend before fieldwork begins – and help ensure you don’t forget anything!

Tip #2: Use the audit process as a capacity building experience

Engage your nonprofit’s accountants beyond the compliance task at-hand and have conversations with them about best practices and trends they are observing in their practice. Your nonprofit can stay ahead of the curve by tapping into insights from experts who are evaluating new practices in the field. However, not every new practice may be right for your organization. What works for a nonprofit with 50 staff members may not be appropriate for a nonprofit with a staff of two.

Tip #3: Strengthen your fundraising appeals by demonstrating your transparency

In a time when donor confidence has been damaged by media stories of fraud and waste, let your nonprofit’s commitment to accountability and strong financial management be a badge of honor. Audits don’t uncover fraud, but an unqualified audit demonstrates that your nonprofit is keeping its books in accordance with generally accepted accounting principles. Post your audited financials on your website for potential donors and funders to see. Complete your nonprofit’s profile on Guidestar, where many donors are looking for information before donating – and display your Guidestar seal prominently on your website. Has your staff been certified by the Standards for Excellence Institute or adopted practices recommended in a Principles and Practices program promoted by your local state association of nonprofits? Each of these steps demonstrates your organization’s commitment to ethics and transparency.

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