Let's Explore Your Response to an Audit and Look at Resources to Help...
The term “audit” stirs a mixture of emotions from panic to excitement! For some, it brings fear and trembling, but for others, it invokes enthusiasm and elation!
If your reaction to an audit is less favorable, let me share three top insights so you can be better equipped concerning the topic of nonprofit audits.
1) Audits Ensure Compliance with Nonprofit Accounting Standards
Nonprofits cannot make up rules as they go along but must adhere to accounting standards governed by the Financial Accounting Standards Board (FASB).
This is very helpful to keep in mind, especially considering that nonprofit regulations are likely to change over time such as the new regulations introduced in 2017 that apply to audited financial statements. Your Certified Public Accountant, CPA, can help guide you through changes since they stay current with accounting. These regulations and potential changes are why I consider compliance as a top reason to embrace an audit.
2) Audits Provide Organizational Evaluation and System Improvement
An audit will analyze your system of internal controls, your policies and safeguards, that protect your organization from mismanagement. Internal control systems are designed to help detect errors/omissions, misappropriation and fraud. They also increase an auditors confidence that your organization has accurate financial records. An audit is an opportunity to evaluate your accounting systems and offer recommendations for improvement. Cheers to enhancing your systems!
3) Audits Demonstrate Transparency and Accountability
Transparency and Accountability are HUGE terms in the nonprofit community.
Charity Navigator defines these terms as:
Accountability is an obligation or willingness by a charity to explain its actions to its stakeholders.
Transparency is an obligation or willingness by a charity to publish and make available critical data about the organization.
Since your nonprofit organization is a public entity, it must be grounded in transparency and accountability. Your Staff, Board, Donors, Grantmakers, Charity Watchdogs and the General Public all care about your operations. So don’t shriek from an audit. Remember, an audit will provide another layer of Transparency and Accountability.
Ultimately, by demonstrating that your organization has fulfilled the audit process will reassure all stakeholders that you are compliant, safeguarded, transparent and accountable.
Here are my closing audit-related questions:
Does your organization have audit policy?
Are your accounting records accurate and up-to-date?
Do you have a qualified nonprofit accounting firm?
Have you or Will you Talk to your Board about an audit?
Would you be ready for an audit with a one month notice?
Below is a Nonprofit Auditor Guide from Fiscal Management Associates to help you out.
NOTE: It includes Planning Tips, a Sample Auditor RFP, Interview Questions and More!
