How to Survive Your Next Audit
While state laws vary, it’s likely your nonprofit organization will come up against an audit. Whether it’s an audit by the IRS or an independent audit, it’s going to take time and money away from your cause and distract you from your mission. Audits don’t have to be a stressful experience. With a few key tips, you can lower the stress level in the office, and get back to the work you love. Here are four tips to make the audit experience easier for you and your organization.
It’s dangerous to go it alone – Have an expert help
If you’re facing an audit from the IRS, having a professional, such as your organization’s accountant, by your side through the audit is incredibly beneficial. They will have experience working with the IRS and will understand how your organization functions each day. They can act as an intermediary for you, ensuring that you are able to stay focused on your organization’s mission.
It should be noted that if you don’t have a great relationship with your accountant, then this should serve as a wakeup call. By developing a good relationship with any outside professional working on your taxes, you can trust that they will help you when an audit comes around.
Look to the past for guidance
If you’re having an independent audit done, go through your past audits. What were the challenging aspects of it? Did you have the right information for your auditors? Have you made any changes in processes since then? Knowing the answers to these questions can help you plan for the upcoming audit. Any changes in your accounting processes will get some attention from your auditors, so be ready to explain why they were made. If your auditor has requested information and you have had some issues finding it, you want to make sure you are pulling the needed reports now. You also want to talk to your auditors about the pain points from the previous audit and come up with a plan to address them early.
Be the quarterback
After reviewing your notes from the last audit, you can make a plan to tackle this one. Create a schedule of when important reports and documents are due. Give yourself extra time to devote to the areas you know can be problematic. Set contingency plans. If an auditor needs information from a department, know who will be responsible for getting it. If the expectations are clear for your team, your job will be easier in execution.
Do future-you a favor
All these tips about using notes from the last audit means that this year you should leave some notes for next time! Just reviewing an audit won’t help you remember what the most difficult aspect was or who had to work late on a Friday digging up numbers for the CPA. Be honest in your notes. Write down what challenges you faced and what went well. Notes about staffing, reporting, and the auditors themselves can all prove to be very valuable next time.
Independent audits are an unfortunate necessity for all nonprofits. While not all states require an audit, different conditions can trigger the need for one. In the end, the transparency they create helps build trust with your community, which in turn leads to more supporters. Independent audits can also highlight ways in which your funds aren’t well protected, which helps your organization safeguard its assets. With the right mindset you should be able to get through your audit unscathed.
Cougar Mountain Software is the creator of Denali Fund, a complete accounting solution specifically designed for nonprofits. To learn more, contact us at (800) 388-3038 or firstname.lastname@example.org.