Checklist for an Easier Non-Profit Audit (Because We Aren’t Magic)

Not all non-profits will have an annual audit each year. The legislation for annual financial review will vary from province to province and state to state. Regardless of the complexity of any assessment of a non-profit’s financial records and systems, presenting well organized information is not only critical to the success of the audit, but it also directly impacts an executive director’s reputation.

Each year I use a checklist to help me make sure everything is in the right place and in the right order. Having a checklist ready long before the audit starts is my gift to myself. There have been many years when operations have been super busy, and I worried that I wasn’t giving the audit the attention it required. The checklist I created in advance was my saving grace. It provided a recorded list of what I needed so I didn’t have to rely on memory.

My audit checklist.

Step #1 – Prep One Month Prior

There may be a handful of external documents an auditor requires that can take some time to pull together. Examples might include letters from funders, or tax forms. The month before the audit is a good time to request these documents,

One month prior to the audit is also a good time to connect with the auditor to confirm they are willing to handle the audit for your organization. This initial conversation will confirm the dates the audit will start, the date you need the audit to finish, the government forms the auditor will submit on the non-profit’s behalf, and the date to get started on the big questionnaire the auditor sends out each year.

Step #2 – Tidy the Account Folders.

I want to make it as easy as possible for my auditor to go through all the account records. So, I spend a little time ensuring there is a specific set of folders for each month of the operating year.

I like to organize my documents into 4 folder categories for each month: (1) payables, (2) receivables, (3) other transactions (transfers, petty cash, etc.), and (4) bank statements.

Step #3 – Tidy the Payable Folders.

I make sure the documents inside each payables folder are organized in order by date or sequentially and that the order is the same in every payables folder. I also like to group my payroll records at the start of each payables folder, so the auditor can find them easily.

I manually confirm that all cheque stubs are accounted for. I never leave cheque stubs in a book. I consider it a red flag if a cheque stub is missing, and I make sure I find it before the files are sent to the auditor. I keep void cheques and even cheques that were damaged in a printer jam, so I can prove all cheques were handled honestly.

Step #4 – Tidy the Receivables Folders.

I make sure the documents inside each receivables folder are organized in order by date and that the order is the same in every receivables folder. If there were no receivable for a specific month, I don’t leave the folder empty, I put a single page in the folder with a note such as “No receivables for this month.”

Step #5 - Tidy the Other Transactions Folder.

In the folders for other transactions, I include my petty cash reconciliation packages for each month (always in the same order), account transfers, and journal adjustments. This folder can become a bit of a catch-all during the year, so I double-check to be sure no unnecessary documents are included for the audit.

Step #6 – Tidy the Bank Statements Folders.

I put all the bank statements in the same order in each folder. For example, I always put the savings account first, the chequing account second, and other bank accounts follow. I also include the reconciliation reports for each bank account in the same order.

Step #7 – Tidy the Receipts Folder.

I keep a copy of every receipt I issue, which makes this step very easy. I manually thumb through all receipts to be sure they are in numerical order, and none are missing. On rare occurrences, when a receipt is missing, I include a note page in place of the missing receipt informing the auditor.

Step #8 – Hard Copy Documents.

Some auditors will require hard copies of certain documents, such as signed board meeting minutes or tax documents. This is a single folder included after all the monthly folders.

Step #9 – Digital Files.

I supply quite a lot of digital files for my audit. Check with your auditor to know what to provide.

This is when having a checklist is very helpful. I simply go through the list and copy all files onto a thumb drive. This is my long list of digital files:

• Letters confirming funding received during the operating year.
• Board meeting minutes, unsigned.
• Contact lists for board, staff, and bank.
• Approved budget for the year.
• Financial reports for each month.
• Trial balance report for the last day of the operating year.
• Backup file created after the last bank reconciliation of the operating year.
• Payroll documentation for all employees during the year.
• Current insurance documents.
• All governing or operating policies.

I make sure the digital files are as well organized as the accounting records, so the auditor can easily find what’s needed.

Step #10 – Notes for Next Year.

I like to make notes for next year’s audit right on the checklist. This helps me remember changes I want to implement.

Step #11 – Packing the Box.

My last step is to pack up the box, so everything is clearly organized from the start of the operating year at the front of the box, to the end of the operating year at the back of the box. I add the hardcopy documents in a folder at the back of the box.

Before I tape the box closed, I put one last folder marked “For the Auditor” flat on top of the files. Inside that folder I include any notes, the thumb drive with all the digital files, and the checklists for parts 2-7, so the auditor can see what is sorted into each folder.

It isn’t about memory or luck.

The annual non-profit audit can make even the most experiences executive director feel self-doubt and stress. It is like we are expected to magically perfect, getting everything right every time. That’s movie fiction, and not reality.

Put aside the worry and create your own checklist to ease some of the burden of remembering what’s needed from year to year. That same checklist will also help if the auditor asks for something new or different. A non-profit executive director can easily reference what was done the year prior and help the auditor remember any changes as well.

If you have an audit coming up, give a checklist a test drive to see how it relates to your own non-profit. Tweak each step to make it work for you. Once you’ve used your first checklist, I promise that future-you will be thrilled by the gift you are leaving.

If you give an audit checklist a try, I’d love to hear how it worked for you. Please use the form on the right side of the page to let me know.

-Christie

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Hi, I'm Christie Saas, former board member, current Executive Director, and non-profit volunteer. I remember well, those early years when I lacked the training, the confidence, and the work-life balance to focus on becoming the best non-profit leader I could be.

Fast-forward past many bumps in the road, lessons learned, and you’ll find me still in the trenches, but a little wiser, a little calmer, and a whole lot happier. I love my work and I want to help you love yours too.

I created ChristieSaas.com so non-profit leaders never need to feel alone. I’m here to help. If you’re a brand-new non-profit leader, or a little more seasoned, someone who’s looking to make a meaningful contribution and still have time for a full life away from the job, you’re in the right place.

© Christie Saas 2023 All Rights Reserved

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