Auditors arrive with a list of what they need, and most delays come down to a handful of items that were never prepared, or were prepared but don't agree with the books. This is that list, grouped the way many auditors think about it.
Cash
- Bank and card reconciliations for every account at year-end, tied to the statements, with any reconciling items explained.
Revenue and receivables
- Grant agreements and award letters for every grant recognized in the year.
- A schedule of pledges and grants receivable, with what has been collected since year-end.
- Donor restrictions in writing. If a gift is recorded as restricted, the auditor will ask to see where the donor said so.
Net assets with donor restrictions
- A roll-forward: opening balance, new restricted gifts, amounts released as the purpose was met, and closing balance. It should agree with the general ledger.
Expenses and payroll
- Payroll registers that agree with the general ledger and with the quarterly payroll tax filings.
- The functional expense allocation (program, management and general, fundraising) and the basis for it, usually time records or a documented method.
- Supporting invoices and approvals for a sample of disbursements.
Fixed assets and liabilities
- A fixed-asset register with additions, disposals and depreciation that agree with the books.
- Accrued payroll and vacation, loan statements, and deferred revenue, each supported by a schedule.
Governance
- Board minutes, the conflict-of-interest policy and annual disclosures, and responses to last year's management letter.
Where audits stall
Three things account for most of the back-and-forth: accounts that were never reconciled, restricted revenue recorded without the paperwork behind it, and corrections made during the year with no explanation attached. Each one turns a request into a research project.
A workable timeline
- Three months before year-end: reconcile every account through the most recent month and clear old items.
- At year-end: close the books, roll forward restricted funds and fixed assets, and update the schedules.
- Within 30 days: assemble the list above before fieldwork is scheduled, not after the first request arrives.
Books that are kept this way all year make the audit a review rather than a reconstruction. Lei Advisory prepares organizations for their audit and manages it through to the final report. See audit readiness.
