Preparing for Year-End? Use This Nonprofit Audit Checklist

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As the year comes to an end, nonprofit organizations must ensure that their financial records are in order. One of the key steps in this process is preparing for an audit. Using a Nonprofit Audit Checklist can help make this task easier and stress-free.

Nonprofits need to stay compliant, keep donor trust, and improve internal processes. Whether it’s a government requirement or a board decision, audits are essential. There are also different types of audits for nonprofits, each with its own purpose.

Let’s look at how nonprofits can prepare with a proper checklist and understand different audit types.

What Is a Nonprofit Audit?

A nonprofit audit is a review of financial records.
It ensures compliance with laws and fund usage.
Audits are either voluntary or required by law.
They check if funds are used properly.
It gives donors and stakeholders confidence.

Why You Need a Nonprofit Audit Checklist

Organized Records

An audit checklist helps you store all key files in one place. You can find documents fast when needed. No more hunting through folders or emails during the audit. This saves time and helps your team focus on key duties.

Quick Preparation

With a checklist, you know what to gather in advance. This helps save time and keeps the process smooth. You can collect reports, receipts, and other records with ease. A clear plan helps you meet all due dates without stress.

Reduced Stress

When you prepare early, you avoid last-minute panic. A checklist helps cut stress and stops you from rushing. You won’t miss key files or steps. With less chaos, the audit feels more like a task than a crisis.

Nothing Overlooked

A good checklist makes sure no item is skipped. You stay in line with all audit rules. From budget sheets to donor files, all data is checked. This helps avoid errors and shows full honesty in your books.

Improved Results

Good prep and neat records lead to better audit scores. It also builds trust with donors and groups who fund you. Clean books and quick replies make your nonprofit look strong. A great audit can help you grow and earn more support.

Types of Audits for Nonprofits

1. External Audit

Done by an independent CPA.
Gives the highest level of assurance.
May be required by law or donors.

2. Internal Audit

Done by the internal team or committee.
Checks internal controls and systems.
Useful for risk management.

3. Compliance Audit

Checks if the nonprofit meets grant or fund rules.
Often required by government agencies.

4. Financial Statement Audit

Reviews financial reports for accuracy.
Confirms data matches accounting records.

5. Single Audit

Needed when federal funds exceed a set limit.
Checks for compliance with federal rules.

Year-End Nonprofit Audit Checklist

Use this Nonprofit Audit Checklist to get ready for your next audit.

Board & Legal Documents

List of board members and meeting minutes
Articles of Incorporation
Bylaws and any changes made
IRS determination letter
Conflict of interest policy

Financial Statements

Statement of Financial Position (Balance Sheet)
Statement of Activities (Income Statement)
Statement of Functional Expenses
Statement of Cash Flows
Budget vs Actual Reports

Bank & Cash Records

Bank statements for all accounts
Bank reconciliations for the year
Petty cash records
Investment statements
Loan documents, if any

Revenue & Donations

Donation receipts and records
Grant agreements
Fundraising reports
Membership income reports
Earned income breakdown

Expense Documentation

Bills and vendor invoices
Staff payroll records
Travel expense reports
Credit card statements
Rent and utilities records

Payroll & HR Documents

List of employees with roles and salaries
Timesheets or work logs
Payroll tax filings (Form 941, W-2s)
Benefit records (insurance, retirement)

Grants & Restricted Funds

Grant agreements
Donor restrictions noted
Funds usage report
Unspent balances identified

Fixed Assets

Asset register with purchase date and value
Depreciation schedule
Disposal records of any assets
Equipment maintenance logs

Internal Controls

Documented accounting procedures
Segregation of duties in finance
Expense approval flow
Receipt and deposit process
Inventory controls (if any)

Other Key Records

Insurance policies
Lease agreements
Contracts with vendors or consultants
Program performance reports

Steps to Take Before the Audit

1. Schedule a Pre-Audit Meeting

Talk with your auditor ahead of time.

2. Review Prior Year Audit Findings

Fix issues from past audits.

3. Assign a Point Person

One team member should lead audit prep.

4. Check All Documents

Ensure all financial data is updated.

5. Make Copies of Key Records

Give auditors what they need, not originals.

6. Create a Folder System

Organize files by category.

7. Test Internal Controls

Do a quick check on your control systems.

8. Prepare Explanations

Be ready to explain changes or large items.

Tips for a Smooth Audit Process

Be Honest and Open with Auditors

Clear and open talk helps build trust with your audit team. Share both good and bad updates. Don’t try to hide issues, as they can still show up during checks.

Keep Backup for Every Number

Support all amounts with solid proof like bills, reports, or bank slips. This avoids guesswork and helps your team explain numbers fast.

Don’t Wait Till the Last Moment

Start early to avoid stress. Use a Nonprofit Audit Checklist so you don’t rush or miss files. A calm start gives you time to fix gaps or errors.

Use Cloud Storage for Sharing Documents

Digital tools make it easy to share records. Cloud storage keeps files safe and easy to reach from any place. It also allows faster updates.

Label All Documents Clearly

Use clear names and folders for all files. Labels like “2025 Grants” or “Bank Jan 2025” help save time and avoid mix-ups.

Communicate Regularly with Your Audit Team

Keep in touch with your audit staff. Quick replies and updates help avoid delays. Share new facts or changes as they come.

Benefits of Following a Nonprofit Audit Checklist

Saves Time During Audit

With a checklist, you know what’s needed. No need to search files during the audit. This helps make the process faster and easier.

Reduces Errors and Missed Items

A checklist helps spot gaps before the audit. It makes sure all key areas are covered. This means fewer risks and less back-and-forth.

Helps Build a Better Financial System

When you use a checklist, your system becomes more clean and clear. It builds habits of good tracking and neat records.

Boosts Donor and Grantor Trust

Donors like to see clear books. A smooth audit with strong files makes them feel safe and more likely to give again.

Prepares You for Future Audits

Each audit makes you better. A Nonprofit Audit Checklist gives you a base to learn from and improve. Over time, audits become less hard and more routine.

Shows Accountability to the Board

Your board wants to see that funds are well used. A full and clean audit gives them proof that the group is run well.

Who Needs an Audit?

Nonprofits with Revenue Over a Certain Limit

In many places, large groups must get an audit. Once income crosses a set line, laws may require full checks.

Groups Receiving Federal or State Funds

Funds from the state or the center often need full audits. This ensures that money is used for the right cause and in the right way.

Organizations Required by Donors

Some big donors ask for audits before or after giving money. Knowing the right types of audits for nonprofits helps meet those demands. They want to see that funds are safe and well spent.

Nonprofits That Want Transparency

Even if not forced by law, some groups use a Nonprofit Audit Checklist to prepare for voluntary audits and show transparency. It shows they care about clear books and open use of funds.

After the Audit: What To Do Next

1. Review the Audit Report

Go through the findings with the board.

2. Fix Any Issues

Create a plan to solve audit issues.

3. Update Your Policies

Change internal rules if needed.

4. Train Staff

Teach team members better processes.

5. Share Results with Stakeholders

Be transparent with donors and funders.

How to Choose the Right Audit Type

If You Have Donors: External Audit

When your nonprofit gets funds from donors, an external audit adds trust. A third-party review shows that your records are fair and correct. It helps donors feel safe about their gifts.

For Internal Checks: Internal Audit

This type of audit checks your team’s work, systems, and controls. It’s one of the important types of audits for nonprofits to ensure good internal practice. It helps spot gaps or fraud early. Internal audits can be done by staff or hired experts.

Using Grants: Compliance Audit

If your nonprofit gets grants, a compliance audit checks if funds are used by the grant rules. It’s key for government or large private grants.

Reporting Needs: Financial Audit

This audit checks your reports and statements. This confirms your group’s money data is full and correct. It’s a vital part of the main types of audits for nonprofits, used for yearly review. Good for yearly reports and board review.

Federal Funds: Single Audit

Groups with over $750,000 in U.S. federal funds must get a Single Audit. It checks both your books and your use of federal money.

Choosing the right types of audits for nonprofits helps meet laws, grant terms, and donor needs. It also shows your group takes rules and truth seriously.

How Often Should a Nonprofit Be Audited?

Each Year

Annual audits help show clear and honest records. They keep your nonprofit open and trusted.

Every Few Years

Small nonprofits with low budgets may audit every 2–3 years. This still helps stay on track without too much cost.

Check the Rules

Some funders or state laws may set audit times. Always follow what’s required for your group.

Free or Low-Cost Audit Help

Local Nonprofit Resource Centers

These groups often give free tools, audit guides, or names of budget-friendly experts. They’re made to help small or new nonprofits.

State Associations for Nonprofits

Your state may have a group that helps nonprofits with audits, books, or grants. They may hold workshops or share low-cost services.

CPA Volunteer Programs

Some certified public accountants offer free or low-cost help. They may help review records or even conduct audits for a charity.

University Accounting Departments

Some schools have students or teachers who offer audit help. This gives students hands-on work and gives you help at a low price.

Preparing for your year-end audit doesn’t have to be hard. With a proper Nonprofit Audit Checklist, your team can stay organized, confident, and ready. A clear Nonprofit Audit Checklist helps improve transparency, maintain compliance, and build strong donor relationships. Also, understanding the types of audits for nonprofits ensures you choose the right one for your needs. By planning early and keeping your records clear, your audit will go smoothly, and your nonprofit will stay strong and trusted. Meru Accounting offers expert help made for nonprofits. Our team keeps you audit-ready with clear books, rule checks, and custom reports. We know the types of audits for nonprofits and help with full audit prep. With our trusted Nonprofit Audit Checklist, your year-end audit stays smooth and on time.

FAQs

What is a nonprofit audit checklist?
It is a step-by-step guide to prepare your records before the audit.
Why is an audit important for nonprofits?
It shows that funds are used properly and builds donor trust.
How often should we do an audit?
Once a year is ideal, but smaller nonprofits may do it less often.
What are the common types of audits for nonprofits?
External, internal, compliance, financial, and single audits.
What documents should we prepare for an audit?
Financials, bank statements, grant records, payroll, and policies.
Do small nonprofits need audits?
Not always, but audits still add value and trust.
Who performs nonprofit audits?
Usually, a certified public accountant (CPA) or an audit firm.