What To Do After Your Nonprofit Audit

The work isn’t really over when auditors have left your nonprofit’s premises and returned the documents they’ve reviewed. Not only do your executive director and board need to review the nonprofit audit report, but it may be necessary to address auditor concerns by making changes to your organization.

Review the draft

Start-Up ExpensesOnce outside auditors complete their work, they typically present a draft report to an organization’s audit committee, executive director, and senior financial staffers. Those individuals should take the time to review the draft before it’s presented to the board of directors.

Your audit committee and management also need to meet with the auditors before the board presentation. Often auditors will provide a management letter (also called “communication with those charged with governance”) highlighting operational areas and controls that need improvement. Your nonprofit’s team can respond to these comments, indicating ways they plan to improve operations and controls, to be included in the final letter. The audit committee also can use the meeting to ensure the audit is properly comprehensive.

Assess internal controls

The final audit report will state whether your nonprofit’s financial statements present its financial position in accordance with U.S. Generally Accepted Accounting Principles. The statements must be presented without any inaccuracies or “material” (meaning significant) misrepresentation.

In a separate letter, the auditors also will identify specific concerns about material internal control issues. Adequate internal controls are critical for preventing, catching, and remedying misstatements that could compromise the integrity of financial statements. If the auditors have found your internal controls to be weak, promptly address them.

Gather feedback

One important audit committee task is to obtain your executive director’s impression of the auditors and the audit process. Were the auditors efficient, or did they perform or require redundant work? Did they demonstrate the requisite expertise, skills, and understanding? Were they disruptive to operations? Consider this input when deciding whether to retain the same firm for the next audit.

The committee also might want to seek feedback from employees who worked most closely with the auditors. In addition to feedback on the auditors, they may have suggestions on how to streamline the process for the next audit.

Fiscal responsibility

Your donors, grantmakers, and other supporters expect your organization to do everything in its power to ensure funds are used appropriately and responsibly. If you fail to act on issues identified in an audit, it could lead to asset misappropriation and seriously damage your nonprofit’s reputation and viability.

Questions

Contact us if you have questions, require an audit, or need help improving internal controls.

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