10 Audit Tips For Non-Profit Organizations

When that time of year comes around for your annual audit, you need to make sure you are ready.  Being prepared is the key when it comes to handling any audit.  You want to be sure that your policies and procedures are being adhered to, internal controls are operating effectively and your financial statements are in line with Generally Accepted Accounting Principles (GAAP).  Prepping for an audit can be a grueling process, but it’s a necessary one.  Go over these 10 non-profit audit tips to ensure your next external audit is quick and painless.

1. Have A Plan

As with any complicated process, it is always better to have a plan in place ahead of time. When we say ahead of time, we mean three to four months ahead of time. Audit season occurs traditionally within 3 to 8 weeks following the close of the fiscal year, so your plan should begin to form well in advance. This might sound like a stretch, but there is no such thing as being too prepared when it’s your organization’s financial well being on the line.

2. Monthly Reconciliation

Reconciliation should be a regular practice within your non-profit organization. As long as your organization is running, it means you’re spending and making money. It is your job to account for that money. If you let your records pile up, two things are going to happen:

You are going to have a huge pile of records to deal with in a short amount of time

You are going to be scrambling to reconcile those records before your auditors arrive, leaving plenty of room for unintentional and careless errors and/or omissions

This is why a MONTHLY reconciliation process is absolutely necessary if you expect to be approved by your auditors.

3. Go Over The List

Most auditors give organizations a list prior to the audit, so they know what is expected. This list indicates everything that your organization should have ready when the auditors arrive. Make copies of this list and pass it around to all personnel, honing in on your finance department. Make sure all members of the organization are thoroughly prepared.

4. Create A Calendar

Once you’ve got that list, go ahead and put it in calendar form with the help of your audit team and personnel. You want to make sure you’re including all deadlines for all deliverables on this calendar, so everyone is attuned to what is going to be required from them.

5. “Pro-Forma”

Pro-forma documents are projected financial statements. Be sure to discuss with your audit team any and all information that you know is excluded from your Pro-forma or may be in the near future, like reconstruction of the non-profit.

6. Book Adjustments

This is simply another precaution to ensure your organization is in line with GAAP. Any and all adjustments should be booked before finalizing the trial balance. Entries have every chance to slip through the cracks in a yearly financial statement view.

7. Ledger Changes

Make sure your auditors are aware of any new accounts in your general ledger. It’s not the worst thing to surprise an auditor with a new account, but your goal should be to keep them in the loop with every single aspect of your organization’s records.

8. Financial Contingencies

This should go without saying, but your audit teams need FULL disclosure on all financial conditions that may be considered liabilities. For example, you may not want to explain a nasty lawsuit from the previous year, but your auditors need to know this kind of information. They are not there to judge your organization. Their responsibility is to ensure YOUR financials adhere to GAAP and are not misleading to its readers.

9. Old Assets/Uncollectable Receivables

Write off old assets/uncollectable receivables and write them off immediately. Having an auditor determine assets/receivables are uncollectable will most likely mean the most conservative answer. Your management team is more attune to the records and are responsible for developing these estimates. Keeping this analysis in house will result in a better approach to dealing with these assets and allows the auditor to simply review management’s estimate.

10. Prior Year

With each annual audit, your organization should become more familiar with the procedure. You know the auditors are going to review and record adjustments from the prior year, so why not get a head start and have them booked before the auditors arrive? If nothing else, your auditor is going to be incredibly grateful for the saved time.

Bonus Tip:

Analyze your final results compared to your budgeted results and be prepared to explain the differences.  Things that don’t add up are going to draw the auditor’s attention and could incur additional un-budgeted time, so make sure you have a reason for any variations in your budgets.

If you remember one thing about this blog post – remember “Be Prepared.”  We can’t stress that enough.  Make review part of your weekly schedule.  When you’re on top of your records and keep everything up to date – you will have no reason to dread those annual audits!  Want to learn more – click the button below:

Be Prepared: Fraud Is On The Rise During Tax Season

Did you know that ALREADY the IRS is warning that is has seen a 400% surge in phishing and malware compared to the last tax year?  Unfortunately tax season now coincides with “fraud season”.

Last week the IRS warned of the dramatic increase in official-looking text and email messages that taxpayers have received.  Phishing messages have been received asking for a wide variety of sensitive information, including filing status, personal information confirmations, PIN verifications, and more.  The messages have been created to look official as if they have been sent from the IRS or a tax software company and are being received in every corner of the United States.

Next time you open up that email that is asking for important personal information, take notice of who the sender is and the link that they are trying to make you click on.  Chances are that the link is hyperlinked to a fraudulent website, in hopes that you enter in your information there.  A trick is to “hover” your mouse above the link and then see where you are really being re-directed, if the link looks odd (which it probably will), then delete the email.  If you are unsure, you can always send the email to your CPA, and he or she can then advise on the validity of the email.

Remember: The IRS generally does not initiate contact with taxpayers by email, text, or social media, or phone calls for that matter. So if you receive a message, be suspicious!

Some subject lines that the IRS has seen in phishing scams, include:

  • Confirm your personal information
  • Get my IP PIN
  • Get my E-file PIN
  • Order a transcript
  • Complete you tax return information
  • Variations about people’s tax refunds
  • Update your filing details, which can include references to W-2

To report a phishing scam to the IRS, email phishing@irs.gov.

This blog was created for your protection, please be aware of these circumstances and alert your CPA if you are ever unsure.  We have experience in dealing with the IRS and can quickly let you know if something is or isn’t a fraudulent message.

Wealth Transfer: What You Should Be Considering…

Wealth transfer is one of the most personal topics within the financial field. Issues like estate tax and gift planning go far beyond numbers and financial records. While there is a strategic side to wealth transfer, there is also an extremely emotional one, which needs to be handled with the utmost delicacy. If you’re looking to solidify the best course of action for your wealth, you should work with a CPA firm that understands not only the financial aspects of wealth transfer, but also the emotional and psychological ones.

Before entering into the wealth planning process, it’s a good idea to familiarize yourself with these two very distinct sides of wealth transfer – emotional and strategic – and understand that each must be taken into consideration before any concrete plans are established.

Wealth Transfer: The Emotional Side

Wealth transfer processes delve into the innermost dynamics of your personal and familial history: They may reopen old wounds, unravel intricate family histories and bring to light issues you might have preferred remain buried.

So, before a CPA firm jumps into any structural planning, it must navigate the personal side of your plans for your wealth. Dedicated solely to the safety and wellbeing of your wealth, a CPA offers you a more objective opinion – one that isn’t influenced by family history. How you transfer your wealth is ultimately your own decision, but a CPA helps to compartmentalize your thoughts, see things rationally and consider future consequences.

Wealth Transfer: The Strategic Side

Once a client’s personal matters are carefully sorted through, a CPA begins developing the best course of action for the client’s wealth. When it comes to this more strategic, tactical component of wealth transfer, a CPA typically provides three options:

Wills

A will is a legal declaration containing your instructions and wishes for your property and assets to be distributed after your passing. It is one of the most uniform options for wealth transfer and remains the most basic estate plan. The downside to a will is that estates typically fall into probate and are thus subject to estate taxes.

Gift Planning

A gift or asset transfer to children or other beneficiaries may help reduce your taxable estate. You may gift, tax free, up to $14,000 per recipient per year – or $28,000 per recipient for married couples if you combine gifts. Additional gifts require the filing of a gift tax return.

Medical Or Education Gifting

If you pay someone’s medical or education expenses directly to the service provider, you make this payment as an extra gift. For example, if you write a check for tuition directly to a grandchild’s school, you can still gift that grandchild the annual per-recipient amount.

529 College Plans Gifting

You can contribute to a child or grandchild’s 529 college savings plan as your annual gift. In fact, with college gifting, you have the option of contributing up to five years’ worth of annual gifts in one year ($70,000 per person or $140,000 per couple) to one person.

Trusts

A trust may enable you to better meet your estate planning goals. There are several types of trusts:

  • Irrevocable Life Insurance Trusts
  • Charitable Trusts
  • Revocable Living Trusts

Trusts help transfer wealth, but they also keep a portion of your estate out of the probate, therefore minimizing your estate taxes.

Wealth transfer is a process that must navigate strategic as well as emotional realms to be successful. You want to partner with a CPA firm that not only is knowledgeable about the financial side of wealth transfer, but also acknowledges the emotional aspect – and takes the time to work through the two together, always with your best interest at heart.

LBA Haynes Strand provides personalized service that reflects the high standards we demand of ourselves. Our caring, competent and client-focused staff are eager to assist you and start planning your financial future. Contact us for a no-cost consultation today!