Here are a few ways that associations can ensure an easy and efficient audit. Hint: Keep your documentation organized.
Audit. Just the word can inspire dread. After all, association finance departments are already busy performing their usual duties when auditors come in asking for document after document after document.
But the independent audit doesn’t have to be such a drag. In fact, being adequately prepared can make the process—while not enjoyable—at least as pain-free as possible. What’s one of the best ways associations can prep for a smooth audit? Keep their documentation organized all year long.
Here are a few tips for doing so from Carol Barnard, a senior manager at Aronson LLC, which conducts audits and provides tax planning for nonprofits, among other services.
Consider going digital. When asked about trends in the nonprofit audit space, Barnard said she’s been seeing more associations move from storing documentation in file cabinets to storing it digitally. Software like Anybill, Bill.com, and a host of others help do the grunt work of digitizing documents.
However, if investing in a software solution like this isn’t a possibility for your association, you can still digitize your documentation by manually scanning them and saving them to the cloud. “Things are going digital and electronic,” Barnard said. “That’s definitely the number-one thing we’ve seen over the last 10 years.”
Complete the PBC list. Before the actual audit, auditors will likely provide a Prepared-By-Client (PBC) list, which is a list of documents that the auditor will require from the association. If associations prepare the required items on the PBC list, they will go a long way toward ensuring a smooth and efficient audit process, Barnard said. “It really is a list that has been customized for that organization of what we need for the audit,” she said. “We really do need everything that’s on there.”
When associations don’t adequately prepare, auditors will have to ask them for those documents during the actual audit, which can be immensely frustrating and time-consuming for both the association and the auditor.
Keep your financial house in order year-round. At the end of the day, the best way to prepare for the audit is to keep organized throughout the year. “The association should be investigating and resolving things all year-long,” said Craig Stevens, partner at Aronson LLC. That means, reconciling cash accounts, investment account balances, accounts receivable and payable, asset accounts, and debt accounts in real time—rather than scrambling to do so months and months after the fact.
“Staying organized all year long is definitely the best way to prepare for the audit,” Barnard said. “Auditors are testing that controls are functioning throughout the year, not just at yearend, plus waiting until the end of the year creates a huge amount of work that would be easier to tackle if it was done incrementally throughout the year. It’s also about setting a company culture where following controls and preparing accurate reporting are part of the regular day-to-day activity.”