Actionable tips for achieving a paperless nonprofit audit

Want to establish more trust and transparency with your donors?

Nonprofit audits can be a powerful demonstration of your organization’s credibility and financial stewardship.

However, if your organization is unprepared for the auditor, it can be a lengthy and time-consuming process.

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With the right technology, it is possible to conduct an entirely paperless nonprofit audit.

Let the efficiency of your nonprofit cloud accounting solution reduce audit costs and complexity.

Many nonprofits, especially smaller organizations, shy away from getting audits.

Audits can be expensive and often require a lot of prep work by the accounting team to produce audit-ready financials.

Fortunately, having a cloud-based nonprofit accounting system helps keep you organized and well-prepared for your audit.

In this article, we will provide technology tips to help you use your accounting system to:

• Implement internal controls
• Engage and empower your auditor
• Create audit dashboards
• Support remote audits

Here’s what we’ll cover

Implement internal controls and best practices

A cloud nonprofit accounting system, such as Sage Intacct, can help your organization set up roles, permissions, and rights for users that serve as critical internal controls your auditor will examine.

Here are five features of cloud nonprofit accounting solutions that can infuse best practices and shore up internal controls:

1. Audit logs and audit trails

Track who, what, and when every transaction is entered or modified. See when user rights or permissions were altered and by whom.

2. Secure access

Define user access restrictions by role or department to retain internal controls and secure sensitive financial information.

3. Automated internal controls

Maintain consistent, transparent processes for internal workflows such as purchase requisitions and approvals.

Smart rules specify documentation requirements and block or warn accountants about transactions that don’t meet the standards.

4. Dimensional database

Some accounting systems, including Sage Intacct, use a table-driven database architecture.

This allows you to tag and describe transactions with multiple dimensions, enabling easy, robust slice-and-dice reporting that helps create audit-ready financials and answering auditor questions.

5. Embedded communications

Document all team communications inside the accounting system so your auditor can see how your team resolved any questions about journal entries, accounts, projects, invoices, purchases, and other transactions.

Engage and empower your auditor

Consider giving your auditor access to your nonprofit financial system.

This will help the auditor work more efficiently and reduce the auditor’s requests to your staff for additional reports and questions.

Allow your auditor to log on and see what you see during the audit process.

A modern nonprofit financial system should allow you to limit an auditor’s access to read-only so they cannot make any journal entries or change anything in the system.

You can also limit what areas of the system the auditor role can access.

The auditor can pull items needed without your accounting team’s intervention.

With Sage Intacct, the auditor can ask questions or request additional information through the Collaborate feature. This efficiency not only makes your audit less time-consuming but can also decrease its overall cost.

Create dashboards that facilitate your paperless audit

When you give your auditor access to your financial management system, you can create role-based auditor dashboards to help them find the information they need quickly and easily.

To help facilitate an audit here are three types of dashboards that would be useful:

Compliance Dashboard

This dashboard should display real-time audit and tax reporting information, including your Statement of Activities and Statement of Operations.

Include workpapers that replicate portions of your Form 990 like your Statement of Revenue and Statement of Functional Expenses.

Quantitative and Qualitative Transparency Dashboard

This dashboard should include disclosures, footnotes, other narratives, and backup support demonstrating and explaining quantitative reporting.

Prepared by Client (PBC) Checklist Dashboard

Auditors appreciate the convenience of having a one-stop checklist for PBC.

Pull together all of the information that auditors require in a checklist allowing you to assign items, track due dates, and track completion progress.

As you work through your PBC checklist, you can assemble and include collaborative attachments such as board minutes, bank statements, annual reports, and org charts.

You can include trial balance, bank reconciliations, aging, and check registers.

Auditors can review system records including approval queues and allocations.

You can even link to internal applications such as accounts payable, cash management, fixed assets, and more.

Support remote audits

Thanks to current technology advancements, supporting partially or fully remote audits has never been more convenient.

By eliminating the need for the auditor to physically travel to your location, both time and travel expenses can be saved.

By conducting the audit remotely, you won’t need to set up space in your office for the auditor.

Your team will be able to continue working uninterrupted.

Your team members across different locations can enhance their collaboration with a remote auditor.

Utilizing cloud-based remote audits also grants added versatility in scheduling meetings outside of traditional work hours.

With access to your cloud-based accounting system and chat features within the application, auditors can effectively work remotely and communicate with your team whenever needed.

In-person discussions with the auditors can be facilitated through various web conferencing platforms such as Microsoft Teams and Zoom, regardless of geographical constraints for team members.

Even organizations in remote or underserved areas can undergo effective audits and choose an auditor who specializes in the nonprofit sector with a remote audit.

Eliminating auditor travel costs will be especially beneficial for nonprofits with international entities or multiple locations.

Final thoughts

In conclusion, transitioning to a paperless nonprofit audit can significantly streamline the audit process and enhance transparency and trust with donors.

Organizations can implement internal controls, engage and empower auditors, and create efficient audit dashboards by leveraging the right cloud-based nonprofit accounting system.

These actionable tips not only improve audit readiness and reduce costs but also demonstrate a nonprofit’s commitment to financial stewardship.

Embracing technology and best practices in nonprofit audits ultimately solidifies credibility and integrity in the eyes of stakeholders.

To learn more about how to create efficient workflows in your nonprofit audit, download the Accelerating Your Nonprofit Audit with Audit-Ready Financials e-book.

About the author

Natalie Anderson

Natalie Anderson is a senior nonprofit industry marketing manager for Sage Intacct.

Natalie has 10 years of experience in software marketing and is passionate about helping nonprofits leverage software to achieve mission success.