An audit may be a nerve-racking process. But it doesn’t have to be. However, a nonprofit needs to be prepared to have everything scrutinized by the auditor. No stone is left unturned, so to speak. They are very thorough.
They must be. Especially when the government has entrusted its money to an organization. It needs to verify the proper use of the funds.
There are some things a nonprofit organization can do to prepare for a grant audit review. Papers, documents and records can be put in order to facilitate the process, making it less stressful on the organization and easier to review for the auditor.
Knowing what an auditor looks for will help unveil some of the mystery of the entire auditing process. It also enables the organization to be better prepared. These 3 tasks are typically performed.
1. Searching for Improper Payments
At the time the organization received its grant money, it was given a list of cost principles. These are the rules stating what is permissible to purchase with grant money and what is forbidden. An auditor will look for improper payments and determine whether the organization is abiding by the cost principles.
2. Checking Internal Controls
Internal controls protect the nonprofit’s assets. A form of checks and balances must be in place to help adhere to the rules of administrating of the grant program.
3. Determine the Risk Factor
This task is simply detecting if there’s trouble on the horizon for the nonprofit. After reviewing the organization’s purchasing, accounting, and inventory systems, the auditor will determine if the organization is at risk for any problems.