For a lot of nonprofit leaders, the word "audit" triggers a familiar feeling: a mix of dread, a vague sense that something might be wrong, and a scramble to pull together a year's worth of paperwork in a few weeks.
It doesn't have to be that way. Audits go smoothly — and quickly — when the prep work happens months before the auditor ever shows up. Here's a step-by-step checklist to get your organization ready.
Start Early: Build Your Audit Timeline
Most nonprofit audits happen 60 to 90 days after fiscal year-end. Work backward from that date and block out time for each step below — ideally starting the month your fiscal year closes, not the week before the auditors arrive.
Step 1: Reconcile Every Account
Before anything else, every bank account, credit card, and investment account needs to be reconciled through year-end. This includes restricted fund accounts and any savings or reserve accounts. Auditors will ask for reconciliations as one of their first requests — having them ready saves days.
Step 2: Confirm Your Restricted and Unrestricted Fund Balances
Auditors will test whether your restricted and unrestricted funds are tracked correctly and whether any temporarily restricted funds should have been released during the year. Before the audit starts, review every grant and restricted donation: has the purpose been fulfilled? Should the funds have moved to "without donor restrictions"? Catching this yourself, before the auditor does, keeps the process moving.
Step 3: Pull Together Your Grant and Contract Files
For every grant active during the year, gather the award letter or agreement, the budget, and documentation showing how the money was spent. If your organization received federal funding above certain thresholds, you may also need a Single Audit — auditors will confirm this early, so have your federal award totals ready.
Step 4: Review Your Financial Statements Before the Auditor Does
Walk through your Statement of Financial Position, Statement of Activities, and Statement of Functional Expenses yourself. Do the numbers make sense? Are expenses allocated reasonably between program, management, and fundraising? Catching an obvious misclassification before the audit starts is far less stressful than explaining it during fieldwork.
Step 5: Organize Supporting Documentation
Auditors will sample transactions and ask for backup: invoices, receipts, contracts, board meeting minutes approving major decisions, payroll records, and signed agreements with vendors and contractors. Build a simple folder structure — by month or by category — so you're not searching through email when a request comes in.
Step 6: Prepare Your Board
Auditors typically review board meeting minutes for the year and may ask board members questions directly, especially your board treasurer or finance committee chair. Make sure minutes are signed, up to date, and reflect key financial decisions — budget approvals, major contracts, and any changes in restricted fund use.
Step 7: Know What Type of Audit You Actually Need
Not every organization needs a full financial statement audit every year — some need a review, and some need a Single Audit in addition to their regular audit. Confirming the right type before you engage an auditor can save significant time and cost. See our guide on when your nonprofit needs an audit vs. a review to figure out where your organization falls.
Step 8: Designate One Point of Contact
Auditors work fastest when they have one person who can answer questions, pull documents, and coordinate with staff — not five people who each know part of the picture. If your organization doesn't have in-house capacity for this, an outsourced CFO or controller can serve as the single point of contact and manage the relationship on your behalf.
The Bottom Line
An audit isn't a test you pass or fail at the last minute — it's a reflection of how well your books were kept all year. The organizations that find audits "easy" aren't lucky. They reconcile monthly, track restrictions as they happen, and review their financials before anyone else does. Do that, and the audit becomes what it's supposed to be: confirmation that your numbers are right.