Annual audits tend to get a bad reputation in the nonprofit world. Some of it’s deserved — tight deadlines, endless requests for documentation, and the occasional mystery transaction from 10 months ago can test anyone’s patience.
But an audit doesn’t have to derail operations or monopolize your time. A few disciplined habits can reduce the chaos and keep the process moving.
Most audit stress comes from trying to prepare 12 months’ worth of records in three weeks. The fix is obvious — don’t.
Keep reconciliations, grant schedules, and payroll reports current throughout the year. Extend that discipline to balance sheet schedules for pledges receivable, accounts receivable, deferred revenue, accrued expenses, and prepaid expenditures. Tight interim reporting makes for a stronger audit and better management decisions along the way.
Rolling these schedules forward monthly should be as routine as your close process. Come December, you’ll thank yourself — because when the auditors arrive, you’re not searching, you’re delivering.
The “Prepared by Client” (PBC) list is the auditor’s roadmap — but if you let it sit untouched, it quickly becomes your bottleneck.
Break it into three categories:
Items already on file
Items you need to prepare
Items you need from others (bank, payroll provider, grant managers)
Don’t just wait for the list — anticipate it. Large donations, new debt agreements, and grant award letters are all predictable asks. Build internal processes so your operations team feeds these into your “audit flywheel” throughout the year.
For restricted funds, prepare donor letters and restriction detail in advance — they’ll need them, and you’ll avoid delays.
Assign ownership for each item and set internal deadlines earlier than the auditor’s request. The goal is to keep the list moving every day until it’s complete, not let it idle in your inbox until it becomes urgent.
Auditors aren’t trying to surprise you — but they can be surprised by you.
Schedule a pre-audit discussion to flag major changes: new funding sources, leadership turnover, accounting policy updates.
Be upfront about known issues. Trying to “fix it quietly” usually creates more work later.
Provide explanations for significant variances before they ask.
Proactive communication saves time, reduces follow-up questions, and helps auditors complete the job faster — which is in everyone’s best interest.
If your auditors offer interim testing — take it. It’s essentially a “mini-audit” performed before year-end, where they test controls, review sample transactions, and verify key balances for part of the year.
Handled well, interim work can:
Spread the workload so you’re not delivering every document in a single month.
Surface issues early enough to correct them before they become year-end problems.
Reduce the volume of testing needed during the main audit.
To make it effective, ensure interim-tested accounts stay reconciled and untouched except for routine activity. That way, the work auditors complete in October doesn’t have to be redone in March.
Think of interim testing as the pre-season: if you do the work early, the year-end game is a lot easier to win.
Treat the audit as a year-round process by maintaining reconciliations and schedules monthly.
Manage the PBC list proactively — anticipate requests, assign ownership, and set early internal deadlines.
Use interim testing to spread the workload and surface issues early.
Communicate significant changes and potential issues to auditors before they become delays.
An audit should confirm what you already know about your organization’s financial health — not expose avoidable gaps. If your audit season still feels like a scramble, it’s time to tighten your systems.
S&Y helps nonprofits and YMCAs build audit-ready processes so the annual review is efficient, predictable, and drama-free.
