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Internal Audit Checklist For Non-profit
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Non-Profit Internal Audit Checklist
A nonprofit is not required to have an annual auditing as it is in for-profit businesses but in order for the nonprofit organization to continue getting donations from other organizations and government (grant), then an audit is required.
The main aim of carrying this audit is to assure the donors that the funds donated are being well spent. This type of audit is carried out by an external auditor.
As the external auditing is important, a nonprofit internal audit is also very important no matter what the size of the non-profit organization is. The importance of this internal auditing is to occasionally check if everything in the organization is running smoothly.
Here is the nonprofit audit checklist:
1- Reviewing the Internal Controls
These are the policies set by the organization to prevent financial records from theft and mismanagement.
The auditor reviews the internal controls and makes sure that they are efficient. While reviewing the internal controls, he also reviews the account practices of the organization by comparing the number of errors identified in accounting with the previous period.
Tip: Always make sure your accounting records are in order before the external auditing to avoid any concerns regarding your accounting practices.
2- Contribution Management of Auditor
This is the main area that the internal auditor focuses on. This is to make sure that the contributions received are being put into good use. He does this by:
Comparing the income contribution percentage with the other nonprofit organization that offer the same services.
The percentages should not have a bigger difference taken into consideration that both organizations have the same purpose.
If there is a big difference between the percentages, you should review your contributions distribution to see where you are going wrong.
1-Checking the expenses: The internal auditor takes time to check the expenses like salary levels and incentives to make sure that they are both reasonable.
2-Checking the investments (If any): The auditor checks the kind of investments that the organization holds and the amount of money used to invest and the expected returns to make sure that they have invested wisely.
3- Preparing Financial Reports
An audit informs the managers of the financial state of the organization and also the path that the organization is taking financially.
The auditor is able to review the financial reports by comparing the current financial report with the previous ones.
Another advantage of carrying out these internal audits is to be aware of the organization’s state and if there is a problem, there is time to correct it before the external auditing is carried out because if the external auditor reports any problems in the organization especial in funds management, this could really harm your organization. This is something to really put into consideration, don’t you think so?
"Internal audits will always make you be in the loop on what’s going on your organization no matter how big it is. The auditors will be your second eye."
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