Nonprofit Audit Checklist: What to Fix Before August

Starting in July or early August gives you a real window to:

• Find and fix gaps before your auditor does.
• Gather missing documents without the panic.
• Reduce back-and-forth with your accounting team.
• Walk into audit season with confidence, rather than with stress.

The Nonprofit Audit Checklist: 8 Areas to Review Now

Download the Nonprofit Audit Checklist today to prepare for tomorrow’s audit.

1. Bank Reconciliations Are Up to Date

This sounds basic, but it’s one of the most common issues auditors flag. Every bank account your organization holds, operating, savings, and restricted funds, should be reconciled through June 30 (or your fiscal year-end). If reconciliations are more than a month behind, that’s a red flag worth fixing now.

What to check:

• Are all accounts reconciled and signed off?
• Are there any old, uncleared checks sitting on the books?
• Do your bank balances match your general ledger?

2. Grant Tracking Is Clean and Documented

This one might keep you up at night, and for good reason. Grant funds need to be tracked separately, spent in accordance with the grant agreement, and fully documented. If your Customer Relationship Management (CRM) and your accounting system aren’t telling the same story, now is the time to reconcile them.

What to check:

• Do you have a schedule of all active grants with amounts, restrictions, and deadlines?
• Are grant expenses coded to the right programs in your accounting system?
• Do your financial reports match what you’re reporting to funders?

3. Coding Accuracy

A messy statement of activity creates confusion for your auditor, and for you. Expenses coded to the wrong program, income posted to the wrong fund, or duplicate accounts can slow everything down.

What to check:

• Are expenses consistently coded to the right programs and departments?
• Are there any accounts that haven’t been used in years and need to be cleaned up?
• Does your financial reporting match your program structure?

4. Restricted vs. Unrestricted Funds Are Clearly Separated

Your auditor will want to see that restricted funds are being used exactly as donors and grantors intended. Mixing restricted and unrestricted money, even accidentally, is a compliance issue that can create real problems.

What to check:

• Are restricted funds tracked in separate accounts or with clear coding in your accounting system?
• Do you have documentation for every restricted gift (letters, grant agreements, donor correspondence)?
• Are you spending restricted funds only on what they were designated for?

5. Payroll Records and Allocations Are Accurate

If your team works across multiple programs, your auditor will want to see how employee time is allocated. This is especially important for grant compliance.

What to check:

• Do you have time-tracking records or written time allocations for employees whose salaries are split across programs?
• Are payroll expenses coded correctly in your general ledger?
• Are contractor payments documented with signed agreements and W-9s on file?

6. Board Meeting Minutes Are Complete

Your auditor reviews board minutes to verify that major financial decisions were properly authorized, such as budget approvals, executive compensation, and significant contracts. If minutes are missing or incomplete, work with your board secretary to draft and approve them now.

What to check:

• Are the board minutes complete and on file for every meeting in the past fiscal year?
• Did the board formally approve the annual budget?
• Are any significant financial decisions documented in the minutes?

7. Fixed Assets Are Listed and Depreciated

If your organization owns property, equipment, or vehicles, your auditor will want to see a current fixed asset schedule. This includes what you own, when you bought it, what you paid, and what it’s worth now.

What to check:

• Is your fixed asset list up to date?
• Are depreciation schedules current through your fiscal year-end?
• Have any assets been disposed of or written off that aren’t reflected in your records?

8. Your Financial Statements Are Ready for a Board Conversation

Here’s one that often gets overlooked: Can you explain your financials? Not just to your auditor, but to your board?

You might also feel anxious presenting financial reports, especially when the numbers don’t tell a clear story. Audit season is a good time to ensure your statements are clean, accurate, and something you can walk your board through with confidence.

What to check:

• Do your financial statements clearly show the organization’s financial position?
• Are your program expenses broken out in a way that tells a meaningful story?
• Are there any line items that look unusual and might raise questions?

Common Audit Problems (And How to Avoid Them)

Even well-run nonprofits run into audit surprises. Here are the most common ones, and what to do before they become your problem:

• Missing or incomplete documentation: Set a goal to gather all supporting documents (e.g., invoices, receipts, contracts) for the past fiscal year before August 1st.
• Unexplained journal entries: Every manual journal entry should include a clear explanation. Review them now and add notes where they’re missing.
• Inconsistent fund accounting: If your accounting system doesn’t clearly separate funds, talk to your finance team about how to fix this before the audit starts.
• Late bank reconciliations: Build a monthly close process so reconciliations never fall more than 30 days behind.
• Grants coded incorrectly: Run a grant spending report and compare it to your grant agreements. If something doesn’t match, now is the time to fix it.

What Happens When You’re Not Ready

Walking into an audit unprepared means long hours, stressful back-and-forth with auditors, and the very real risk of findings that end up in your audit report.

That could mean presenting uncertain numbers to your board or incurring grant reporting delays, putting future funding at risk.