The Nonprofit Show The Audit Roadmap Nonprofits Need: Tips Every Leader Should Know
Audits may make nonprofit leaders tense, but this discussion reframes the audit process as smart organizational practice rather than a yearly ordeal. Ben Stap of Your Part-Time Controller explains that a nonprofit audit is not simply a compliance exercise. It is an outside review that helps confirm financial accuracy, transparency, and proper use of funds so donors, grantmakers, and regulators can trust the organization’s stewardship.
Ben makes the conversation approachable right away with a memorable comparison: “It’s like having a police car behind you while you’re driving.” That simple image captures why audits feel stressful even when an organization has done nothing wrong. From there, he shifts the focus from fear to preparation. His message is clear: nonprofits that treat every month like audit season are far better positioned when the real process begins.
A major theme of the episode is audit readiness. Ben explains that many of the biggest audit problems come from issues that build up over time, including missed in-kind contributions, unclear treatment of restricted cash, revenue recognition confusion, stale footnotes, and unusual transactions that were never properly documented. His advice is practical: keep policies current, organize records all year, reconcile monthly, and review financial activity regularly so year-end does not become a scramble.
One especially useful takeaway for nonprofits is that audits are not only about finance staff. He points to the value of internal communication across departments, especially when program teams, development staff, and finance professionals need to share information about grants, pledges, and restricted funding. He also offers a smart governance practice: have the board periodically review the vendor list to help prevent conflict-of-interest concerns and support stronger oversight.
Another emphasized point is that nonprofits should decide what they want from an audit relationship. Some organizations need an audit firm that simply reviews and reports. Others need a partner who will answer questions during the year and help them think through complicated nonprofit accounting situations. As he puts it, “Proactive, overreactive is always a good way to go about it.”
00:00:00 Opening Discussion
00:01:19 Why Nonprofit Audits Matter
00:03:45 What Audit Ready Really Means
00:04:35 The Purpose of a Nonprofit Audit
00:06:13 Common Audit Pitfalls to Avoid
00:10:16 Documentation and the PBC List
00:13:15 Policies Procedures and Separation of Duties
00:16:28 Why Communication Drives Audit Success
00:21:05 Monthly Reconciliations and Year Round Prep
00:22:21 Audit Season Timing and Expectations
00:24:40 Turning Audits Into a Useful Tool
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