Name: Show Your Auditors Some Love! Stay Audit Ready All Year-Round
Uploaded: 2026-03-24T18:30:58.083Z
Duration: 1 h 5 min 56 s
Description: Show Your Auditors Some Love! Stay Audit Ready All Year-Round

Transcript for "Show Your Auditors Some Love! Stay Audit Ready All Year-Round": Hi, everyone, and welcome. My name is Caroline, and I'll be kicking things off today. Thank you for joining us for show your auditors some love. Stay audit ready all year round. Before we dive in, let's quickly cover a few housekeeping details. On the right hand side of your screen, you'll see the control panel with chat, docs, polls, q and a. These are your tools to interact with us throughout the session. In the docs tab, you can download today's webinar. We'll also send you an email of the webinar recording after today's session. For polls, all poll questions will appear in the poll polls tab. Each poll stay open for a few minutes so you have time to respond. If you're looking to earn CPE, credit responding to the polls is required. Note the polls tab will disappear once the polls close. For chat and q and a, feel free to chat with us and other attendees during the webinar. If you have questions, submit them in the q and a box in your control panel, and we'll answer as many as we can during the session and at the end. If you are having any streaming problems, try refreshing your browser. This usually resolves the issue quickly. And then, also, just to share, we have Kenneth, one of our representatives on the line today. Kenneth is available to answer sales specific questions to learn more about your organization's needs. Connecting with Kenneth is easy. It's usually just a quick five to minute chat, five to ten minute chat or phone call, and it's definitely the fastest way to get information on how Blackbaud can support your organization. After your conversation, Kenneth can connect you with an account executive for next steps often as soon as the next business day. Also, just to note here, if you are a current customer and have a question about your software, we recommend using the chat or calling the support number provided here. And to go over again, CPE credit is available for this session. You must answer all three poll questions to receive CPE credit, and certificates will be sent out within two weeks of the webinar over email. If you do have any questions or issues, please reply to the email or contact here. And with that, let's get started. I'm excited to hand things over to Eric and Eric. Thank you, Caroline. Welcome to everyone. Thank you for joining us today. We are super excited to be here. We're here to talk about something that usually doesn't get described as what we would say fun, but we hope you walk away feeling better prepared for your audit, after the end of today. Our goal is to share how to show your auditors some love by staying audit ready all year long. So the audit is not something that you dread. And the easiest way to show your auditors some love, just let them be auditors. And you can do that by providing your schedules and not waiting for them to do those things for you. So I'll be speaking from the nonprofit finance team side, you know, the side that you all are doing that's juggling programs, funder requests, operational needs, and competing priorities. And my colleague, Eric, will be bringing the auditor lens, and together we'll connect what they, the auditors, need with what you can do to help them out. Oops. And of course, I went to the wrong screen. There we go. Alright. Alright. And to start, so I'm Eric Johnson. I'm a manager at YPTC. I've been working in nonprofit finance for twenty years now. I've been working in, social service organizations such as senior services and workforce developments, director of finance roles. I've worked in the arts. I worked at a museum and community theater. I've worn many hats like many of you do, doing finance, IT, HR, you name it. So excited to be here and and share some resources. And I reside in Kalamazoo, Michigan. And, yeah, and I'll pass it over to my colleague, Eric. Yep. I am the the other Eric in today's Eric and Eric buddy cop. Like Eric mentioned, I I also work at YPTC. I'm a director of client experience. I'm based in the Dallas Fort Worth area. Shout out to, fellow Texans on the chat, and I see, yeah, some familiar names. As Eric mentioned, I bring an auditor lens. I do I work at YPTC, so I'm not doing audits currently. But I did, I've been in nonprofit accounting my entire career and began at a CPA firm doing audits of nonprofits, both financial statement audits and single audits. So I I've been on that side of the desk, and then in my time at YPTC have been an auditee. So I've I've seen kind of both sides of it, but for the flavor of the conversation today, I'll really lean more on the auditor lens just to bring some of that kind of behind the scenes perspective to the conversation. Awesome. Thank you, Eric. And nice to see there's a you have a fangirl, I think I saw on the chat. Someone here excited to see Eric. I'm excited to be here with Eric as well. Why we're here is, part of the Blackbaud month end series. So we wanted to discuss, you know, some of the important things that you can do throughout the year, to make sure that you've got month end checklist and month end close. We're all accountants. At least I'd imagine most of us here are accountants. We'll find out a little bit more, later. But we all love structure. We love checklists. We love to be able to get things done. And we are from Your Part Time Controller or YPTC. Your Part Time Controller is a professional services firm, and we specialize in nonprofit financial management. We have more than thirty years of nonprofit expertise, so we're all excited for you to be here. And our services that we provide to clients range from accounting, reporting, data visualization, and implementing best practices, just to name a few. So we have a network of over 800 staff. It looks like I saw some of them in, the chat here with staff around the country, and we've got over 2,000 clients. We have clients in The United States as well as in several other countries. So, with that, we're gonna talk about the learning objectives for today. So we've got three main objectives. The first one is to cover the objectives, the goals, and stages of a nonprofit audit, and then we'll discuss the different types or procedures performed and the items that are requested. So we'll really hone in on the two areas that auditors, participate in and do a lot of their, heavy lifting. So you can see behind the curtain, so to speak, or how the sausage is made, also known as your financial audit. And then finally, we'll use those different things and, share some tools and ideas and things that you can do on a monthly basis to implement those into your month end close so at the end of the year, you're not scrambling to try to get things ready for your audit. Because I know as you all are sitting here thinking this is so much easier said than done, nonprofit nonprofit finance teams, especially now more than ever, are running really lean, and you're not just sitting around waiting for the audit to happen. Right? So we're gonna share some things that will hopefully, give you some insight to pry try to be proactive, and you can understand what both sides need so you can feel like the audit is a little less mysterious and a lot more manageable. So, before we get started, we do want to we have our first poll question. So if you could go up into near where the chat is, we've got a poll question, and we just wanna know who's joining us today. So, hopefully, you know, we've got maybe auditors. We maybe have executive directors, CEOs, finance team members, or other. So that might be program staff, board members, so on and so forth. So I'll give you a moment or two to answer that question in the poll. And I guess if Caroline could share what that response is just so we can see who is here with us today. Oh, and you're on mute, Caroline. It looks like lots of finance team members was the number one for sure. Awesome. A little of everything, it seems, which is good. Thank you so much. Alright. Thank you for joining us. Glad to see who's here. And with that, I will let Eric take it away. Yes. I think as a starting point, we're we're gonna begin kind of with why audits even happen in the first place. So let's, let's unpack that a little bit and get into really starting with the objectives, the goals of a financial statement audit. There's a couple different reasons why these are performed in about I think it's at least 26 states currently require nonprofits to submit a copy of their audit when they're registering or renewing their charitable status. If you have a bank loan, it may be required as part of the covenants on that debt agreement. Some organizations just like to have that audit opinion as a way of providing some extra credibility to the financial statements that you're maybe posting on your website or sharing with, funders. You know, maybe you just want that extra credibility. Maybe those funders and grantors specifically require an audit to be performed. So there's a couple different reasons why these get, done. But as an added bonus, it is an opportunity to have some dialogue with, you know, a nonprofit accounting professional and maybe get some advice from them as part of the process since they're going to be, you know, digging through quite a few things from your finance office. That said, you know, the auditors are there to help. They are rendering a service to your organization, but but there's limits to what they can and can't do mainly because of this concept. It's called independence. Basically, they need to be outside of the work that they're reviewing more or less. So what they can do, they can give you maybe some technical guidance on, like, a new accounting standard when that's being implemented. They may share some resources related to that. They may help compile your financial statements based on all the information you've given them. Maybe they help, you know, compile, like, some of the footnotes. Maybe they can just take you to lunch. But what they can't do is make a management or or, like, an execution function within your organization. So they're not actually decision makers. They're not your accountant doing the the books. They're checking the books, which is a separate function. And at the end of the day, right, it's it's your financial statements. And and so you can draft the language if you want. They are gonna make sure that it aligns with what they found from the audit. So, really, they're there to be partners to your organizations. If you're asking them for help in a way and they're they're having to say no, just know it it may not be them just being difficult. It's likely the case that they are bound by these professional standards, these rules that they must abide by as auditors to be faithful to that process as professionals in the space. So we've kinda talked around what they can and can't do, maybe ancillary to the audit, but let's unpack a little bit more just the audit specifically and what that is. Really, it it's just that outsider coming in. So they're an external auditor coming in, to look kinda objectively at the financial statements to make sure that the transactions and maybe the related internal controls are working in a way that they can render an opinion on the financials to say, yeah. These these look correct. In order to do that, they're taking a risk based approach, so there's some evaluation as part of that. They don't look at every single transaction. Otherwise, they'd be they'd be at your office every day of the year just looking over your shoulder instead of coming out, you know, for that field work period. So they're they're being thoughtful in what they ask for. It does feel like they ask for a lot, but they're limiting that beyond, you know, not everything as part of the testing process. And part of the reason that they take those professional standards, the pronouncements, the accounting requirements so seriously is that auditors also go through an audit process called peer review where another audit firm will audit their audit just to check, you know, how did the documentation look, how were auditing standards followed and applied and documented. So they're they're very serious not just about compliance of the organization that they're auditing, but very serious about compliance for themselves as auditors that are bound by professional standards. The objective behind performing an audit is they're there to provide assurance about the financial statements. It's reasonable, so not 100% absolute assurance that because they don't test everything. Right? And that the financial statements are free of material misstatement. And you'll hear that word material or materiality a couple more times throughout the presentation, but, basically, that means that they're they're reliable financial statements. And and the goal here, they're going to render an opinion on the financials, and we want that to be what they call an unmodified opinion or a clean audit opinion. In terms of what that opinion looks like, practically speaking, this is really the main thing that comes from if you think of your audit package at the end of the year, it's a lot of pages. Right? There's the financial statements. There's the footnotes. The front end of that is really the auditor's report, and there's this paragraph within there. The first is just them confirming, hey. We did this audit. We looked at your statement of financial position and your statement of activities. The box with the dotted line around it is that opinion paragraph. So this is an example of a clean opinion where they're saying these financials present fairly in all material respects the financial position, the changes in net assets, the cash flows in accordance with those generally accepted accounting principles. So this is really their their work product. The rest, it's your financials. It's your footnotes. But there's a lot of work that goes into them getting comfortable with the information to be able to arrive at this opinion. So it's, maybe a little more about the journey than the destination, right, in terms of the workload that gets done. And because of that, what we're here to talk about today is really understanding that process so that you can help make that as efficient as possible, for both, you know, your own benefit and for the auditors. That can kinda be a win win for both of you by having it go smoothly and efficiently. And with that, I think I'm gonna hand it back over to other Eric to talk about the goals for an efficient audit. Yep. Thanks, Eric. So what should your audit goals be? You know, that's a pretty, I guess, vague question, but we would hope that the goals would be an efficient audit. So what would we define an efficient audit as? You know, as Eric mentioned, a clean audit or unmodified opinion would be what we would consider a baseline. Right? That's where the auditors believe your financial statements are presented fairly. They would be presented fairly in all material respects and in accordance with applicable accounting standards. So in other words, they're saying, yep, we're giving you the stamp of approval that these are accurate and complete. We don't really have any opinions or issues, but we would really wanna make it a gold standard, so to speak, by having, bullet points number two and three on this slide, where you would have no proposed material audit adjustments as well and having a governance letter with no significant deficiencies or material weaknesses. So if you do have material weaknesses or deficiencies, that means your internal controls aren't strong enough to ensure that errors would be caught. And that means by leadership, by auditors, they're not entirely sure. So that puts the, a risk on issuing the financial statements, meaning that you could unintentionally paint an inaccurate or misleading picture, of your organization's financial health to external stakeholders. And when we talk about internal controls, we're talking about processes designed to help keep your books and financials accurate. And then we would also say an efficient audit is about timing. So, you know, we would say sixty days after your fiscal year end, you should have a draft of the audit. If you had a December 31 fiscal year end, you know, and you're trying to be as efficient as possible, you hopefully already have a financial draft and maybe have it already completed and just need your board members to sign off on it. You know, those are two different things. These are tight time frames we understand, so this would be one of those where, hopefully, just because you have attended this today doesn't mean, you know, you're gonna suddenly become more efficient. Hopefully, there'll be processes that you can implement, you know, in advance what the auditors are going to ask, and we'll really help you give a picture to your donors, any lenders, or any other external stakeholders, as I mentioned, real confidence in your organization. If you're doing timely financials, if you're taking a long time, if you're taking six months and you're really pushing up against deadlines to try to get your nine ninety submitted, and then they start to ask questions and they start to wonder, you know, what's going on. So consistent, proactive communication with your auditors, not only during the audit, but also throughout the year, is really a key part of this process. And, throughout an audit so there are multiple constituents within an audit, and audits are a team effort, and so is this slide. So Eric and I will, split it up. So there's a lot of text on this page. We're not gonna go through all of it. We wanna draw your attention to the row with the orange text. And I'm gonna take the finance team and the management where there's a lot of overlap, and Eric will cover the auditor perspective. But as you all know, an audit is a very heavy lift, and everyone has their own role to play. The finance team's role is probably the most important of this. Eric might disagree and say the auditor, but the auditors rely on a lot of the information coming from the finance team. And we like I said earlier, we want the auditors to audit. That means that we have to give them things complete, we have to give them accurate information. So if you're preparing things on a monthly basis, in a timely and accurate fashion with a good month end close, you'll be in a good spot. I'll learn more about the month end close later. But management, if you're a smaller organization might have some overlap on who participates in the management function as well as finance. So you might have a CFO or a director of finance or a controller that sits in both both, tables, so to speak. They might be in this phase, you know, answering questions, lots of back and forth between management and the auditors, then going back to the transactional team and making sure that everything's there, but it's providing clarity, really managing the process. So, Eric, if you could share about the auditor's role. Yeah. And I think this comes back to kinda that work product, that opinion that I was talking about earlier. Really, that's the piece that comes from the auditors. So they're drafting that auditor's report. A lot of that is fairly standardized or just, like, there's a lot of required language as part of that because of professional standards. But that's where they're rendering that opinion. That's their work product. But then those financial statements that that go behind them, those are yours as the auditee. So if there's a way, you know, like a line item that maybe you want a different description of or even the wording in a footnote that you may want adjusted, that can be a dialogue with your auditors. Now you can't, you know, rewrite history or change the facts of the situation, but the way that notes are presented, I know, especially when we had additional footnotes, like, during the pandemic and just talking about the impact that that was having, that was a place to maybe include more of your own storytelling as part of the the financial reporting that that you can put into that, whereas the auditors are really there just to render an issue that, independent auditors report, which contains their opinion on the financials. Alright. So we've got four phases, that are the the key four key phases, so, of an audit. The each phase has its own owner, and, each of these cannot be done without the other. So understanding how they all fit together will help you understand the process when you're preparing for your next audit. So phase one would be the preparation phase. This is where your team the finance team is doing a lot of the heavy lifting, entering transactions, just, you know, doing the year, getting the audit schedules ready, pulling the trial balances, pulling key documentation, and then providing it to the auditors. So other in other words, you're preparing and going through the PBC list or the prepared by client list, and this really sets the foundation for the rest of the process. And then from the preparation phase, we move over to the planning phase, and this is where the auditors take over. And from here, they're determining materiality. They're deciding where it's most likely that misstatements could occur, whether due to error or fraud, and they kinda design their approach from there. So they, you know, they've set their materiality threshold, which is, intentionally mysterious. And then this is one of those where this phase determines how big how much they'll test and how deep they'll dig into the different transactions and ask questions in the testing phase. That's where the planning phase and testing phase we'll talk a little bit more even more in-depth, but the testing phase is the other part of the picture that from a finance team perspective is, you know, we get a lot of questions. We get lock lot of back and forth with the auditors, lots of requests for samples, lots of just lots of questions. And this is where they're doing this intentionally. They're asking questions. They're trying to understand all of the things that happened throughout the year and testing controls. So and then finally, you've got the reporting phase. This is the wrap up or the culmination of the audit, and this is where your auditors pull everything together. They give you a set of financial statements. They provide note disclosures, audit opinion, and any other findings. And like Eric said, these should not be a surprise to you. These are your financial statements. So as you're looking at everything, you know, this should this should not be there there should be no surprises, hopefully not. And as an auditee, you know, you're most likely to be familiar with the first and last phases of the parts most clearly. And to give you a a little bit better, as I mentioned, understanding of behind the scenes and how the sausage is made, we'll take a deeper look at the neck at the phase two planning and phase three testing in the next section, where Eric will do a deeper dive. But first, we have another poll question. So make sure to go to the poll question. The poll question is which audit stage involves assessing risk areas and determining materiality? So if you just recall back to the previous slide, we had preparation, we had planning, testing, and reporting. So I'll give you a moment to understand or to an to understand to answer. Hopefully, you understand the question, and then we can keep moving along. Alright. Give you another moment here. Alright. So the correct answer, three, two, one, is b, and that's gonna be the planning phase. So planning is where materiality is determined. Testing will be where they are testing to see if anything above the materiality threshold needs to be tested and analyzed, but they're determining materiality in the planning phase. So, again, planning phase is where auditors are analyzing the organization, identifying areas most likely to contain misstatements, and then setting that threshold, and that guides how the rest of the audit will be performed. So with that, I'm gonna hand it back over to Eric. Yep. Yep. So, yeah, like Eric was saying, that that planning phase, that materiality, that's almost like a piece of scoping of the audit. Right? They're gonna determine where they dig in. In this section, we're gonna talk more about what those procedures are that they're doing in the areas that they do dig into where they're asking questions and asking for lots of, you know, additional supporting schedules and supporting documents. So the first place that we'll start with this is that there's two core types of audit procedures. There's what they call analytical procedures and what they call substantive procedures or tests of details or detailed testing. The analytical procedures are based on analysis. It's it's used during the planning for them to get their arms around, you know, what happened during the last year, get a better understanding of the organization as kind of a business model and identify where those risk areas are. Right? So if if revenues went up, did expenses related to that also go up? Does that make sense? You know, those kinds of things just to, like, an initial kinda gut checks and, like, kicking of tires just to see what they might be in for as they get further in the weeds of the audit process. So they might look at your budget to actual or a year over year comparison or a variance analysis just to kinda see, you know, what was what was kind of an expectation coming into this year and how did you benchmark against that, whether it was your budget or the prior year, and then just see where those gaps are in case that reveals any anything that was new or changed during the year because that might be something that they need to adjust or add an audit procedure for. The substantive procedures are designed to substantiate transactions and activities that are in the financials. So this is them getting that direct evidence to basically build their case to support the opinion, the conclusion that they arrive at at the end of the audit. So this is where they're getting underlying documents. They're ticking and tying and making sure transactions, are complete, are accurate, are supported by the documentation of things like invoices or those kinds of things. So they might be sending confirmations to your bank or maybe a major donor that had a multiyear gift. They may be vouching expenses to invoices. They might recalculate something like depreciation as part of that process. A little bit more on substantive procedures we'll talk about in each of these on the following slides. This is typically what you might think of during, like, an audit process, right, where you're getting these kinds of supporting schedules, and the audits are there. The auditors are in your office looking through all those documents. But what exactly are the auditors doing with that? We'll talk through more on the next couple slides as well as how that can inform what you do on maybe a month end basis so that you're preparing in advance every month, you know, in kind of, like, equal installments of preparation instead of waiting until, a batch audit prep at the end of the year, if you will. Let's start by talking a little bit more about bank account reconciliations. You know, we've heard cash is king. Right? Bank recs are kind of the crux of a nonnegotiable in terms of, like, a month end close because this is what's required to verify that those cash balances are there. But the auditors don't just look at do clear transactions match the bank statement. They're gonna look at your reconciling items to see, are your outstanding checks correct and legitimate and and have any of those are those actually maybe some unintentionally duplicated transactions? And the same for, like, a deposit in transit. Right? Is that something that truly is coming and hits the books one, two, three days after the end of the fiscal year, or was this something from four months ago that we said is an ACH in transit? Well, that might be a bit of a flag because we know ACHs don't usually take four months to to clear from the bank side. So, really, what auditors are looking for here is those I mean, definitely, if if things don't match to the bank statement, that's that's really low hanging fruit. But looking a little bit further at those reconciling items, if anything is old or unusual or just wasn't properly put on the right side of the fiscal year cutoff, that's an indicator as well as maybe signs of unauthorized activity. So they might pull a sample of checks to see if they had appropriate signatory, on those checks that cleared as part of the testing as well. For fixed assets, the auditors wanna make sure that these things exist, right, that the items that you're showing on that roll forward, anything that's carried in from the prior year is still around, it's still functioning maybe or at least in use. Any new additions, they might wanna look at those, and they're obviously gonna recalculate depreciation. So this is one where they're gonna use probably both the analytical and the substantive procedures on the analytic side. They might look through your repairs and maintenance or maybe your, like, office supplies account and see if you have a capitalization threshold of $5,000. Do you have any transactions over $5,000 that maybe hit somewhere else that might look like they could have potentially been things that should have been captured by your capitalization threshold and policy. So that's maybe a check you could build into your month end process is do a little bit of that preventive maintenance yourself on the general electro hygiene for checking for those. Also, doing the substantive procedure. So if you had a big addition, they'll probably wanna see a purchase order. If you bought, like, a very big property or something, they may want to just go physically see the asset, to verify, like, yep. That's that's a warehouse, and and it exists, and it's over there. And we walked into it, so you own it just to test those kinds of things and corroborate what they see in the books and records. So it's it's not just rolling forward Excel schedule or a fixed assets module. It's making sure that capitalization policy was applied correctly. Your depreciation was calculated accurately and consistently and in accordance with your own policies and accounting desk book for, you know, what methods you use for that and just making sure those fixed assets exist. On accounts receivable, here, the main risk that auditors see is you'd be more there there's more incentive to overstate these assets. Right? So they want to make sure that the receivables that are on the books are realistic and collectible by the organization. So they may send a confirmation to a major donor or a multiyear grantor or if you have fee for service contracts, those revenues from contracts with customers, they might confirm some revenue from that side if there's an outstanding receivable balance at end of the year. But they're also gonna talk about, you know, if there's past due accounts that may raise questions of, are these collectible? Should there be an allowance for doubtful accounts booked to, maybe net that down to what we expect to be realizable? So the auditors here are looking for, what is that allowance? You know, have you calculated that on a way that's reasonable and consistent with your prior year practices? Have you applied the new standards for those current expected credit losses or CECL model? You know, does that align maybe with forecasts or, like, subsequent receipt of funds is a good way to prove that that's a legitimate and very viable receivable. All with them getting comfortable with like, yes, this is the number that is a net realizable amount to show as receivable at end of fiscal period. And then on the accounts payable side, this is a procedure that the auditors might call a search for unrecorded liabilities because kind of the opposite of receivables here, the risk is that things are maybe more likely to be understated. So they want to go looking to make sure this is complete. So they'll maybe check your bank statement, see if there was a big disbursements that are, like, right after end of year. Maybe they pull invoices related to those and just check which line of the fiscal year end should this have been on, and does that match the period in which it was categorized so that if it if it shouldn't be there, it isn't. If it should, it is. All of that is just them getting comfortable with when that line in the sand is drawn as of fiscal year end, everything that should be there is recorded. And this is another thing that you can do maybe monthly, maybe quarterly, or at least at fiscal year end. Come up with some kind of threshold. Do your own housekeeping maintenance just to check your own work of, hey. Here's these things that we paid, you know, in the two, three, four weeks right after fiscal year end. Let's just double check the invoices for these big ones to make sure that that was a service that was rendered in the period that we have it recognized as an expense and payable. And with that, I'm gonna hand it back over to Eric to talk more about preparing as an auditee. Yep. Thanks, Eric. So, you know, when and where should you start your audit preparation? And I guess the answer to this question would be, you know, Eric just described in detail four different tests that auditors perform, and, you know, that would be a great place to start. And when should you start? You know, the sooner, the better. Maybe not right after this presentation, but as soon as you can start creating a month end close process that incorporates these tests, that's looking at those four different areas. We'll talk a little bit more about that. But the more you can do this on a monthly basis, the less, you know, surprises we talked about. You'll start thinking like an auditor, start, you know, thinking of all the procedures and processes that Eric just described to go through. You'll start just understanding the design of your month end process and how it can align with those of the auditors' needs. So we're gonna move on to the third section here. So thank you to Eric for all that really great information on the auditor side of the audit. So now we'll talk through and walk through some of the how to prepare for an audit and really discuss, you know, what month end steps you can do in the process and what items you can incorporate into your close to help, as it is a really critical part to staying audit ready. As Eric said, it, you know, not hurrying up and waiting and getting everything done, but more of a across time, splitting, spreading it out over time and not just the one lump sum payment into all of the, things that you need to do. So dispersing it is really beneficial and actually helps you as well. So we're gonna move on and start going through the steps. So the three steps that we would share that really don't differ at all, even if you're a large organization, small organization, what your mission is, there should be three key steps to a month end close process. Fundamentally, again, the same for the vast majority of organizations. First, you're gonna record all of your transactions, make sure that everything is there. Then you're going to summarize all of those transactions and reconcile those accounts. We'll go into depth a little bit more. I think I saw there were some questions about how Blackbaud can be used, but we'll give you overarching ideas on how to do that. And then from there, you'll prepare your financial statements. So the key that we really wanna emphasize in this is if you do the right things in the right order consistently, you will have a more clean and efficient audit. And I think that's one of the things we're going to probably emphasize more and more in this presentation is just the importance of consistency and reinforcing that. Auditors also don't want surprises. I know you all don't want surprises when you receive your audit reports back, and they wanna be able to see consistency. You know, here's what we've been doing all these years. We've been doing it the same way. Hopefully, it makes sense. Hopefully, showing them some consistency is also how you can show them some love. So the first area we're gonna talk about is recording, and this is really where you're gonna capture the full story. This sets the tone for accuracy. You're gonna be making sure that all of your accounts payable, all your payroll, all your revenue are all recorded. And then you're gonna make sure that you any accruals are reflected based on what's earned or incurred. And then finally, you're gonna make sure that any recurring entries are posted, every single month. So when this happens, every month, you're going to avoid the year end scramble or that hunt, for a needle in a haystack for missing invoices, for late entries, or retroactive fixes, all things that lead to audit adjustments. If you're doing this on a consistent basis, it will improve your audit process. And then moving to the next phase, this is where we'll talk a lot about schedules. So your audit schedules, looking at your material accounts. So the summarize and reconcile phase or step is to really prove the numbers. And this is where the auditors will wanna make sure that, you know, your statements and your trial balances are reflected accurately. So this is validation of all the information you're giving them. We'll provide a general ledger, a trial balance. We'll reconcile all the material accounts, and a lot of those will be from your balance sheet or your statement of financial position, any of the larger balance sheet items. We at YPTC do all balance sheet items on pretty much a monthly basis. You may or may not do that, but making sure that you're seeing everything that flows in and out of those accounts is also accurately reflected on your statement of activity or your income statement as well. So you wanna make sure you're posting adjustments and locking the period because as we all know, if there's other people working in our files, they may inadvertently post something to a wrong period, and that can cause mass chaos, even just one small entry. So doing monthly reconciliations creates a clear audit trail that your auditors can follow. And then finally, you're gonna tell the story of what's happening with your organization by preparing your financial reports. So you're gonna with your adjusted trial balance and produce financial statements in a month end memo and a month end memo is really key because it gives a narrative and a story of what's going on. So when your auditors are reading this memo, they can not just say, yep. Memberships went up this amount. I can look at the statements and see that, but they're getting some context. So then they're understanding the must know items as well as your leadership is knowing variances, why they're happening, and understanding what the must know important things are so they can make business decisions. So as you can see, we're starting to move things not just to what the auditors need, but organizations holistically need. So by year end, as you're doing this every single month, this is a, a culmination of all the amazing work you're doing. So you have twelve months of already reviewed months that they can take a look at, understand the story, read the different finance committee and board meeting minutes, and understand the whole picture. So really, the key message here is good documentation today keeps the auditors' questions away tomorrow. So and then in closing, you know, when we close the books on this area, at when we close books accurately, timely, and consistently each month, balances are reconciled, decisions are documented, and audit trails are there for the auditors to follow. So this turns an audit into a confirmation and less of a a reconstruction, which your auditors will love. Alright. And then we are moving on to so the key items, that you can do and prob and need to do on a monthly basis. So perform these key tasks. You know, we talked about reconciliations, and and a lot of people do bank recs, and that's amazing. That's a really good start, but you wanna make sure that you're reckon doing reconciliations monthly for all of your cash accounts. This includes your all your bank accounts, your investments, any payment platforms like payer PayPal or Stripe or Venmo, making sure that you're capturing all that. I mentioned on the last slide, you also wanna do all of your balance sheet accounts, you know, the key balance sheet accounts if you don't have a ton of time, but those would be your accounts payable, accounts receivable. The auditors are gonna look at those. Eric, just confirm that. And then we wanna make sure that any of the other items, fixed assets, we can talk about on the next slide. But revenue and expense reconciliations are also really important. So making sure your subsidiary ledgers, for those of you using Blackbaud products, if you're using Razor's Edge, making sure that all the revenue, memberships, donations, anything that is recorded there is also recorded on your general ledger. So your auditors are asking for a membership, schedule at the end of the year. You've got that if you're doing it on a monthly basis. That's one less thing to do, and you're keeping up on it so that you know when your fundraising team says these numbers don't tie, you can show them that, hey. The two systems are tying. It might be a timing issue. You've got that nailed down. And final item is, you know, looking at revenue invoicing and grant reconciliations, especially if you're getting government grants, you know, with the onus on organizations really making sure that you're providing documentation and support for everything. If you're tracking everything, reconciling your invoices and reimbursement requests on a monthly basis and doing it timely, this will be something so that you can make sure that you get paid as timely as possible. And then finally, the adjusting and closing entries. And this is something where you don't want to just do adjusting and closing entries at year end. Obviously, it's really, really important to do those when the auditors give them to you, and tying out the trial balance from the previous year. So when you see your auditors again next year, they're not like, why do the beginning balances don't tie? Closing and locking periods, closing prior periods in particular is really important. And I know there was a question in the chat previously, but Financial Edge NXT, the closing assistant is a really great place to start. It talks about a lot of the key items. I think it talks about the bank recs. It talks about unposted items in your general ledger. It really gives you a good start, but asking your auditors for schedules and other things will help you really enhance your month end close process, and we'll talk a little bit more. But before we get too far along, we have a third and final poll question. I'll give you a moment to answer that question, and I'm sorry. I'm clicking through. So which of the following tasks does not need to be formed every be performed every month? We didn't actually cover this one just yet, but we're almost there. So if you get this right, congratulations. Still, please watch the last couple minutes as we go through these final slides. The options are reconciling bank accounts, preparing financial statements, reviewing payroll against quarterly filings, and posting adjusting journal entries. So which one of these does not need to be performed every month? And the answer is c. So, testing account balances or, reviewing payroll against quarterly filings. One, because nine forty one filings aren't provided every single month. They're a quarterly filing that you or your payroll provider are submitting, and then you will need to reconcile your payroll to those. The other accounts are, you know, necessarily cash and looking at other items that you're gonna wanna do, adjusting entries monthly, financial statements monthly, and bank accounts monthly. Alright. We're gonna keep moving along. So tasks that are not required, every single month, these are gonna be you know, one thing we just mentioned, our nine forty ones. These are your quarterly items. But also, really, key here is materiality. So if you're not sure if you have any items that like prepaid insurance or fixed assets, if you have a really small amount of depreciation that are recorded annually, You might wanna do those monthly, but materiality, I know that auditors can't tell you the materiality, but you as an organization can determine your own. Because if it's material and impactful, you will wanna make sure that those are recorded every single month. So the other items may be looking at grantor reporting if there's one, you know, particular funders that don't necessarily need things on a monthly basis or really complex allocations that you need to do. We'll talk a little bit more in allocations, but I think those are things that are most likely it depends on if it's material or if it's impactful. I'm gonna try to get through here because we've just under ten minutes. So advanced monthly close tasks that you can use to enhance your controls and really reduce the number of audit adjustments. These are pretty straightforward and simple. Yeah. Again, easier said than done. But if you're reviewing your variances of budget to actual on a monthly basis, if you're reviewing your restricted revenue on a monthly basis, if you're reviewing your receivables for collectability. These are all things that the auditors are absolutely gonna ask about and making sure that you're doing a functional allocation and moving expenses across, you know, programs, fundraising, and and admin, those are really important. Then finally, intercompany activity, if you have those. The last thing you wanna do with those is to wait until the year end. Trying to decipher and move back and recreate the wheel can be complicated. And last but not least is potential fraud items. So if there's any any unusual items, any new vendors or things that you weren't anticipating, those are really things that you're gonna wanna look into. Because if you can find them, your auditors are absolutely going to see it. So try to find things, and try to implement these if you can, because these will really help your year end go smoother and ensuring issues are caught long before the audit starts. And then we all know that there are internal and external factors that will impact us as we're going through the month end close process. Some external factors that are gonna be most likely outside of your control are gonna be reporting deadlines from funders, federal reviews, regulatory filings, and even staff staffing constraints. So if you have staff members that are gonna be out sick or gonna be out on vacation the first week, those are really going to dictate when you need to close or how long you need to keep the books open. Internal factors, these are gonna be more operational, so getting information from other departments, be it programs or development or fundraising and getting information from them on a on a timely basis, working around finance or board committees and their schedules and getting them the documentation that they need. And then as you you know, we it goes without saying that when you're working on your audit, you know, the rest of your operations don't stop. So you're gonna keep managing your audit schedule while also working on your operations and your month close. So if you have all of this or if any of these slip, you know, your close is going to get pushed back. But overall, the key is recognizing which factors you can't control and really tightening those controls that you can. And then, all right, and I'll let Eric share this slide. Yeah. I I think I'll keep this a little high level in the interest of time. But, really, a couple things that can guide your month end close to be, one, just a more robust month end close, but also do more of that audit prep legwork for you is just start with potential, like, known issues. Right? So if you had prior audit findings, that's a great place to start. Or if there was a a piece that was difficult to put together or really time consuming, maybe that's something that you wanna break into pieces over the course of the year so that it's not such a heavy lift right at the end of the fiscal year. It's also important for, like, documenting those things that are kind of in the moment decisions. It's a lot easier to capture all the context and the thought process at the time instead of trying to recreate that later. If you do find issues, you know, as you're doing these prechecks, make sure you implement some kind of corrective action and just document the steps that you took. So then if the auditors find that something looked a little out of whack in the first half of the year, you can also have that proof of saying, we identified that, here's where we corrected it, and here's how that's no longer an issue by the end of the fiscal year. On that note of documentation, accounting policies are a good one to keep up to date if the guidance changes, if your practices change, if you have turnover in your department or someone that's doing a finance function changes hand. Just keep those things up to date, do some routine maintenance on that. And those audit schedules. Right? Any of those monthly reconciliations that you're doing and tying to the general ledger while keeping that opening balance to make sure that the housekeeping you know, you you've got a good handle on everything is currently year to date reconciled so that you're only ever having to do one month at a time. So what should your team provide throughout the year? I'm gonna hand it back to Eric to talk a little more about this one. Yep. In this slide, we pull everything, together that we talked about. So on the left, you'll see the key documents that auditors are going to request. That's going to be your leases, loan agreements, grant awards, major contributions. You wanna create an audit folder, and I'm hoping that that's more of an electronic file, especially now that there's a lot of online portals that your auditors are using. Some are coming on-site still, but creating a folder where all of these are being captured throughout the year instead of hunting them down at year end is tremendously helpful. Then in the middle, we have your support for account balances, and this is really helping with your schedules that your auditors are gonna ask for. So your bank reconciliations, your bank statements, your any balance sheet schedules, deferred revenue, accounts payable, any deferrals, revenues, expense schedules, as well as I mentioned earlier, any monthly monthly financials. These become, as I mentioned, your audit schedules, so you're preparing and organizing them throughout the year. This mirrors much of what your, PBC list will look like. Then finally, on the right, we've talked about governance documents. As Eric just mentioned, if you've got, accounting policies or, accounting issues that are changing throughout the year, you wanna make sure to capture those. Any board minutes, handbook updates, related party information, these are things that might fall outside of the accounting, realm, but the sooner you can get these, the better. If there's someone that is working on board meetings or if you know the board meetings that are happening, making sure that you capture all of these sooner rather than later, these help create an easier, faster, and, more accurate audit. And then here is, your audit item list or your PBC list. This would be an example of what an auditor would provide. And you can really use this as a great tool, this and what your auditors will also share. Especially if they have online portals, you can go in and see what you provided last year. You can look at the schedules. Maybe they updated the final documents, making sure you have those. But use this as your guide, and there won't be any surprises. At least, I would be shocked if there were. Right? If you're doing this on a regular basis, you want to give your auditors read only access to your accounting system if possible, or your bill play platform bill pay platforms, or shared drives. That really helps the process as well. But, you wanna make sure that your, systems are clean and accurate Because if they go in and look for something and it's not there, they're gonna have more questions and, are gonna have more back and forth. So when done well, this PBC list takes a lot of the mystery out of the audit. And then Eric and I are gonna go quickly through this next slide and just how audit readiness can change the outcome. And I know it looks like we're about to run out of time. Yeah. I think this is maybe where the good cop, bad cop routine is gonna reach its peak. But there are adverse effects if you're not audit ready. Right? Beyond, the audit taking longer and just dragging out, it can have, it can result in those material findings, or whether that's adjustments or, internal control findings. Maybe there's compliance issues that may delay your form nine ninety. All of that might affect how the auditor views you as an auditee, and and that may affect, future grant funding or their scheduling or their fees for the audit. So there's consequences that we wanna avoid, by being audit ready. But it's not all doom and gloom. Right, Eric? It is not all doom and gloom. So if you start implementing good habits and back to what we talked about earlier where you're creating consistency, you're getting cleaner financials, stronger controls, more confidence from your stakeholders, hopefully, a smoother, more efficient audit. Like, as I said, we might even be able to reduce the cost if it's more efficient, fewer surprises, and just emphasizing consistency. So and protect protects your organization's credibility as well. And then I know we have one two more slides. I don't know if, Caroline, if we have time to go through these. It looks like we've got just a little bit. Caroline, you're still on mute. A little bit of time. I know we're running over a little bit. There are some questions as well too. I don't know. And also, everyone, I know that the CPE question, the last pull tab was a different question. So we did as long as you just answered it, then that'll be totally fine and count for CPE credit as well. Just want to make note of that. Sorry. I'll let you guys go for it. Alright. I think quick comments on this slide, since we are a little bit over on time. Just keep in mind that the auditors are a year round resource. Now they can't be part of your month end close process, but it's all in that interest of, like, avoiding surprises. Right? So if something big happens at your organization, whether that's a big like, a new federal grant program or a new programming effort that you're launching that maybe changes the the structure of your financial reporting or the general alignment of your financial business model at your organization or anything that's just kinda complex or unusual, the more of a heads up you can give the auditors, the more that can be a front end conversation instead of them finding it when they do that kicking of the tires. And that's really how you can avoid the delays. Right? If they know what to expect coming in, then they can plan maybe they need to start a little bit earlier, or maybe they can do some work a couple months ahead just to bite size their own audit process and and kind of spread that over a time period to make sure that everything's gonna flow well for you and for them. So it is it's all designed to be mutually beneficial. Eric, you wanna wrap us up with the last slide after this one? Absolutely. I I really liked your description of kicking the tires. That's very much a pretty good representation of of an audit. So, yeah, thank you for being here. We're gonna recap our learning objectives. In the first stage, we went through our audit object what the audit objectives are, the goals, the stages. The objective is the biggest thing, reasonable assurance that your financials are free from material misstatement. You wanna have goals of an efficient audit, clean opinion, no material adjustments, and on done timely. And then finally, the stages were preparation, planning, testing, reporting. From there, we moved on and dug a little bit deeper into the planning and testing stages where Eric talked about the categories of analytical. So big picture or micro macro picture, and then your substantive or detail testing and getting really down into the weeds and looking at the micro level. This includes everything from testing bank recs, fixed asset work, AP, and receivable collectability. And we wrapped it up with the month end close where you use your month end close process. If you've done it right and done it well, it can be an engine that really helps you. So when you get to the audit, it's a confirmation, and you're finding gaps, identifying issues as they arise, documenting policies, gathering documents. And as Eric said, your auditors are there to be collaborative. They wanna make this as easy as possible for them and for you. Hopefully, going through this present today presentation today, you are more comfortable and might even give your auditors a hug. I don't know. Don't do that unless you think that might be worthwhile, but maybe I don't Eric, has anyone ever given you a hug when you're an auditor? You know, I had one client, and she was the bright spot of my entire year because she was the only one that was ever happy to see me when I was in. Yeah. But, I mean, it's it's all designed to be a mutually beneficial process. Right? So the more that is a dialogue, a conversation, and kind of the help me, help you, help us kind of relationship. Caroline, I know there were a couple questions in the chat made about specific reports from Blackbaud. Are there any kind of internal resources that you could maybe point folks to within? I know you mentioned in a conversation earlier maybe a product demo coming up or something that y'all have available as well. We do have a product tour coming up at the end of this March, so or at the end of this month, so not too long. And then also in the doc docs tab, we have some different blog posts as well as some white papers that can also help kind of go over some of those different things. We have an audit survival guide in there as well. And so and also a buyer's guide as well. So if anyone needs help there, there's some things in the docs tab that can help. And also today's slides will be in there as well. Awesome. And I wanna clarify, do give get consents before giving hugs. That was kind of a joke, but I totally agree. And, actually, if you found this valuable, we do have another presentation at your part time controller. Go to yptc.com. We have a presentation tomorrow, not done by Eric and Eric, but by other two people that we know are amazing presenters. And it's called Better Than Luck, and it talks about being ready with a being audit ready with financial statements. So if you wanna continue this theme and learn more about it, you can attend that tomorrow or get the webinar and watch later. Thank you so much for joining us. Eric, thank you for being here with me. And Caroline, thank you for having us. We appreciate it. Awesome. Thank you both. Have a good one.