Preparing a non-profit organisation for an audit
A separate engagement before the audit: we look at the books, the documents and the procedures the way an auditor will, and tell you what the donor is likely to disallow or raise in the management letter. The difference is that at this stage everything can still be fixed, whether that means producing a document, agreeing a deviation or redoing a procurement record. Once the audit starts, that window is closed.
Audit preparation is a pre-review carried out in house or with an external consultant. The aim is single: find the weak points before the donor’s auditor does, while they can still be closed. It takes one to two weeks and costs materially less than the expenditure a donor typically disallows.
What an unprepared audit costs an organisation
The donor refuses a cost that lacks a document or falls outside procurement rules and asks for the money back. The most expensive consequence and the most common one.
Even where funds are not recovered, the finding stays in the report and carries into the next partner assessment cycle. It will be remembered next year.
The auditor waits for documents, the timeline slips, the donor report is filed late. Sometimes that affects the next tranche.
What we review
Accounting policy and internal procedures
Whether a written accounting policy, procurement rules, remuneration and travel procedures exist, and whether they match what is actually done. Missing written rules are the first thing any reviewer records.
Reconciling the donor report to the ledger
We take the submitted report and the project trial balance and reconcile them to the last hryvnia. A gap between report and ledger is the worst finding, because it casts doubt on every figure.
Procurement
We check the donor thresholds, the quotations, the selection minutes, the contracts and the conflict of interest declarations, and look for purchases split to stay under a threshold.
Staff and timesheets
Contracts stating the share charged to the project, signed timesheets and reconciliation of timesheet amounts to the payroll registers. Timesheets signed retrospectively in one sitting undermine the whole cost category.
Tax exposure
Where personal income tax and military levy may arise, when a reimbursement to staff becomes taxable income, whether operations create a VAT object and whether non-profit status is at risk. More: non-profit status in Ukraine.
Shared costs and assets
Whether an allocation key for rent and administrative staff is approved, and whether the equipment register with inventory numbers makes clear where each item physically is.
Three steps in one or two weeks
You hand over the agreement, the budget, the donor reports, the project trial balances and the source document folder. We work remotely through secure exchange.
We work through the six blocks above. Each finding is written the way an auditor would write it, with the way to close it beside it: produce the document, issue the order, agree the deviation with the donor.
We answer questions while you close the items and, if needed, re-check before the auditor arrives.
Who prepares and who audits
If we audit your project, the preparation is done by another firm, and the other way round. An auditor cannot review the result of its own work. Preparation is therefore a service for organisations whose auditor is already appointed or named by the donor. We say this at the first meeting so that nothing has to be unwound later. What the auditor examines is described on grant audit and donor audit requirements. The full document checklist is in the article how to prepare for a grant audit.
What clients ask most often
When should preparation start?
Ideally six to eight weeks before the auditor arrives. That leaves time to obtain documents and, where necessary, to agree deviations with the donor. A week before the audit, much of it is no longer possible.
How much does audit preparation cost?
It depends on the number of projects, the volume of transactions and the state of the documentation. We quote after reviewing the assignment, normally within one working day. In most cases the fee is lower than the expenditure a donor would disallow.
Can you do both the preparation and the audit?
No, that would breach independence. If we perform the audit, another firm must prepare. We say straight away which of the two is available in your case.
What is the deliverable?
A list of findings phrased as an auditor would phrase them, with a risk rating for each and a concrete way to close it, plus a short conclusion for the board or the director.
Do you work remotely?
Yes, almost always. A visit is needed only to verify the existence of equipment, and not in every case.
Request a proposal
Tell us the donor and when the audit is planned. We reply within one working day.