Nonprofit Audit Checklist 2025

A recent global study highlights a striking vulnerability: 35% of fraud cases in the nonprofit sector happened because of a lack of internal controls. Of course, the financial fallout is severe. 

• Median losses in frauds committed by owners/executives reached $600,000 per incident. 
• 43% of occupational frauds were detected by a tip.

These fraud incidents clearly aren’t just rare “glitches.” They’re the result of a weak financial oversight process. 

After all, running a nonprofit is more than just managing programs and raising money. It also means committing to transparency and being accountable for your finances. 

One of the best ways to prove that your organization is trustworthy to your donors, board members, and regulatory bodies is with an audit. 

At first, the whole process might feel overwhelming. It’s even a bit intimidating. But when you have a well-structured checklist, it all feels so much more manageable. You can get it done in small steps, one at a time.

In this guide, we’ll walk you through what an independent audit looks like and why a checklist is essential. We’re also giving you a comprehensive nonprofit audit checklist for 2025.

Key Takeaways 

• When you’re prepared, you’re protected. This is why a detailed audit checklist will help your nonprofit stay organized, reduce errors, and keep you accountable. 
• 35% of nonprofit cases are linked to weak controls, so make sure to get your oversight in order and document all of your compliance. 
• Leverage technology to make the audit process smoother and easier. Purpose-built software like Aplos will help you get ready for your audit by automating reconciliations, tracking restricted funds, and providing a clear audit trail. 

What Does a Nonprofit Audit Look Like?

Nonprofit audits are formal examinations of your organization’s financial records. You’ll usually have an annual audit conducted by an independent Certified Public Accountant (CPA). The point of this financial audit is to check your financial statements for accuracy, consistency, and compliance with Generally Accepted Accounting Principles (GAAP). It will also compare these to any applicable regulations.

Key Aspects of a Nonprofit Audit

• Independence: The auditor must be from an external auditing firm and impartial. They can have no financial stake in your nonprofit.
• Financial Statement Audit: Your auditors will examine your balance sheet, income statement, and cash flow statements.
• Internal Controls: They’ll take a look at how your processes safeguard your assets, prevent fraud, and ensure accuracy.
• Compliance: A regular audit confirms you’re following IRS regulations, state laws, and donor restrictions.
• Recommendations: At the end of the audit, your auditor will give you a report that highlights areas for improvement.

Who Needs a Nonprofit Audit?

Not every nonprofit organization has to go through an audit. 

Your nonprofit may need an audit if:

• You receive more than $750,000 in federal funding annually
• Your state’s law mandates audits once you reach a specific revenue threshold.
• Your foundations or large donors require audited financials as a condition for funding.

Even if you don’t have to undergo a single audit, you might want to conduct an internal audit anyway. Many nonprofit organizations conduct financial audits of their own accord. It can help you demonstrate transparency and build credibility with your stakeholders.

The Benefits of an Audit Checklist

Yes. We've established that a nonprofit audit can feel overwhelming. But this is only if you don’t have a clear plan. An audit checklist keeps the process simple for you by breaking down your preparation into bite-sized chunks. 

Here’s why it’s so valuable:

Organization

A checklist will help you put all of your financial statements, board minutes, donor agreements, and compliance records in one place. Then, you won’t have to track down documents across shared drives, email threads, or filing cabinets. Instead, you’ll have a centralized system. This streamlines access both for your staff and the auditor. Organizing in this way keeps you from overlooking important records. It will also save you a ton of time during the preparation stage.

Efficiency

When you know what documents are expected, you can get them ready long before the audit begins. Taking a proactive approach like this helps you prevent last-minute scrambling. We all know how a mad dash to get everything ready can find us making silly mistakes that can cost big. It can also lead to delays or incomplete submissions. 

Efficiency also helps your team continue working as normal during audit season. The checklist helps you spread tasks out instead of trying to squeeze them all into one stressful rush.

Accuracy

Mistakes in reconciliations, reporting, or documentation can turn an audit super complicated super quickly. An audit checklist will help you minimize these risks. It does this by prompting you to: 

• Verify balances
• Review reconciliations
• Double-check compliance documents 

And you can do it all well in advance of the audit. 

When you double-check for accuracy early on, you cut way down on the chance that auditors will find discrepancies. These mismatches can slow the process way down and even raise nasty red flags.

Preparedness

Auditors typically ask follow-up questions about your internal controls, revenue recognition, or restricted funds. When you have a checklist, you’ll be sure your team has already reviewed policies and clarified procedures. You’ll also have all their collected supporting documents. 

This means your staff members will be better equipped to answer questions confidently. So your staff will reinforce your nonprofit’s credibility and professionalism.

Peace of Mind

Audits can be stressful for leadership. This is especially true when donor trust and funding rely on your results. A detailed checklist in place puts your board, management, and staff at ease. They’ll know that you’re fully prepared. With less uncertainty, your organization can see the audit as an opportunity to demonstrate transparency. So it won’t be something to dread.

Think of the checklist as your roadmap: it breaks a daunting process into clear, actionable steps.

Your Nonprofit Audit Checklist for 2025

Below is a comprehensive checklist to help you meet the nonprofit audit requirements for a successful 2025 audit.

1. Pre-Audit Preparation

Weeks before the independent auditor arrives, take the time to gather your team and review your accounting practices. Have a pre-audit meeting about what’s coming. Delegate responsibilities to smaller teams who can organize all the documentation you’ll need.

Check each of these tasks off as you go:

• Review Prior-Year Audit Findings
  
  • Address any recommendations made in the previous audit.
  • Document steps taken to improve financial practices.
• Meet with Key Staff and Board Members
  
  • Ensure everyone in your audit committee understands their role in the audit process.
  • Designate a point person for auditor communication.
• Set an Audit Timeline
  
  • Work backward from your audit deadline.
  • Allocate enough time for data collection and review.

2. Financial Documentation

An external auditor is going to rely heavily on your financial records. This means it’s your job to guarantee the accuracy and completeness of all your documents.

Here’s what you’ll need: 

• General Ledger for the fiscal year
• Trial Balance reconciled with the ledger
• Bank Statements for all accounts
• Reconciliations of bank and credit card accounts
• Accounts Receivable and Payable detail
• Fixed Asset Schedule with depreciation
• Investment Statements with supporting documentation
• Payroll Records, including W-2s and 1099s
• Expense Reports for staff and volunteers
• Grant Documentation with restrictions and expenditures
• Board-Approved Budget for the year

3. Compliance and Governance Documents

Nonprofits also have to demonstrate compliance with regulations and proper governance. Get these documents together: 

• Articles of Incorporation and bylaws
• IRS Determination Letter confirming tax-exempt status
• Form 990 filed for the audit year
• Board Meeting Minutes, especially those approving financial decisions
• Conflict of Interest Policy and signed disclosures
• State Registrations for charitable solicitation (if applicable)
• Grant Agreements with compliance terms
• Donor Restriction Records for restricted gifts

4. Internal Controls Review

Your auditors will assess your internal processes. This helps them verify that you’re protecting your organizational assets.

Here’s what they’re looking for: 

• Segregation of Duties: This makes sure no single person controls all aspects of financial transactions.
• Approval Processes: You should document your approval policies for expenses, payroll, and reimbursements.
• Cash Handling Procedures: You’ll need to outline how donations and receipts are recorded and deposited.
• IT and Data Security Policies: These are your safeguards for donor and financial data.
• Whistleblower Policy: Make sure this is documented and accessible to staff and volunteers.

5. Revenue and Expense Verification

Your nonprofit’s financial activities should always match supporting records. This one’s easy. Just double-check that your transaction management shows your: 

• Revenue
  
  • Donation records (cash, checks, online giving).
  • Pledge tracking and receivables.
  • In-kind contributions with valuation documentation.
• Expenses
  
  • Vendor invoices and receipts.
  • Expense allocations across programs, administration, and fundraising.
  • Proof of grant-related expenditures.

6. Grant and Donor Restrictions

Restricted funds can be a focus of audits. So make sure you show a clear path that: 

• Tracks Restricted Funds Separately: Double-check that your restricted gifts are not mixed with general funds.
• Document Expenditures: Show that your restricted funds were spent in compliance with donor intent.
• Grant Reporting: Provide evidence that you submitted reports to your funders.

7. Personnel and Payroll

Auditors will review payroll to confirm accuracy and compliance. You’ll need to have the following on hand: 

• Employee Contracts or offer letters.
• Timekeeping Records for hourly staff.
• Salary Approvals from the board or compensation committee.
• Payroll Tax Filings with supporting documentation.
• Independent Contractor Agreements with 1099 forms.

8. Year-End Closing Process

Your year-end close should be complete before the audit begins. To make sure this is updated, check that you’ve:

• Reconciled All Accounts (bank, investment, and credit card).
• Closed the General Ledger with final adjusting entries.
• Reviewed Your Accounts for Accuracy (e.g., clearing suspense accounts).
• Prepared Your Draft Financial Statements for auditor review.

9. Auditor Communication

Once your preparation is complete, you’ll want to make communication with your auditor as easy and transparent as possible. Here’s how: 

• Provide Requested Documents in Advance: Share secure access to digital files with your auditor.
• Prepare Staff for Interviews: Discuss with your team what the auditor may ask about controls and policies.
• Be Transparent: Just be up front and disclose any challenges or irregularities with your docs or process.
• Respond Promptly: Obviously, follow up and respond as quickly as possible to avoid unnecessary delays in the process. 

10. Post-Audit Follow-Up

Of course, an audit doesn’t end when the auditor leaves. Here’s what to expect after the physical audit: 

• You should review the Auditor’s Report with your staff and the board.
• Make sure to implement the auditor’s recommendations. This helps you both strengthen your controls and get ready for next year.
• Document all the corrective actions you take for your upcoming annual audits.
• Communicate your results to your stakeholders, like donors or funders.

Using Aplos to Simplify the Audit Process

Manual processes make audits far more complicated than they need to be. You’ll be stressed out juggling spreadsheets and searching through paper files. 

Nonprofits can spend weeks pulling together reconciliations, donor records, and compliance documents. Great. Now you’re overwhelming an already stressed-out staff and delaying your audit progress.

It can be so much better… so much easier.

That’s where Aplos Nonprofit Accounting Software comes in. Designed specifically for nonprofits, Aplos streamlines audit preparation. That way, you can focus on your mission instead of dealing with administrative headaches. 

With Aplos, you can:

• Automate Reconciliations: Save hours with synced bank transactions and letting Aplos do the heavy lifting.
• Track Restricted Funds Separately: Always know how donor-restricted contributions are being used. You’ll get clear reporting to satisfy both auditors and funders.
• Generate Reports Instantly: Create GAAP-compliant financial statements and audit-ready reports in just a few clicks.
• Maintain a Transparent Audit Trail: Every transaction is logged and accessible. So your auditors get the clarity they need. And you don’t have to force extra work on your team.
• Store Documents Securely: Keep everything in one place with centralized, cloud-based storage that auditors can access safely.

No more dreading audit season. Now, your organization can look forward with confidence. With Aplos, you’ll always be one step ahead. You’ll be organized, accurate, and ready to demonstrate financial integrity.

Next Steps in Your Nonprofit Audit Checklist

Your audit doesn’t have to be stressful. You just need the right preparation and tools. Then, your nonprofit can turn audit season into an opportunity. 

You’ll get to showcase your transparency, accountability, and strong financial stewardship. 

A structured nonprofit audit checklist gives you the roadmap you need. Yes. But having the right technology makes the journey so much more pleasant.

Aplos Nonprofit Accounting Software takes the hassle out of audit preparation. We do this by automating your reconciliations, tracking your restricted funds, generating your GAAP-compliant reports, and maintaining a clean audit trail for you. 

When you have it all organized in one secure, cloud-based system, you’ll be ready for your 2025 audit. 

And you’ll leave the chaos behind.

Start your free trial with Aplos today. You can give your team the confidence and peace of mind they need. And they can focus on what matters most: your mission.