The auditors just left.
They’ve been here for week conducting an independent financial audit of the Foundation, pouring over bank and investment statements, payroll records, check stubs and meeting minutes, all with an eye to ensuring that our financial statements are fairly presented and conform to generally accepted accounting standards. The results of the audit will be used in the preparation of our tax return and annual filing with the state’s attorney general.
The annual audit requires a great deal of our time and energy. There is the preparation, organizing all of the required documents and related files and providing electronic copies so that the auditors can easily track our assets, liabilities, income and expenses on their laptops. There is the process review, checking on who has authority to write checks, who handles deposits, and where is the oversight to ensure the absence of fraud.
And then there are the questions – lots of questions, what’s the status of this grant? Why is this line item different from last year? Or, what’s behind this journal entry?
The state requires annual financial audits of nonprofits with revenues over $500,000, but private foundations are exempt from this requirement. So, why do we spend all this time and expense to have an independent audit? The answer lies in the Foundation’s founders’ strong commitment to accountability and transparency.
As stewards of funds derived from the sale of a community asset, our board has always strived to ensure that we adhere to the highest possible standards of financial integrity. The founding bylaws called for the formation of an audit committee that would annually review the audited financial statements prepared by independent auditors and ensure compliance with federal and state requirements.
Our audit committee includes several Foundation trustees but is also made up of finance and accounting professionals who do not sit on the board – yet another way we strive for community accountability. They carefully review the work of the auditors and our financial statements not only looking for discrepancies, but what additional practices we should consider to further strengthen our financial position.
They carefully review the work of the auditors and our financial statements not only looking for discrepancies, but what additional practices we should consider to further strengthen our financial position.
Having an audit committee and an annual audit is clearly a best practice observed by most private foundations. As the person who signs the checks, I wouldn’t have it any other way.