How to Prepare for an Audit at Your Church or Nonprofit (Without Losing Your Mind)

Let’s be honest—when someone says the word audit, nobody cheers. For churches and nonprofits, it often triggers a quiet wave of panic, followed by someone digging through a filing cabinet that hasn’t been opened since the last potluck fundraiser.

But here’s the good news: an audit doesn’t have to be scary. In fact, a well-prepared audit can boost your credibility, reinforce trust with donors, and help your organization grow stronger.

You don’t have to be perfect—you just have to be prepared.

Here’s how to get ready.

Understand What Kind of Audit You're Facing

First things first: not all audits are the same.

• Financial Statement Audit: The most comprehensive. It involves a licensed CPA reviewing your full financial records and internal controls.

• Review Engagement: More limited in scope. It provides assurance but doesn’t dive as deeply.

• Compilation: Basic presentation of financial statements, with no formal assurance.

Talk to your auditor or financial advisor about what’s required for your organization. Government funding, grants, or your bylaws may dictate the level of audit you need.

Organize Your Financial Records

This is where things can go sideways—unless you stay ahead of the game.

Start by gathering:

• Bank and credit card statements

• General ledger reports

• Payroll records

• Donation tracking reports

• Receipts and expense documentation

• Board meeting minutes

• Lease agreements or major contracts

• Any relevant grant documentation

The cleaner your documentation, the fewer follow-up requests you’ll get. And yes, digital files are fine—as long as they’re organized and accessible.

Review Your Internal Controls

Auditors love to ask how things actually work—who approves spending, how cash is handled, how financial oversight happens. They’re not just checking your numbers; they want to know if your processes protect against errors or fraud.

Ask yourself:

• Do two people review and approve expenses?

• Are bank statements reconciled monthly?

• Are donations tracked and receipted properly?

• Is there separation between those who handle money and those who record it?

If these areas are weak or unclear, address them now. Your audit is a great reason to tighten things up.

Communicate with Your Team

An audit isn’t a solo mission. Staff, volunteers, board members—anyone who touches your financials needs to know what’s coming. Make sure they understand what’s expected and can respond to questions if needed.

You don’t need to hold an all-staff meeting with donuts and spreadsheets (unless you want to), but a clear heads-up goes a long way.

Review Key Policies

Auditors will likely ask to see your financial and governance policies. If you don’t have these—or if they haven’t been updated in years—now is the time:

• Conflict of interest policy

• Gift acceptance policy

• Financial procedures manual

• Document retention policy

• Whistleblower policy

Yes, even churches should have a whistleblower policy. These documents show you take accountability seriously—and they’re often required for grant eligibility.

Be Ready to Answer Questions

Your auditor will likely have follow-up questions. They might ask about large or unusual transactions, budget variances, or internal approval processes. That’s normal.

Be honest, be clear, and if you don’t know the answer—say so. You’re not expected to memorize every transaction, but you are expected to know where to find the information.

Use the Audit to Get Better

Once the audit is complete, review the findings with your leadership team or board. Celebrate what’s working—and make a plan to fix what’s not.

An audit isn’t just about compliance. It’s a chance to build trust, improve processes, and show that your organization handles its resources with care. And that’s something worth investing in.