Preparing Wisely for your Annual Audit
By Kim Daly
In 2011, the Colorado Department of Education began requiring charter schools in the state to complete an independent financial audit annually. Preparing for this financial audit is a critical component of maintaining both regulatory compliance and financial transparency. The executive director, business manager, and other support staff all have a direct impact on a school’s documentation and operational activities, including the audit process.
Because school finance is complex, many schools elect to partner with outside consultants. Jason Guerrero is the owner at G&G Consulting Group, a local firm providing consulting services to the charter school sector and a member of the League Marketplace. He explains that the consulting firm may perform all or some of the school’s back-office support activities, such as accounts payable, accounts receivable, financial budgeting and reporting, payroll, and various human resource activities. All parties then work together to ensure the school’s records are accurate and complete, which contributes to a successful audit.
To begin, says Guerrero, “Clients need to make sure everything is up to date and that they operate within their fiscal budget.” There six primary ways that schools can ensure this remains true and they are poised for a painless audit:
- Properly maintain all supporting documentation and make it available for others to review and post in a timely manner.
- Ensure all reconciliations are up-to-date on all accounts and all supporting receipts are maintained.
- Review all transaction coding and updates made as needed throughout the fiscal year.
- Ensure all accounting transactions are posted in the proper year. This includes accruals and prepaid expenses.
- Ensure all payroll and human resources activities and files are compliant with accounting & employment regulations.
- Ensure grant revenue and expenses are correct and all documentation is complete.
Avoiding Common Oversights
As with any detailed process, oversights can hold up the process. Guerrero points out the following commonly encountered pain points. Anticipating and avoiding these potential slowdowns will keep the audit process moving forward efficiently:
- Not providing supporting documents, i.e. receipts for Credit Card transactions, in a timely manner.
- Not providing grant information to ensure accruals aren’t missed.
- Not maintaining adequate balance sheet accounts, including inventory if applicable.
- Moving expenses from one accounting category to another and potentially creating budget errors.
In addition to the points above, ensure that your school’s leadership team understands all new accounting rules when they are put into place. The League and its partners stay current on these financial developments and provide members with timely updates and learning opportunities within the finance arena. To learn more, contact G&G Consulting, join our Operations & Finance cohort, or explore our learning opportunities today.