A well-prepared audit is your finance team’s best opportunity to showcase operational excellence and build board confidence. A predictable routine can also keep fees down and fieldwork moving on schedule. This guide is for finance leads preparing for their first nonprofit audit, and for teams who want this year to run smoother than last. It reflects the 2024 Uniform Guidance revision, which changed the federal audit threshold. Do You Need an Audit This Year? Whether your nonprofit needs an audit depends on four things: federal funding, state law, funder requirements, and your own bylaws. Federal funding threshold. Under the Uniform Guidance revision, organizations that expend $1,000,000 or more in federal awards during a fiscal year need a Single Audit, up from the previous $750,000 threshold. The change is effective for fiscal years beginning on or after 1 October 2024, which means it first applies to audits for fiscal years ending on or after 30 September 2025. State law. State thresholds vary widely and don’t follow the federal number. California requires an audit at $2,000,000 in gross revenue. New York sets its threshold at $1,000,000 in gross revenue and support. Massachusetts requires an audit at $500,000. Connecticut raised its threshold to $1,000,000 in 2023, with organizations between $500,000 and $1,000,000 able to choose an audit or a review. Check the rules in every state where your organization is registered to solicit donations, not just the state where it’s incorporated. Funder or grantor requirements. Many foundations and government grantors require an audit as a condition of funding, regardless of your revenue or federal spending. Bylaws or board policy. Some nonprofits commit to an annual audit voluntarily, as a way to build donor trust. If more than one of these applies, plan your engagement around the earliest deadline and the broadest scope. Step 1: Choose the Right Auditor When starting the audit process, look for a firm with nonprofit-sector experience specifically, not just general audit experience. Nonprofit accounting has its own rules around restricted funds, in-kind contributions, and functional expense reporting. A firm that mostly audits for-profit clients may not know that terrain well. It’s also a good idea to ask for references from organizations close to your size and funding structure. An audit firm that mainly serves large hospital systems may be a poor fit for a $2,000,000 human services nonprofit, and vice versa. When you narrow down your options, issue a request for proposal that asks each firm for its scope of work, fee structure, timeline, and references. Confirm what format the firm wants documentation in, including file types and naming conventions, before fieldwork starts. Sorting this out early saves confusion once the audit is underway. Keep in mind that choosing an auditor commonly takes four to 12 weeks from first outreach to signed engagement letter, so start well before your fiscal year closes. Organizations that wait until year-end often end up with whichever firm has availability, not necessarily the best fit for their sector or size. Step 2: Build Readiness Into the Year, Not the Week Before The nonprofits that have the smoothest audits treat readiness as a year-round habit. Close the books monthly instead of waiting until year-end. A monthly close catches errors while they’re still easy to trace and keeps your financial statements audit-ready at any point in the year. Track restricted fund activity as contributions arrive. Tag each restricted gift or grant at the moment it comes in. Keep a running record of why your team applied a treatment a certain way, not just what got recorded. Auditors ask “why” as often as they ask “what,” and a documented rationale saves everyone a search. Maintain records continuously throughout the year: board minutes, variance analyses, org charts, and updated internal control documentation. These are the documents auditors typically request first, so keeping them current removes a common source of delay. Step 3: Pull and Organize Documentation Most nonprofit audits draw on a consistent set of document categories: financial statements and supporting schedules, bank reconciliations, grant and contract agreements, payroll records, board minutes, and prior-year workpapers, among others. Auditors typically also request your accounting policies and procedures manual, a schedule of expenditures of federal awards if you’re subject to a Single Audit, and documentation supporting any significant estimates. For the complete breakdown by category, see Trullion’s nonprofit audit prep checklist. Step 4: Get Through Fieldwork With Less Friction Fieldwork goes smoother when it’s a conversation, not a series of one-off requests. It can be helpful to set a weekly standing meeting with your auditor for the duration of fieldwork, and use it to walk through open items together. A short recurring check-in resolves small questions before they pile up into a backlog. That same instinct to talk first applies before you pull together a large document set. Ask what the auditor’s underlying objective is before you start compiling. Sometimes a report you already have on hand satisfies the request, and a quick conversation saves hours of unnecessary work. It also helps to know who to ask. Designate one point person who can answer “why did we handle it this way last year” without a multi-day search through old email. That person becomes the fastest path to an answer for the whole engagement. Most delays trace back to the same handful of causes: restricted funds reconciled after the fact instead of as they arrive, documentation scattered across drives and inboxes, no written record of prior reasoning, and staff turnover that erases institutional memory. Address these before fieldwork starts, and the audit itself moves faster. Step 5: After the Audit Once the audit report and management letter arrive, the work isn’t quite done. Your board or audit committee should formally review both, giving your governance structure real ownership of the findings. From there, build an action plan with named owners and deadlines for each finding. A finding without an owner tends to reappear in next year’s management letter. There’s also a filing deadline to keep in view. Form 990 is due by the 15th day of the fifth month after your fiscal year ends, which for calendar-year filers means May 15. If you need more time, Form 8868 grants an automatic six-month extension, as long as you file it by the original due date. Before the details fade, hold an exit debrief while the process is still fresh. Note what worked and what didn’t, and feed those notes directly into next year’s prep. A short written record beats relying on memory nine months later, when the next audit cycle starts and half your team has moved on to other projects. How AI Is Changing Nonprofit Audit Preparation Auditors and finance teams still decide how to treat a transaction, how to interpret a standard, and what a finding means for the organization. AI helps with the work that surrounds those decisions: the search, the cross-referencing, and the re-explaining that eat up most of prep time. A few examples of where that shows up: Surfacing prior treatment. Instead of staff searching memory or old email threads, AI can retrieve how your organization handled a similar transaction or grant last year. Cross-referencing standards. AI can check a proposed treatment against FASB, GAAP, or IFRS guidance and your organization’s internal methodology at the same time, rather than requiring separate manual lookups. Maintaining traceability. A well-built system keeps a record back to the source document, so the “why” behind a treatment is retrievable rather than reconstructed from scratch each time someone asks. Reducing rework. The search-and-reexplain cycle, not the underlying decision, is what eats up most prep time. Cutting that cycle is where AI adds the most value. This is the kind of grounding Trullion’s Knowledge Room is built for. It brings your accounting standards, internal methodology, and historical financial data into one AI-accessible layer, so your team and your auditors are working from the same source of truth. Trulli, Trullion’s AI agent, can query that layer directly and surface the citations and rationale behind an answer. Trullion’s Audit Suite builds on that same foundation to support financial statement validation and substantive testing with a full audit trail back to the source. Start Building Readiness A smoother nonprofit audit starts long before fieldwork does. Monthly closes, current restricted-fund tracking, and a documented rationale for prior decisions do more to shorten fieldwork than any last-minute scramble ever will. See how Trullion supports faster, error-free audits. Learn more. FAQs What’s the current federal threshold for a Single Audit? Nonprofits that expend $1,000,000 or more in federal awards during a fiscal year need a Single Audit under the Uniform Guidance. The threshold rose from $750,000 and applies to fiscal years beginning on or after 1 October 2024, first affecting audits for fiscal years ending on or after 30 September 2025. How is a nonprofit audit different from an IRS audit? A nonprofit financial statement audit, including a Single Audit, examines your financial statements and internal controls, and it’s performed by an independent CPA firm. An IRS audit is a review by the IRS of your organization’s tax filings, most often Form 990, to check compliance with tax-exempt rules. The two are separate processes with separate purposes, though clean financial records help with both. How far in advance should we start preparing? Start choosing an auditor four to 12 weeks before you want fieldwork to begin, and treat readiness as a year-round habit rather than a pre-audit task. Monthly closes, current restricted-fund tracking, and documented decision rationale throughout the year matter more than any single week of preparation. What should we do differently if last year’s audit had findings? Address each finding early in the year, not right before the next audit starts. Document how your team resolved it, assign a named owner if you haven’t already, and be ready to show your auditor what changed. Auditors specifically check whether your organization addressed prior findings, so a clear paper trail here saves time in fieldwork.