Five Tips for a Smooth Financial Statement Audit in a Rocky Year

As this unusual school year draws to a close, you’re probably already thinking about how preparing for your district’s financial audit might be different this year. Here are five tips to make the process run more smoothly even if you do hit a few bumps in the road.

Tip #1: Review or create a year-end checklist

Your year end checklist should list items to prepare or gather for the audit, including the date each item needs to be completed and the person responsible for the task. The checklist should include:

  • A list of balance sheet accounts that will need to be reconciled at year-end, such as cash, investments, property taxes receivable, due from/to state, due from/to other funds, accrued payroll, and accounts payable.
  • Entries only done at year end. Reviewing the list of closing entries from the prior year will help remind you and others at the District about what needs to be completed at year end.
  • Significant changes. Examples are account balances that have changed significantly compared to prior year and items that were new in 2021, such as agreements entered into, complex transactions, changes to payroll or purchasing internal control processes, or new or significant changes to grant dollars received.

Tip #2: Train non-accounting staff to meet cut-off dates

In order for the business office to close the year efficiently, campus and departmental staff must do their part. Having a call with non-accounting team members to make sure they know what they need to do will help ensure that they understand the requirements and the deadlines.

Tip #3: Keep track of your progress to avoid delays

Establish a way to track the completion of what your auditors will need when the audit starts and check on it weekly until the audit starts. There are a number of ways to manage these documents, from manual binders to a shared drive to a secure cloud-based site like Dropbox. Select the method that works best for you and then follow through with tracking.

Tip #4: Know the 2021 reporting changes

Take advantage of resources like TASBO to help you stay informed of changing financial reporting standards. TEA communications and the FAR guide aren’t the only changes to keep an eye on. There are also GASB pronouncements, such as GASB Statement No. 84, Fiduciary Activities, and GASB Implementation Guides that will have an effect on your current year audit. Other changes to be aware of are in the Uniform Guidance and the annually updated OMB Compliance Supplement. If you issue a comprehensive annual financial report, be sure to review the latest GFOA checklist.

Tip #5: Meet with your audit team before the audit begins

One of the most beneficial meetings our audit teams have is the entrance meeting. We like to cover significant changes or new items and revisit the Prepared by Client list (PBC list). We go over anything that gave the District or the audit team trouble in the prior year, discuss the new accounting and audit changes and their effect on the current year audit, and set the timeline for completion by working backwards from the date your audit needs to be in the agenda for your Board meeting. Depending on how well your audit went in the prior year or your experience at the District, this meeting may be anywhere from 1 (went very well) – 4 (needs to improve) hours.

Avoid common pitfalls and delays

Even the best-run business offices get tripped up occasionally, but you can save yourself time and frustration by taking these steps to prevent some of the most common complications:  

  • Completed and reviewed cash reconciliations
  • Ensure due to and due from other funds nets to zero
  • Ensure transfers in and transfers out net to zero
  • Check fund balance for general fund, debt service fund, capital projects fund, and special revenue funds and make sure they agree to the prior year report
  • Check net position for your enterprise and internal service funds to make sure they agree to the prior year report
  • Check the state aid calculation and payment ledger for adjustments
  • Reconcile capital asset additions to capital outlay in your governmental funds
  • Maintain the schedule of expenditures of federal awards (K-1)
  • Prepare year-end detail when needed (such as accounts payable detail by fund if your software does not)
  • Revisit the prior-year audit adjusting journal entries — can the District make the journal entries before auditors arrive?
  • Use check figures in reconciliations / PBC schedules to avoid errors that will cause additional work down the road
  • Finally, when everything is almost ready for arrival, perform a variance analysis between current year and prior year account balances. You can proactively research accounts with significant changes, or if there is no change, you can check to make sure a journal entry is not missing

Once you have processes and tools in place, preparing for the audit can be much easier. We have sample year-end checklists to help, so please reach out if you would like one. Even in a year like this one, working smarter will keep you and your staff from having to work harder. For more information, contact us. We're here to help.

© 2021

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Sara Dempsey

Sara Dempsey

Partner-in-Charge, Government and Not-for-Profit Services

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Sara Dempsey, CPA, who leads Weaver's practice serving governmental and not-for-profit entities, has 17 years of public…

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