Auditing is a process of reviewing an organization’s financial records to decide if they are accurate and align with regulations, state laws, and accounting standards. They are done usually by third-party auditors that are CPA(certified public accountants) or by an auditing firm. There are both internal auditors and external auditors.
Internal auditors examine an organization’s business practice and risks and audits are conducted throughout the year.
External auditors examine an organization’s accounting records and financial information to issue an assessment in the form of an audit report on the financial statements of the organization. External auditors conduct annual audits to make sure they fit auditing standards.
In order to prepare for a successful audit, there should be sufficient internal controls put in place, audit procedures should be properly followed by an auditor, and financial reporting should be done regularly to follow GAAS (generally accepted auditing standards) or other international standards on auditing.
Publicly traded companies are also required to follow PCAOB standards, which is a regulatory board reporting to the SEC who oversees the audits of public companies.
THE USUAL AUDIT PROCESS
STEP 1 – SUBMITTING ORDER
First, to purchase an order, schools will need an order justification form and reason on how it is an educational purchase by American state law. Once the order has been approved by the appropriate individuals, it will move into the next stage: purchasing.
In purchasing, the purchasing manager is responsible for sourcing the items and evaluating vendors based on their delivery speed, pricing, and quality.
STEP 2 – PURCHASING
After the order has been purchased, the purchase order becomes another documentation. Depending on where your Charter School is, procurement laws may be different. In the United States within the state of Texas, Procurement Managers are a legal requirement. Anything that is purchased will need to be tracked in an asset tracker. At any given time, they can be audited and may need to produce where those items are. For example, if they order a laptop, it will need to be tracked and traceable.
This information should be in a centralized place – it could be an excel sheet, a purchasing software, a ticketing software, anything that works for you and your organization. Be sure to let your team know the importance of tracking the information and how. Empower your Procurement Manager to hold others accountable for providing the needed documentation. It will be extremely helpful in the long run and save you time when you’re going through the auditing process. If your procurement law doesn’t require a Procurement Manager, an administrator would be the one who creates the purchase order and checks if the proper documentation is attached.
STEP 3 – RECEIVING
When receiving items, there could be 3-4 people involved in this chain of events such as an administrator, receptionist, purchaser, and teachers.
As there are many people involved, items and packing slips can be lost and can lengthen your audit. By selecting one individual responsible for each task, there will be less back and forth. For example, communication will be a lot easier if there’s a designated person receiving all incoming packages. They’re held accountable for tracking the item and delivering the items to the correct people.
The packing slip and invoice would be attached together such as the time that it was created and the time that it was received. The accounts payable team process the invoices and keeping a paper trail of checks, payment method, and who signed off on the invoice. The invoice is the final piece of documentation needed to complete the financial audit.
HOW TO MAKE AUDITING A BREEZE FOR YOUR SCHOOL
In Arizona, auditors may ask for ~150 orders per school and require order forms, invoices, purchase orders, cost statements and packing slips (audit evidence). By manually organizing, picking, and compiling all of the documentation in an internal audit, it could take days, weeks, or even longer.
Usual Auditing Documents Needed:
- Order and the order justification form
- Purchase order
- Packing slip
Although paper tracking is very common among Charter Schools, there are Charter Schools who are adapting to use information technology or software tools to track documents and business activities digitally, including online bookkeeping or spend management.
Traditional paper tracking is manual, tedious, and time-consuming. Finding documents for each order and alongside with everything that is tied to that order. There are chances that documents may be misplaced or lost, especially if employees have left your organization, let go, are on leave, or even just disorganized. The lack of visibility into where the documents are can cause more issues when you’re being audited and lengthen the auditing process.
By utilizing technology to keep your documents in one centralized place, your auditing process that may have taken weeks can be reduced down to days with using a tool such as Procurify. Auditors will be able to quickly view documents and with a system in place, auditors won’t have to be on-site at all.
“Procurify keeps me organized and on top of purchasing requests, I don’t need to hunt down paper POs and emails with requests, it’s all in one place. It provides an easy to use interface for people to enter exactly what they want, how much of it and estimate costs. This makes it significantly easier from a purchasing and budgeting standpoint to approve requests and process them.” – Excel Public Charter School
If your organization is not yet ready to implement an entire system, it might be good to just start with the best practice of making sure all data is reflected in one place, such as a google drive.
If you’d like to learn more about the auditing process and the best financial practices to ensure your school is following compliance, check out our webinar with Scott Rolfs of Ziegler, a financial services firm that has provided over $1.7 billion funding for educational institutions across the United States since 2000.