Transcript Episode 145 – Nonprofit Audits: How to Wrap Up 2023 Finances and Prepare for 2024 with Mark Pate on The Prosperous Nonprofit
Stephanie Skryzowski: [00:00:00] Welcome to the prosperous nonprofit, the podcast for leaders who are building financially sustainable and impactful nonprofits and changing the world. I’m Stephanie Skrzewski, a chief financial officer and founder and CEO of 100 degrees consulting. My personal mission is to empower leaders. To better understand their numbers, to grow their impact and their income.
On this show, we talk to people who are leading the nonprofit sector in new, innovative, disruptive, and entrepreneurial ways, creating organizations that fuel their lives, their hearts, and their communities. Let’s dive in.
Hello, everyone. Welcome to the Prosperous Nonprofit. I am your host, Stephanie Skrzewski. Today I’m talking to, dun, dun, dun, an auditor. I know. Um, but I’m talking to Mark Pate, who is a [00:01:00] partner at the audit firm called Cape Kraus, and he is not a scary auditor. We talk about this quite a bit on the episode, but he is really just such an advocate, such an ally to his nonprofit clients and really views himself as a.
support to his clients. And so he’s here to help us out, to help us make smart decisions, to help us not have any comments on our management letter. I have worked with Mark for a number of years with a number of different organizations, and I just love how the mission and the mission statement of Capen Kraus as an audit firm really carries into The way that they run their audits.
So we talked a lot about how to get the most out of your audit firm, out of the audit process. And I think the key thing for me here was thinking about your audit as an investment, right? This thing costs 20, We’re spending a lot of money and a lot of time. So how can we really get the [00:02:00] most out of this investment?
And it’s not just to check a box because we have to, right? So I just love his perspective on this, which you will hear. And he also gave us some really good tips on how to have the smoothest audit possible. I asked him to share like, what was the best audit experience? And what he shared, like the end result was hashtag goals for me.
Now I know what I’m going to be working towards with all of my clients next year. So you’re going to have to listen in to hear this amazing results that he got from like his dream client basically. So it was fantastic. Let me tell you a little bit about Mark. Mark joined Cape and Kraus in June of 2013.
He has over 10 years of experience in nonprofit auditing and serves many different types of organizations with a primary focus on universities, foundations, and international organizations. Since joining the firm, he’s worked with key clients and served as a lead in planning and performing several financial statement audits every single year.
In fact, 30, he works with 30 [00:03:00] organizations every single year. So he has a lot. of experience. I hope you enjoyed this episode. It is not boring. It is not dry. You know, while the audit is perhaps not my favorite thing, this conversation is a really, really good one. So listen in and I hope you enjoy.
Hey everybody. Welcome back to the prosperous nonprofit. I am super excited to have here with me today, Mark Pate and Mark is a partner. At Cape and Kraus, which is an audit firm that I have worked with for many, many years. And I will say, Mark, you are like not a scary auditor. You’re not the mean auditor that we all dread working with.
So I’m really excited to talk to you today, Mark. Welcome to the
Mark Pate: show. Thank you. So good to be here with you. Stephanie.
Stephanie Skryzowski: Yeah. We’ve worked together on a number of different nonprofits over many years at this point. And while I wouldn’t exactly call the [00:04:00] audit process like delightful, um, working with you and your team is quite delightful.
So I’d love to just like learn a little bit more about you and what your, what your path has looked like and how you landed as a partner at Keeping Cross.
Mark Pate: Yeah, absolutely. Well, thank you so much for having me on today. Uh, so I actually started with Cape and Kraus right out of college, actually a month after graduation, I started with Cape and Kraus and I have been here ever since then.
So, um, I just celebrated about 10 years here at Cape and Kraus. Um, so I did my internship with another audit firm, but then the rest of my public accounting career has all been at Cape and Kraus. So yeah, I’ve been at the firm, June was 10 years. And I serve about 30 clients in total, uh, and so I kind of have a broad mix.
Uh, I serve some colleges, some foundations, and then a lot of international organizations. Um, and those are the ones that you and I have worked on together. So. Yeah, Cape and Kraus, just a little bit about our firm. So we work exclusively with not for profits. Uh, we serve actually [00:05:00] about 1, 500 clients all across the U.
S. Um, so we have several different offices. We’ve got about 30 partners, 200 staff, something like that. We’re a top 200 accounting firm, and we’re actually the largest firm in the U. S. that works exclusively with non profits. So, yeah.
Stephanie Skryzowski: That’s awesome. I didn’t know that you are the largest firm that works just with nonprofits.
So coming to Cape and Crouse as a college graduate, obviously you knew that like, they were, did, did you think, like, did you always know you wanted to work with nonprofits or was it more like, this is a great firm to work with? So these clients sound good. Or what was that decision
Mark Pate: like? Yeah, I didn’t always know that I wanted to work with nonprofits.
Um, you know, I, I knew that I wanted to be in public accounting. I had done an internship with an audit firm, so I knew at least that was the track that I was going with. Um, and then, uh, at the school I went to, they, uh, Capen Crouse did some recruiting and so I found out, you know, that there’s a firm out there that actually works with nonprofits.
I didn’t even really know, uh, that was a thing, uh, but [00:06:00] then I found that out. And I thought, wow, that’s that’s pretty cool that you’re not just working with organizations that are, you know, primarily concerned with the bottom line and everything like that they’re more interested in, in how they’re changing lives and everything.
And I thought that’s really cool to get to work with them. So that was kind of the driving force in getting me in. And then since being here, I’ve just loved working with the people, you know, At the firm and then working with the clients, getting to see their stories, getting to see what they’re doing. Um, we get to work with some really cool clients that are doing some just really amazing things all around the world.
Uh, so yeah, I’ve loved being here.
Stephanie Skryzowski: Yeah. Um, as you know, like we do client work as well. And so I think it’s really interesting to get, to be able to work with a number of different organizations and see different things. I, at least I know for me, like I’m always learning something with one organization that I can apply to another organization.
And I would imagine that that’s probably the case for you as well, working with, you know, 30 clients. And do you, are you working with the same clients [00:07:00] every single year, or is it like 30 different clients every year? No,
Mark Pate: it’s the 30 same clients every year, so most of the partners and managers that came across, we tend to work with the same clients year over year, so we develop that relationship, we get to know them, um, so that, so some of my clients I’ve been working with for 10 years now, uh, the whole time I’ve been here, so all the way from being a staff on the audit all the way to now I’m the partner on the engagement, so that’s pretty cool to get to know those people, you know, over a decade.
Stephanie Skryzowski: That’s awesome. Now that actually leads to a question that I feel like I hear a lot. Should we change audit firms every three to five years? And to me, that sounds terrible because we all know how much work that first year audit is. And so, but I feel like it’s, it was sort of touted, at least I’ve heard it this way as a best practice.
Can you talk to that a little bit for our listeners who are like, Wait, you’ve worked with clients for 10 years. I thought we’re supposed to get a new audit from every three or five.
Mark Pate: Yeah, for sure. Yeah, we definitely have those discussions with clients. [00:08:00] Um, and a lot of times the boards are the ones who are saying, Hey, maybe we should look at changing audit firms or something like that.
Um, and then a lot of times it’s management that says, Oh no, we don’t want to go through the process of getting a whole new auditor and having to do all that stuff. And so, yes, it’s a good question. It’s a, it’s something that. You definitely have to think about, um, there’s a lot that we do on our side to make sure that we’re maintaining independence, that we’re changing up our audit procedures every year so that it’s not the same.
We’re not asking the same questions and doing the same exact testing and everything like that. So we work harder on our side to make sure that all gets changed up. Um, and then most of the time there is enough rotation amongst the audit team. Um, partners will change, managers will change. Like I said, some of the clients I’ve worked on with for 10 years, all the way from staff up.
So that means for several years, there was another partner and now I’m the partner. And so we’re always trying to change up those eyes on the engagement and making sure that new people are looking at it. Um, we also have our peer review where another firm comes in and looks at the audits. We [00:09:00] have our internal inspections where we’re looking at stuff.
It’s a good thing to be thinking about as a board to make sure that you’re not just getting the same thing done every single year, but I think it came across. We’ve been able to establish a lot of areas and a lot of ways where we’re able to address that concern of rotation and still continue to work with these clients.
And that longevity also helps where we can. Kind of number one, see a lot of the history of the organization. And we get, that’s cool to get, to see what they’ve been doing over several years. Um, but then we also get to know them very well. And so we know some of the specifics of what’s going on. Um, we can maybe speak to the accounting better where you’re not just having to try to figure out a brand new client, you know, this client, you know, how things operate.
And so when new things come up, you can address it in that light, rather than trying to figure out a whole new client.
Stephanie Skryzowski: Yeah, I mean, I can speak to that and I totally agree with you as well, even thinking about like when we’re onboarding new clients [00:10:00] in our capacity and, you know, in terms of bookkeeping and CFO, like it is so much work on the front end to feel like you really know a client and can contribute at like a high level to strategic discussions and decision making and stuff.
Cause it takes a lot of time to really like get in there. So I really liked that. I love how you talked about all the different things that you do to make sure every single audit is fresh and you’re looking at different things. And I know like from the client perspective, it can be sometimes frustrating for our side when it’s like, they didn’t look at this last year.
Why are we going into this like deep conversation? And like everything was fine last year. Um, and so that is like, Oh my goodness. But I think that really speaks to, this is a great practice. to make sure that the audit is fresh, that the results are sound and a good reason to not have to switch every three years.
So I think that’s interesting. And I’m not sure if I, maybe I did know this, that it was very intentional that you’re looking at different things and designing the audit [00:11:00] differently every single year. So one thing. That you just mentioned in talking about, you know, really being able to provide solid insight and support to these organizations you’ve been working with for a long time.
I’d love to hear you talk a little bit more about really how to get the most out of working with an auditor. I feel like I love using you all and your team as a sounding board, especially when there’s big things that happen throughout the year. Like, I remember reaching out to you when, um, one of our clients got like this.
Big 3 million award. And I was like, can you look at this grant agreement? Cause I’m not really sure what I’m reading here. And I want to make sure that I don’t post an incorrect entry. And now we have like a 2 million, you know, adjusting journal entry. So I love using you and your team as a resource throughout the year to kind of double check things or ask, Hey, there’s this big change happening.
How do you suggest that we proceed? But can you share a little bit more about like how [00:12:00] nonprofits can really. utilize their auditors as as partners.
Mark Pate: Yeah, absolutely. The first thing I would say is exactly what you were just saying. I think you need to establish a great relationship with your auditor. Uh, get to know them again, going back to knowing our clients are several years that helps.
They, they know they can pick up the phone or email or call or anything like that. So get to know your auditor very well. And ask questions, you know, throughout the year. Don’t just wait until it comes time to the audit to figure out all these complicated things, especially at Cape and Kraus. We love being able to answer questions and we view that as a big part of our service as being able to help you think through things and, and help you do things correctly.
And so I would say exactly like you mentioned, When something complex comes up, you know, in July or something, don’t wait until the auditors are coming in February to figure out what you need to do. Go ahead in July. Just pick up the phone or send an email or something like that and just ask the question and say, Hey, we’re about to do this.
What do we need to think [00:13:00] about? Uh, how do we need to record it? You know, all that stuff we do as auditors, we have to be careful of independence. So we can’t be making decisions for you, but we can definitely help you think through. Okay. Here’s the questions you need to ask. Here’s what you need to look at.
We can send you the accounting guidance and say, uh, this is kind of how it plays out in the real world and everything like that. So yeah, definitely be reaching out to your auditors. I always tell my clients I’d much rather have a phone call in July to talk through a complicated issue and then everything gets recorded properly.
Then have to come back in February and we got to figure out, okay, what did you do six months ago? Let’s talk about it. You know, let’s, we have to. That go back and dig through the records. We got to go find old emails, all this different stuff. So yeah, absolutely. Just develop that great relationship and, and go ahead and ask questions.
And for us at Cave and Kraus, you can even ask questions more than just, okay, how do I account for this particular grant or stuff like that? Uh, you know, like I mentioned, we serve 1500 clients. I serve 30 personally. So nine times out of 10, when our [00:14:00] nonprofits come to us and say, Hey, we’re thinking about this operational thing, or we’re thinking about this, you know, legal thing or something like that.
I can almost guarantee that another Cape and cross client has dealt with the same thing already, which means I can connect you with them. And I’ve done that so many times where a client comes to me and says, Hey, we’re thinking about doing such and such. We’re thinking about implementing this, getting this new software, whatever it might be.
And I can say, okay, there’s a client out in California who has done the exact same thing. Let’s get on a phone call with them. Let’s see what they learn, uh, what they thought through and everything like that. So, that’s a huge part of, with Cape and Carls, uh, serving so many non profits is we can connect you with ones.
Stephanie Skryzowski: Yeah. I mean, and that’s a really interesting thing for our listeners to think about. Like you said, it doesn’t just have to be like debits and credits. How do I post this journal entry? Um, you mentioned operational legal technology because your firm and I’m sure many others, um, you know, if, if your audit firm, uh, also has a large network, if you’re [00:15:00] listening, like there, there probably is a big network that you can, you know, your auditor can kind of be that connection point.
I think that’s huge and I can think of at least like five scenarios with a couple clients in the last year that I’ve reached out to your team about like a subsidiary is closing or they got a huge grant or not exactly sure how to book this or they’re thinking about shutting down this. Thing, whatever.
And I’ve talked to you guys about all of them because like you said, it’s so much easier to do things in real time to get solid answers rather than having to backtrack through the last eight months and or like you did something wrong and now there’s, you know, either a comment on the management letter or a big adjusting journal entry that has to be posted.
Um, I really like that idea of being proactive. Are there any other things like how to get the most out of your audit firm? Um, any other, any other things that you can think of sharing?
Mark Pate: I think really the only other thing is don’t be too afraid of your audit. Use your audit. Um, you mentioned that we’re really nice [00:16:00] to work with and I’m glad to hear that.
Uh, I appreciate it. Uh, we, we like being the auditors that not everybody hates seeing. So that makes us feel good. But yeah, use your audit. Um, you know, a lot of times an audit can be viewed as just kind of this huge burden that the board is putting on us and we have to deal with it. And, you know, it’s just.
It’s going to make everybody miserable, but I would say try to use that audit as much as possible. Work with your advancement people to say, hey, you can tell your major donors, we get an audit, we undergo the scrutiny, we, we get things looked at during, during the year and everything like that. You can use that to talk to a lot of your major donors.
You can also use your audited financial statements to tell your story as much as possible. There’s at the beginning of the notes to your financial statement, you typically have to describe your organization and a lot of our clients use that area to really tell their story of this is how we’re serving whoever it is that we’re trying to serve.
And they can, they can be very descriptive in that you can also use, uh, your functional [00:17:00] expense schedule that you include. Um, maybe sometimes people don’t think about using that as kind of your messaging, but you can use that to say, look, we’re spending this amount of money on. Our programs or this particular thing that maybe a donor is interested in, they say, I really like this one program that you’re working on.
You can use that functional expense schedule, which is a required audit statement. You can use that and say, look at how much money we’re spending on this. Look at how much focus we’re putting on this. Um, and so don’t just be afraid of the audit or the yeah. Audited financial statements or anything, embrace that, use that as an organization to tell your story and to show your commitment to integrity and to, um, financial judgment and everything like that.
And you just use it as much as you can to further your mission and to tell your story. That’s such a good
Stephanie Skryzowski: tip because I mean, if an audit is costing, you know, 20, 000, 30, 000, that’s a pretty big investment. So let’s not just like go through the audit and then file it away and never think about it [00:18:00] again. I love the idea of proactively sharing it.
And actually one of your clients, who’s also one of our clients, I love that they proactively email their audited financials out to their entire email list as a nonprofit that, you know, I don’t know how many people they have on their email list, but they send their audited financials out like, Hey, listen, one of our core values is transparency.
And we’re really proud of our audit results. And here’s our audited financials for you to check out. And so I love that because I think it builds so much trust. Um, with your people, whether it’s your donors or your funders or just other supporters. And yeah, I love the idea of proactively sharing it because again, this is like a big investment.
So let’s get our money’s worth, right? Like let’s get it out there. And I, just to your point about using the descriptions. Describing your organization and your audit. Those are written by you by the nonprofit. And so there is some autonomy in like, what should we write here should, you know, like, let’s write maybe more than just one [00:19:00] sentence about our very basic mission, you know.
I think often we may think that like, oh, this is like this super formal document and it has to be a certain way. And I think in many ways it does, right? Like there’s not a lot of wiggle room, but there are some areas where we as nonprofits, we can describe our organization how we want to. So let’s really be mindful of that.
Is that right? Are there any other areas that like we as the nonprofit kind of have a little space to. Do what, like, say what we want to say in there. I know a lot of it is regulated, but are there pieces
Mark Pate: that aren’t? Yeah, so no, that is true that a lot of what goes in there is regulated. Um, and so we do have to audit everything that’s in the, the audited financial statements.
You know, we issue our opinion on it. So we do have to be careful about that, especially there in that note one, which is normally like the nature of the organization. So there are certain required things in there that we have to describe about the organization, the legal status and everything like that, any subsidiary.
So that’s all required. But then there is a lot of, of room for you [00:20:00] to be able to tell your story and to say, this is what we’re doing. And, you know, we have to audit it. We have to make sure that what you’re saying you’re doing, you’re actually doing and everything like that. But there’s a lot of area where you can just say, this is who we are.
This is what we believe. This is what we’re excited about. And this is what we’re doing.
Stephanie Skryzowski: that’s great. And I think that, you know, maybe not everybody’s going to be reading that, but you’re savvy, you know, you’re savvy funders, you’re savvy reviewers are probably looking at that. So I do think it’s important.
Do you feel like you’re missing something when it comes to your nonprofits finances, but you have no clue what you might be missing? I’d venture to guess that one of the reasons you feel overwhelmed and nervous about your financials is because you don’t have a solid monthly routine. So I have created a free finance routine checklist for you.
The spreadsheet will help you know exactly what to focus on monthly, quarterly, and [00:21:00] annually so you never miss a beat. Staying on top of your numbers every single month will help you feel more confident as a leader. and grow your impact and your income. I’ve made the checklist for you. Now, all you have to do is use it.
Gain more clarity into your numbers, more cash in your bank account and more impact in your community. Head over to 100degreesconsulting. com slash routine to get the checklist.
I’d love to talk a little bit about year end. Beginning of the new year because this episode is going live in December. So if you’re listening, when it drops, you’re probably in the thick of, you know, closing things out for the year, or maybe if you’re listening to this a couple of weeks later, you’re at the beginning of the new year.
And I would love to hear from you, Mark, from your perspective, what do you think are some important things that organizations should do as they’re starting to get ready [00:22:00] to wrap the
Mark Pate: year up? Yeah, so a few different thoughts. Uh, so number one, I would say get some sort of checklist or something like that, that you are saying, this is all the things that we need to do.
And at Capon Crouse, we actually have like a template for a checklist, um, for like month and year and that kind of stuff. But just be thinking about, these are the things that have to be done. These are the accounts that need to be closed. These are, you know, the accruals that need to be made and everything.
thing like that. So yeah, just having a checklist and making sure that the people responsible for it and know that they need to be looking at that. And then I would say, especially for nonprofits. With year end, a lot of times, especially for our December 31st year ends, the, all the tax receipts and everything that’s happening at the same time as closing the books and everything like that.
So just, I’m sure a lot of nonprofits are already thinking about this, but just. Be mindful of that, that your advancement people, your fundraising people, they’re not going to be able to deal with a lot of your questions about stuff in that first week of January or [00:23:00] last week of December or whatever.
They’re, they’re trying to do a lot of that stuff. Um, and so just be mindful of the fact that, um, some of that stuff in January may have to wait for a few days or something like that. Um, which is fine. I mean, for us as an audit firm, I mean, I think the earliest we ever go out to client is like a third, the third week in January or something like that.
So, That may even be not really to do the entire audit might just be kind of some preliminary stuff. And so just be mindful of that. And then I would say, especially with the audit itself. When you’re closing everything out, sometimes what we see happen is, you know, stuff just kind of, you almost just let a default close happen, you know, to your books and, and stuff just kind of, okay, well, it just rolls forward and we don’t worry about it.
And then we as auditors get a trial balance and it’s like. Did anyone actually go through these accounts and make sure that they tie to the support, that they tie to the accrual schedule, that the net assets close, whatever it might be. Um, and so, yeah, just be having somebody, especially this is [00:24:00] related, especially to the audit, but you know, just having somebody that goes through your general ledger or your trial balance and looking at stuff.
Does this actually make sense? You know, don’t just submit a trial balance to the auditors. That is just. You kind of just ran it out of the system and send it over like looking at this stuff. Okay. Does this actually make sense based on what we know about our organization? Does it make sense that this is how much cash we have?
This is how much payables we have. This is how much receivables we have, stuff like that. But I think the biggest thing overall is just getting a checklist, getting something where, you know, okay, we’re going to go step by step and we’re going to say, this has to be closed, this has to be accrued, this has to be.
Account, uh, you know, calculated or accounted for or whatever. Um, and just implementing that and making sure that the people responsible are doing it in a timely manner.
Stephanie Skryzowski: That’s huge. And it’s so funny you just said, um, you were talking about the checklist as like, or the most important thing because I just spoke at a conference, like literally what’s today, today’s Wednesday, like three days ago on Sunday talking about how important it is to have a checklist[00:25:00]
Um, because. I feel like I’ve come into a lot of organizations where everything is just like in somebody’s head and how easy is it to forget like, oops, forgot to post that entry or oops, forgot to do that reconciliation because it’s all in your head and you got literally 5, 000 other things going on. So I love that.
Friends, listeners, if you do not have a checklist to close the books for the month and for the year, like now is the time to get one. So I think that’s a great tip. We just talked about kind of wrapping up your end, but in terms of sort of planning for next year, when it comes to the audit or finances, are there any tips or things that you see organizations doing really well in terms of planning?
Mark Pate: I think honestly, the biggest thing that I see an organization do well is what we talked about a few minutes ago about being proactive about reaching out the clients whose audits go really well are the ones where we show up and we already know the six things that we need to look at probably the best example of this.
I had a [00:26:00] client in Florida that. Every year when we go down in like early December to kind of do the preliminary phase of the audit, I would sit in his office and he would already have up on the whiteboard about 10 things that he knew I needed to know about, whether it’s, you know, property purchases or sales or unusual agreements or whatever it might be.
He had it listed on the whiteboard. We sat there, we took two hours and we talked through everything. We did that every single year during the audit. And I always joked that that was Basically, the entire audit was that two hour meeting because that told us everything we needed to know. And then when we came back in, I think, March to do the actual, um, testing and the actual audit and everything like that, we already knew the five or six things that we had to zero in on and, and think through and talk about.
So just letting your auditors know. Going back to that example you mentioned of the grant agreement that I think you and I talked about in July or June or something. When it came time to February, I already had that on my radar and I knew, okay, there’s a few agreements that we [00:27:00] really got to make sure that, you know, we’ve already talked about the accounting, we’ve got to make sure that’s Actually, how the accounting got done, uh, make sure that it’s been reported correctly and everything like that.
So just the, the clients that do well in the audits are the ones who are letting us know ahead of time. So just be thinking even during the year, just be thinking, okay, this is unusual. I need to talk to auditors about it. This is new. I need to talk to the auditors about it. Just be thinking through that, you know, throughout the year, uh, and, and don’t just wait to say, you know, at the very end, like when we’re showing up to actually test everything, don’t be saying, oh, here’s the six things that you should know about.
And we don’t even know how to record them in the trial balance, but you should know about them and stuff like that. So just, again, be proactive.
Stephanie Skryzowski: It’s such a good reminder and I’m like, Ooh, I think I might need to go through my, my clients that we have in common and think through like, okay, wait, has anything big happens that I have not yet talked to y’all about?
Um, and I kind of need to, I need to think about that. Yes. So. You mentioned this, this meeting that you had with this client where [00:28:00] y’all sat and just talked about all the big things. Can you like share any more about like, if you could think of the smoothest audit and the most like clean process that you’ve gone through with an organization before, where for you, they’re just like a dream client.
Can you share some more qualities or maybe things that they did that helped make them a dream client in your eyes? Yeah, share it, share a little bit more about that if you can think of anything.
Mark Pate: Yeah, um, there’s another client where I think even the first year that we did the audit, we basically wrapped the entire audit up and got like a draft of the financial statements during the week that we had scheduled for field work, which is pretty unheard of for a brand new client.
Um, and so that’s how prepared they were. So, and they were another one of those where their CFO and their controller, they were reaching out to us months in advance. They were asking for our preparation list, which is something we send to every client. So they were asking for that ahead of time. Every time they came across something on [00:29:00] our preparation list that they didn’t exactly know what they need to do, they were getting on the phone with me.
We were doing emails, whatever it might be. And so they were, by the time it got, I think they had everything on our preparation list, maybe like two weeks before we actually were scheduled to start the audit. And so even there, you know, Even though we had time scheduled, we were actually able to start a little bit early on it because they had provided everything.
So it’s like, okay, well, we got time. We can be working through some of this stuff. Um, and so they did that and then they were also just So transparent like every even some of some little tiny things that maybe we didn’t have to know about they were telling us Hey, we did this or we’re thinking about this or whatever including they actually give us access to their quickbooks Uh, like their online Platform, and so we can go and run all the reports we need.
Um, and so that’s, that’s about as transparent as you can get. It’s just giving access to that. And, you know, then we could run our own trial balance once they told us it was ready to go. And we could, um, we could run different listings. And, uh, for the most part, a [00:30:00] lot of like their disbursements and stuff, they already had an invoice in the, um, like in the disbursement.
And so we could pull that ourselves and look at it and everything like that. But I think that’s, yeah, it, that’s probably one of the smoothest audits that I’ve ever worked with. And a lot of it was just getting ready ahead of time and asking questions and, and reaching out that I can almost always tell an audit is going to go poorly when I don’t hear anything from them all year, especially if they’re a new client, I don’t hear anything at all.
Uh, and then I send them the preparation list, and I don’t really hear anything back from it. And then, like, two weeks before fieldwork, I look in our online portal, which is how we exchange information, and I see nothing’s been prepared, no questions have been answered. I can almost always guarantee that this audit is gonna, it’s just not gonna go well.
And so just getting prepared, uh, being on top of it, talking to your audit partner and audit manager ahead of time, that’s, that’s a great way to make sure it goes smoothly. Okay. Well,
Stephanie Skryzowski: now I have some goals. I mean, not that that wasn’t always, always [00:31:00] my goal, but now I’m like, oh my gosh, to have financial statements issued during that same week.
That would be a dream. Okay. So that’s going to be my goal for the clients that we work together with for next year. Incredible. And so are you all doing any in person audits anymore or is everything remote?
Mark Pate: It’s a pretty broad mixture actually. Uh, so a lot of it is dependent on the client. Um, some clients still like having us in person.
There are a handful of clients where we actually still need to be in person. They’re still very paper based, um, especially some of our older organizations. They’re very paper based. And so we have to go and look at stuff. Um, then there’s clients where we’ve never been to their client site. I think you and I serve a couple of those where they’ve for their entire history, they’ve been remote.
And so we just do an entirely remote audit. So. We do try to keep in mind that at the end of the day, it is a client relationship. And so sometimes even if you don’t absolutely have to be in their offices to [00:32:00] do the audit, it is good a lot of times to go for a couple days and get to meet with them, talk with the CFO, go have lunch, get to know them, you know, going back to establishing that relationship so they’re more comfortable.
Reaching out, you know, it’s, you’re much more comfortable with reaching out to an audit partner and audit manager who you just had lunch with three weeks ago than somebody who you’ve only ever emailed back and forth with. And so we still try to keep that in mind, but a lot of it is client preference, especially, you know, through COVID and after COVID we kind of say client, what is it you want us to do?
Do you want us in person? Do you want us not to do it? And some have said. We love having you here in person, even though it’s not absolutely necessary. So keep on coming. And then some others will just say, Nope, we’re good. You know, we don’t need to expend that travel costs or anything like that. And we’re, we’re fine doing it all over video and, uh, email and phone call.
Stephanie Skryzowski: Yeah. I haven’t experienced an in person audit in a year, like, Like even long before COVID. So [00:33:00] I, I like that, but at the same time, I can definitely see not just the relationship piece, which obviously is super important, but also from an efficiency standpoint, like it’s kind of hard to like blow the auditors off when they’re sitting at the conference room, like two doors down versus like, if they’re emailing you, it’s really easy for that email to just get to the bottom of the inbox.
So I would imagine that. There could be a scenario where it’s actually faster to have the auditors in person for a period of time because it’s like, okay, well, they, they just walked into my office and asked me for a document. I’m not going to, like, not give it to him for four days, but that I’m sure happens all the time via email where it’s like, you guys just don’t get responses for a few days because people are busy and the email gets buried.
So I would imagine that, is that true that there, there are some efficiencies and some speed with being in person?
Mark Pate: There absolutely are. And yeah, that’s one of those things where it can be, you might think of it as annoying to have the auditors in your office, but you know, if you can block off two or three days where you’re available, it is so true that, [00:34:00] you know, to go and just walk down the hall and stand in somebody’s office and say, Hey, I saw this.
Can we talk about it? And a lot of times they can answer a question and then they can maybe show you something that you need to see. And there’s not all this email back and forth where, you know, the client might answer it. Not see the email or not address it and on our side we might not see it or might not be able to address it for a couple days and stuff just tends to drag on.
So yeah, there are a lot of efficiencies to be gained by just being able to walk down the hall and say, okay, we’ve seen this situation. Let’s go ahead and talk about it. And then actually we like it as well because, um, you may not realize this, but a lot of things that we find out about, uh, that we need to know for the audit come through informal conversations.
I, I cannot list the number of times where something pretty major has come up because we went to lunch with the CFO and they said, Oh, we’re doing such and such, or we’re thinking about doing this. And it’s like, Oh. Lightbulb, we need to talk about that for the audit. Uh, and so that actually helps us as well where we can sometimes get a broader picture [00:35:00] of what’s going on and get a good understanding of it.
Stephanie Skryzowski: is like I’m having so many lightbulb moments and I’m thinking of one client that works with Capen Crouse that works with us. I don’t know if you’re the, I don’t. I can’t remember if you’re the partner on it and I’m like, I think I may suggest having y’all come in person this year because it’s a big audit.
It’s a complicated audit. There’s a lot of different people, a lot of different players involved in different ways. And I’m like, Oh my goodness, if y’all were just sitting in their conference room for like five days, I feel like it would be so much more efficient because you could just bring the right people in and get all your questions answered and they have a lot going on.
Um, so. This was a very good reminder. I think I’m going to have a little discussion with them and see if that might be, if that might be a good thing. One thing that I will say that I think makes working with you and with your firm different is that it doesn’t feel like You’re out to get us and I have definitely [00:36:00] worked with nonprofits audit for with audit firms that specifically serve nonprofits, where it feels like their sole purpose is just looking for things to put on the management letter.
And that is not really a good feeling when it’s like you’re going into this sort of situation, this relationship, and you know that they’re just. Looking to find where you messed up and that doesn’t really feel good, but it’s not like that working with you and with the team at caper and cross at all. Is that something that y’all like talk about internally in terms of like, what is our purpose?
Why are we here? Are we trying to like find how this organization messed up? Like. I don’t know if there’s anything about like your core values at Cape and Cross, but I think that’s really important because I’ve definitely had auditors where it’s like they are actively looking for mistakes and trying to catch us.
And it doesn’t feel like that with you guys at all.
Mark Pate: Well, I appreciate that. And I’ve had other people say that, and we definitely do. That’s, that’s something we pride ourselves on. Uh, it. You [00:37:00] asked about internally. Yeah, it all goes back to our mission statement, which is serving organizations whose outcomes are measured in lives change.
And we talk about that all the time. And I think getting to know these organizations and seeing the work that they’re doing and the lives that they are changing is a huge part of that. And we’d love working with them. And so, uh, you know, even sometimes when you have to have the hard conversations, like I just recently had a conversation with a newer client where they had some internal control things, and I started off the conversation by saying, look, we want you to be the best possible.
We want you to be as protected as possible. And so here’s some ways that we’ve identified in your internal controls where you need to strengthen some things, you need to change some things up. And I think going into it with that attitude and that mindset, we’re still communicating the same thing. We’re.
We’re saying here’s an internal control problem that we need to address, but they’re able to take it and say, okay, Cambridge house wants to make us better. They want to make us the best nonprofit we can be. Um, and we really do see that [00:38:00] as our mission and our entire purpose is that we’re trying to provide the most expertise and the most value to you can carry out your mission as a nonprofit as, as best you can.
And you know, that the financial related areas are. pretty shored up and you know, you have good controls and, and Capon Krause is looking at all that stuff. And so we’re empowering you all to be able to do your mission as effectively and as best as you can.
Stephanie Skryzowski: Yeah. I think that’s huge. And for our listeners, if you are looking for a new audit firm, of course, I always recommend Capon Krause, but I think that’s something to really think about and ask about as you’re interviewing.
new audit firms is really understanding their firm’s core values and their purpose and their mission, because it absolutely will impact your experience and the process. And again, it’s a relationship that you want to build over, you know, and keep for a long time. So yeah, I just, I really do think that makes Cape and [00:39:00] Kraus stand apart from other firms that I’ve worked with in the past.
Well, Mark, it has been such a joy to chat with you. And it’s always interesting to me because I’ve never, like, I’m, I’m not an auditor. I’ve never been an auditor and I’ve worked with a lot of auditors with a lot of different audits over many, many years, but it’s always interesting to hear your side of things, the, the sort from the sort of audit side of things.
And I think you gave us so many good pointers and tips to help us really. Make the most out of something that is mandatory for a lot of us, but really make the most out of it. I have one question that I always ask all of our guests on the show. And the question is, what does a prosperous nonprofit look like to you?
Mark Pate: I love this question, and I love hearing it. I’ve listened to several of the podcast episodes, and I love getting to hear the different perspectives that people have on this, uh, and so for my answer, I’m going to actually go back and draw on the mission statement that I just mentioned that we have at Cape and Kraus, which is that we are serving organizations [00:40:00] whose outcomes are measured in lives changed, and so we are trying to help those organizations out, and so I think To me, a prosperous nonprofit is one who is changing the lives or the communities of the people that it is trying to serve, while at the same time, it’s setting itself up well, both financially and structurally so that it can continue to provide that service at a high level of quality for several years to come.
Um, so both of those pieces, making sure that you’re actually changing the lives of the people you’re trying to change, uh, and then you’re setting yourself up so that you can continue to do that long into the future.
Stephanie Skryzowski: I love that. Yeah, that’s so important. And the audit is one important piece of that actually.
So, fantastic. Well, Mark, if our listeners want to learn more about you or about Cape and Kraus, where can we find you?
Mark Pate: Yeah, absolutely. So, our website capeandkraus. com has a ton of resources for nonprofits. blogs. Uh, we post all our [00:41:00] upcoming webinars and events. Uh, we do a lot of webinars and in person events where we’re teaching We have webinars for all sorts of different things, like on I.
T. We have by industry. So whatever type of nonprofit you might be, we probably have a webinar geared specifically toward that we have webinars on taxes. So our website is great. And then following us on LinkedIn, we post a lot of our webinars. And so you can see that you can register and everything like that.
And then I would also encourage people, if you go to the website, check out the Capon Center for Nonprofit Excellence. Um, so this is kind of a new initiative for us, but it’s basically like online assessments in, I think, six areas of nonprofit management and financial, everything like that, uh, where you can kind of do assessments and kind of see how you’re doing and maybe get some suggestions.
So I definitely advise you to check that out, but our website and LinkedIn, those are probably the best places to find us.
Stephanie Skryzowski: Awesome. Thank you so much. Yeah. Capon Cross is super active. on LinkedIn. So fantastic. Well, [00:42:00] again, thank you so much, Mark, for first being a wonderful audit partner to our clients and to us.
And thanks for being here on the show today. All
Mark Pate: right. Thank you, Stephanie. So good to be with you.
Stephanie Skryzowski: Before you go, I just want to thank you for being here to access our show notes and bonus content. Visit 100degreespodcast. com. That’s 100degreespodcast. com. And I’ll see you next time.