Capital Campaign Internal Control Best Practices and Preparing for Your Audit

The first three installments of our Capital Campaigns series covered how to keep your finances organized, making sense of pledges, and expensing, capitalizing, and when to release restrictions. In the final article of our series, we’re diving into internal controls and audit preparation.

Strong internal controls aren’t just about compliance. They protect your organization’s reputation and build donor trust. Auditors will pay special attention to capital campaign activity, so preparing in advance is critical.

Best Practices for Internal Controls

Year-end Pledge Review

Two staff members (typically finance and donor relations) should verify that pledges are properly recorded, not duplicated, and agree to the general ledger.

Subsequent Pledge Review

Check pledges recorded in the first two months of the new year to confirm none were pledged prior to year-end.

Independent Calculation Checks

Someone other than the preparer should review discount and allowance calculations for accuracy.

Preparing for Your Audit

What documentation will your auditor need?

• Detailed lists of campaign contributions and pledges
• Donor-level pledge schedules with payment timelines
• Supporting documentation (pledge forms, contracts, invoices)
• Discount and allowance calculations
• Internal control documentation

How will your capital campaign impact financial statements?

Your campaign will likely affect multiple areas of reporting, such as:

• New line items (for example, construction in progress)
• Increased restricted assets and fundraising expenses
• Cash flow adjustments for long-term pledges and noncash financing activities
• Footnotes describing campaign purpose, progress, and commitments

Set Your Nonprofit Up for Success

Strong controls and audit readiness aren’t just about passing your audit. These controls show donors and stakeholders that your nonprofit is trustworthy and financially responsible. With proper preparation, your capital campaign can withstand scrutiny and serve as a model of nonprofit accountability. Looking for more guidance? Get in touch with our nonprofit advisors to talk about your upcoming capital campaign and how we can help!

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