As a non-profit organization, your mission is at the heart of everything you do. However, even with a clear purpose, operational challenges—especially in Human Resources—can slow down progress. Ensuring that your HR practices are effective and compliant is essential, especially when your organization is poised for growth, navigating funding changes, or striving to improve employee satisfaction.

An HR audit can assess the health of your HR processes, identify areas for improvement, and ensure compliance with laws and regulations. For non-profits, it also safeguards against potential risks and aligns your people practices with your mission. In a sector that depends so heavily on trust, transparency, and efficient use of resources, an HR audit is not just a good idea—it’s a necessity.

Why Non-Profits Should Prioritize an HR Audit

Non-profits must also maintain transparency with donors, government bodies, and grant funders, making HR compliance and efficient processes essential for sustaining trust and funding. In addition, these audits can:

• Ensure compliance with labor laws and regulations specific to the non-profit sector

• Improve efficiency in your hiring, onboarding, and benefits processes

• Boost employee and volunteer satisfaction by aligning HR practices with your organizational culture and values

• Protect your organization from potential legal risks and improve governance transparency, thereby protecting financial resources

• Make sure your HR strategies align with your mission, allowing your team to focus on creating a greater impact

If you want to make sure that your HR practices are ready to handle these challenges and more, here’s how to complete an internal HR audit.

Gather Key Documents and Policies

Before your audit begins, you must have all HR-related documentation readily available. Non-profits, especially, must be diligent about maintaining accurate and up-to-date records to remain accountable to grant requirements, financial donors, and compliance expectations.

Make sure you have access to the following resources:

• Employee handbooks and contractor and volunteer guidelines

• Employee records

• Benefits and compensation policies

• Payroll records and time-tracking documentation

• Employment and contractor agreements

• Worker’s compensation and safety policies

Assess Compliance with Non-Profit-Specific Regulations

Non-profits are often subject to different rules and regulations than for-profit businesses. In addition to general labor laws, many non-profits rely on grant funding, which often comes with its own set of restrictions around wage allocations and employee classifications.

Prepare for your audit by ensuring that:

• Employees and volunteers are properly classified

• Wage and hour practices meet the required standards

• Your policies reflect any grant-specific guidelines on compensation, benefits, conflicts of interest, whistle-blowing, etc.

Evaluate Your Onboarding and Training Processes

With the high turnover rates often seen in the non-profit sector, having a robust onboarding and training program is necessary for success. An HR audit will look closely at how well your organization welcomes new hires and volunteers, introduces them to the culture, and ensures that they are set up for success.

Ask yourself:

• Do your onboarding processes clearly communicate the organization’s mission, values, and expectations?

• Is compliance training regularly offered to staff and volunteers?

• Are job descriptions clear, and are employees aware of their roles and responsibilities?

Conduct an Internal Self-Audit

Before the official HR audit, conduct an internal review to identify gaps and areas for improvement. This will give you time to correct any issues in advance, ensuring that your organization is well-prepared when the auditor arrives.

Consider:

• Running an internal audit to check the accuracy of your records

• Asking key staff members for feedback on HR processes

• Reviewing your employee and volunteer satisfaction data to identify potential problem areas

Get Input from Your Team

Non-profits rely heavily on staff and volunteers to drive their mission forward. Involving your team in the audit preparation process can boost morale and ensure that any gaps in your HR practices are identified from multiple perspectives.

Encourage your team to:

• Provide input on the effectiveness of current HR policies

• Share ideas for improvement in areas such as communication, benefits, and performance management

• Offer feedback on any compliance concerns they may have noticed

Prepare to Take Action on the Audit Findings

The results of an HR audit can provide you with a roadmap to improving your HR processes. After the audit, make sure you’re ready to take actionable steps to address any gaps or issues identified during the review.

Be prepared to:

• Update your policies and procedures in line with audit recommendations

• Ensure ongoing compliance with changing labor laws and non-profit-specific regulations

• Invest in training and professional development to continuously strengthen your team

An HR audit is more than just a review of your policies and procedures—it's a way to ensure that your non-profit is running smoothly, ethically, and in accordance with its mission. By preparing your organization for an HR audit, you’re taking a critical step toward optimizing your HR practices for better performance, compliance, and staff satisfaction.

Are you ready for your HR audit?

An HR audit is the key to safeguarding your non-profit's mission. Start your journey toward stronger HR practices with HR TailorMade’s expert guidance. We can help you prepare for your internal audit or do it for you to ensure your organization is prepared to make an even greater impact. Schedule a consultation now.