The audit will help support how your organization receives and spends funds from grantors, contributors, and contracts. It demonstrates to donors, members, directors, and regulators that the firm does its work transparently, comprehensively, and above board, and thus, the public has more confidence in the non-profit. Even if it’s not required, a nonprofit audit can be a smart move to build trust, strengthen operations, and ensure financial integrity. Even better, with our nonprofit bookkeeping and accounting services, we’ll ensure your books are always audit-ready. Plus, give you timely financial reports and expert advice that help you carry out your mission.
Background on the federal law governing nonprofit audits
Knowing the reasons that organizations do end up getting audited by the IRS is important and can help instruct your organization on ways to operate properly in order to avoid ever being in that situation. Nonprofits should note that after reviewing annual filings, the AG might request an independent CPA audit from nonprofits with gross revenue over $250K due within 120 days of the request. In the nonprofit world, audits are a normal course of business and should not accounting services for nonprofit organizations be something to be nervous about. As soon as you know that you will be obtaining an independent audit, begin the planning process.
Nonprofit Audit Terms to Know
From incorporation and tax-exempt status to annual reporting, fundraising compliance, and employment laws, Florida nonprofits must ensure they remain in good standing. Staying on top of these requirements is essential for maintaining transparency, protecting the organization’s legal status, and maximizing its impact within the community. At the same time, many large donors, foundations, or other sources of funds may request or require audited financial statements. These statements help them have confidence in the reported financial health of the organization. As a nonprofit organization, it’s a good idea to prepare your financial statements and documents for any 501c3 audit requirements that may arise.
- Just like with normal tax returns, if there are discrepancies, inconsistencies, or incomplete information, then the IRS is interested in learning more.
- An audit starts with the initial contact and continues until a closing letter is issued.
- A robust audit strategy has regular audits, risk identification, and operational improvements as key components.
- This audit evaluates how federal funding is spent and helps ensure compliance with the Uniform Guidance issued by the Office of Management and Budget.
- For our Office of Finance as a Service, we charge 2% of the client’s monthly revenue.
- This might include implementing dual authorization for significant transactions or increasing oversight on expense approvals.
- During the independent audit, the auditor will review the organization’s financial statements to determine whether they adhere to “generally accepted accounting principles” (commonly referred to as “GAAP”).
Understanding Policy: Key Characteristics and How it Differs from Procedure & Guidelines
Rather, it is an examination of your accounting records and financial statements by an independent auditor—normally, a certified professional accountant (CPA). The auditor https://greatercollinwood.org/main-benefits-of-accounting-services-for-nonprofit-organizations/ is an independent professional hired and paid by your nonprofit. The auditor will do an independent investigation to test the accuracy of your accounting records and internal controls. The auditor’s letter is attached to the front of your financial statements.
The IRS and the nonprofit’s board of directors also use financial audits to ensure that nonprofits are in compliance with all laws, regulations and their governing documents. A nonprofit audit is an independent examination of a nonprofit organization’s financial statements and records to ensure compliance. An audit can also provide insight into the organization’s financial health and help identify areas of improvement. During the independent audit, the auditor will review the organization’s financial statements to determine whether they adhere to “generally accepted accounting principles” (commonly referred to as “GAAP”).
- Ledgers and financial statements are checked and re-checked in search of duplications, omissions, or mathematical miscalculations.
- Selecting an auditor who specializes in the nonprofit sector ensures they understand the unique challenges and requirements of nonprofit organizations.
- ✔️ When you want to get serious about grant funding.Many grants require an audit (not a review or compilation) because it provides an opinion of assurance.
- Whether you need audited, reviewed, or compiled financial statements for your non-profit organization in any U.S. state or territory, our team of CPAs is ready to assist you.
- Audits help identify inefficiencies, protect against fraud, and demonstrate credibility.
One circumstance where an independent audit is mandated relates to the spending of federal funds. Just like with regular taxes, audits, and IRS-relations, things can get very confusing when it comes to the financial information of nonprofit organizations. Add audit requirements to the list and you may feel like there’s no way you can keep everything straight. A nonprofit audit refers to the comprehensive review of a nonprofit organization’s records, transactions, policies, and internal procedures.
- In most instances, the non-profit must complete registration before engaging in any fundraising or solicitation activities.
- An audit shows your organization is trustworthy, compliant, and well-managed.
- Once you’ve selected an auditor, they should provide information about preparing for the audit.
- To summarize, an audit of a non-profit organization is a comprehensive examination of an organization’s financial statements by an independent auditor.