Among the more important questions are those pertaining to how many nonprofits they have performed independent audit reviews for. Clearly, the ratio should reflect solid experience with not-for-profit groups and 501c3 audit requirements. Beyond this criterion, it is important to know the estimated length of the audit process and how the fee structure works.

Organize Financial Documents

This ensures compliance with legal requirements and enhances credibility among stakeholders. Donors, grantors and other stakeholders view audits for evaluating an organization’s financial health. Nonprofits must provide a minimum of five years’ worth of documentation for the auditor to review. The audit examines the organization’s financial statements, including income and expenses (such as salaries).

Why Nonprofit Clients Choose Us

Grants often come with stringent conditions dictating how funds must be used and reported. Nonprofits must establish robust compliance frameworks to adhere to these stipulations, safeguarding future funding opportunities and maintaining credibility with grantors. Here’s a breakdown of the key phases and typical timelines involved in working with an independent auditor. Our meticulous approach ensures accuracy and adherence to all regulatory requirements, giving you peace of mind and avoiding potential penalties. Leadership in serving the nonprofit sector — evident in our publications, seminars, surveys, and memberships.

• NFPs also represent an important market segment for public accounting firms; many NFPs traditionally have a fiscal year-end that falls outside the profession’s traditional busy season.
• This process involves reviewing the organization’s financial records, processes, and procedures to guarantee accuracy and adherence to legal requirements.
• The agent may also quiz staff as to the state of internal controls and other procedures that ensure accuracy and integrity.
• The obligation to file an independent audit report with the state government is generally just one requirement among many in connection with charitable solicitation registration.
• And in some cases, grant funders will also want to see an audit of your nonprofit’s financials before giving to your organization.
• Federal grants in the United States, for example, may require adherence to the Uniform Guidance (2 CFR 200), which outlines administrative, cost, and audit requirements.

What is the difference between audited, reviewed, and compiled financial statements?

• Within that portfolio, we have clients with $750 million annual budgets and extreme levels of complexity.
• A nonprofit audit is an independent examination of a nonprofit organization’s financial statements and records to ensure compliance.
• These independently verified documents provide an in-depth look at an organization’s financial health, ensuring that the information presented is accurate, complete, and compliant with regulatory standards.
• Our years of experience working exclusively with nonprofits like yours will help you approach audits with confidence and make the most of them.
• A well-executed audit provides transparency, builds donor confidence, and ensures regulatory compliance.
• Nonprofits must comply with specific reporting and disclosure requirements to maintain transparency and accountability to stakeholders.

The short answer is no. 1 When running a nonprofit, there are a few requirements your organization needs to meet in order to stay compliant with federal and state rules and regulations to maintain your 501(c)(3) status. Although an internal audit isn’t as objective, your team understands your nonprofit’s unique context and can make recommendations to improve your financial strategy. These types of audits allow the organization to take a step back and determine if there are better ways of doing things than how they’re currently being done. Edited by CPAs for CPAs, it aims to provide accounting and other financial professionals with the information and analysis they need to succeed in today’s business environment. A final alternative safeguard that could be implemented by the audit firm is the separation of an auditor who has an expressed desire to support the mission of the NFP from the auditor who leads the firm’s audit of the NFP. Implementing this safeguard is obviously not available in an audit firm with a single owner.

Preparing for a nonprofit audit can feel overwhelming, but with a structured approach, you can navigate the process smoothly. Below is a detailed checklist that covers all the essential steps and documentation you’ll need to assemble and organize before your audit begins. Not-for-profit organizations are uniquely positioned to drive positive change, despite facing a range of challenges, especially in times of economic or political uncertainty. Since 1999, Fohrman & Fohrman has helped hundreds of organizations of every size by providing specialized nonprofit accounting expertise on demand. Additionally, refining your financial processes can make your nonprofit more attractive to corporate sponsors and their workplace giving campaigns. Double the Donation’s workplace giving strategies guide explains that these programs are designed to positively impact all parties, including nonprofits, companies and their employees.

Conclusion on Nonprofit Audit Checklists

This includes reviewing your organization’s financial statements, internal controls, and compliance with generally accepted accounting principles (GAAP). Transparency and accountability are paramount, especially for nonprofit organizations seeking to build trust with donors. One of the most effective ways to ensure financial integrity https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ is through audited financial statements. These independently verified documents provide an in-depth look at an organization’s financial health, ensuring that the information presented is accurate, complete, and compliant with regulatory standards. Nonprofit audits typically include evaluating internal controls, analyzing financial data, and assessing risks.

• A key component of nonprofit reporting is the Form 990, required annually by the IRS for tax-exempt organizations in the United States.
• It will determine whether the audited financial statements represent the financial position of the organization without inaccuracies or material misrepresentations.
• Yearly collections falling beneath $25,000 need not file any audited financial records.
• Compliance audits are conducted by government agencies or third-party organizations to ensure that the nonprofit is complying with all applicable laws and regulations.
• If you find issues with employee or contractor documentation, you can remedy them now.

While a nonprofit audit may be something your organization is required to do, it’s also a chance to confirm your financial practices are sufficient or improve upon your strategy. Either way, you’ll learn exactly what you have to do to keep your nonprofit financially sound so you can continue allocating funds to your mission responsibly. While it’s very likely your organization will fall into at least one of these categories, conducting an audit is beneficial regardless of whether you’re required to. Reviewing your financial statements and procedures allows you to assess your financial management and improve your strategy going forward. Auditing a small nonprofit organization is a necessary process that should not be overlooked. It can help to ensure compliance with laws and regulations, reduce the risk of fraud or other financial irregularities, and improve your overall financial health.