Just the word audit can sound scary, but an independent audit is actually a good thing for your nonprofit. It’s a valuable tool that can help you stay financially sound and open up more funding opportunities. Here are answers to some frequently asked questions about independent audits for nonprofits.
What Are Independent Audits?
For an independent audit, you hire an auditor from outside your organization to examine your accounting records and financial statements. At the end of the review, they give you a letter with their opinion as to whether your financial statements fairly represent your financial position and conform to generally accepted accounting principles.
Does My Nonprofit Have to Audited?
The IRS does not require nonprofits to be audited, but there are many other reasons to do so. You may need to get audited if you receive federal grants or if your state government requires you to do so based on the size of your budget or your fundraising activities. Many foundations also require grant recipients to have audited financial statements. Apart from any requirements, an audit can also help demonstrate your financial soundness to your board, donors, and other constituents.
What Do I Need to Do in the Audit Process?
Once you hire a CPA or other professional to conduct the audit, you’ll need to schedule a pre-audit meeting and gather the documentation they’ll need. The auditor may need to work at your office for a week or more so plan on providing a space they can use, maybe in your conference room or an empty office.
Are There Any Less Expensive Alternatives to an Audit?
What can you do if you’re a smaller nonprofit that can’t afford a full audit? Talk with a nonprofit accounting professional about alternatives like a more limited review of your financial records. You’ll find that some funders are willing to be flexible.
Learn More About Independent Audits
Are you looking for assistance with nonprofit accounting and business support services, including audit preparation and management? Contact us at Mainstream Nonprofit Solutions for customized and cost-effective outsourcing.