Does your nonprofit need to have an independent audit?

That kind of vision generally goes hand in hand with a more collaborative approach, addressing the organization’s operational needs rather than simply crunching the numbers. A clear game plan is another factor that works in your favor when pitching to potential supporters, especially if you have a trustworthy reputation supported by verified information. Picture the IRS checking if you correctly report income from a major fundraising event, like an annual gala or charity auction. These audits verify that your donors’ stipulations have been followed and that program outcomes align with the funders’ expectations. As a nonprofit, your relationship with donors and government entities is vital, and has to be built on trust. Working with Dimov Audit ensures that you’re not navigating these steps alone—we’ll guide you at every phase.

Provide an RFP

A poorly prepared financial report can cause management or board members to receive incorrect financial information. This can https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ result in penalties, worse yet material fraud, including misappropriation of funds. Compliance audits are conducted by government agencies or third-party organizations to ensure that the nonprofit is complying with all applicable laws and regulations.

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This comprehensive checklist can help you streamline the audit preparation process so every detail is ready for a thorough financial review. Also, the federal Office of Management and Budget says that if your nonprofit spends $500,000 or more in federal funds in a year, you’ll have to get a single audit. Donorbox is an all-in-one online fundraising platform for nonprofits of all sizes. Our simple-to-use and powerful features range from Donation Forms and Fundraising Pages to Recurring Donations, Crowdfunding, Peer-to-Peer, Events, Memberships, and more. You can also easily store and manage your donor and donation data on Donorbox.

Is your documentation ready?

Make sure your RFP is well organized, specific to what you need and free of redundancy. In brief, the IRS wants to confirm that the foundation, charity, or other nonprofit concern is following the prescribed rules of reporting and fulfilling the purpose upon which its tax exemption is based. As with audits, the appropriate company officer will receive a written heads-up that a compliance check is coming. There are no sanctions or penalties if an organization passes on the compliance check questionnaire. All the same, too many refusals might invite a more comprehensive audit later. Nonprofits should begin by establishing a clear timeline that outlines all necessary steps leading up to the audit.

• Some RFPs ask audit firms to disclose information on the biggest client(s) they’ve lost in recent years.
• Before an audit takes place, it is crucial for nonprofits to conduct a thorough review of their internal controls and policies.
• If you are not prepared for your audit, it will be more expensive and take longer to complete.
• The auditor will also look at the nonprofit’s financial statements from previous years, if they are available.
• This internal review not only prepares the organization for the audit but also helps identify any potential issues that could arise during the audit process.
• The primary purpose of the auditing committee is to find an independent auditor.

In fact, nonprofits are required to disclose their financial information to the public in a number of ways. It’s recommended to conduct a financial controls audit at least annually, as well as when there are significant changes in financial personnel or systems. Your organization can share the information discovered in an audit and how that information is being used to improve operations with its constituents. Not only does this demonstrate your organization’s ability to embrace change but to leverage it to the nonprofit’s benefit. An audit also shows that an organization takes its finances and operations seriously and is committed to continuously improving the use of its valuable resources.

Either way, retaining an independent auditor to perform a financial review of accounting records can only help your business. If you submit audited financial statements to donors and other sources, they will give your grant requests greater weight than those applications without such evidence of financial health. Nonprofit audits also burnish a firm’s reputation with the general public from which a new generation of contributors may come. Thirdly, making a habit of an annual audit creates a discipline of adhering to generally accepted accounting principles. A financial statement audit provides the highest level of assurance on the accuracy of a nonprofit’s financial statements. It involves an in-depth analysis conducted by an independent CPA who verifies financial records, tests internal controls and assesses compliance with accounting standards.

• If your organization needs an audit, the most important step is selecting the right firm.
• It’s an essential tool for nonprofit organizations to ensure financial accountability, transparency, and stakeholder confidence.
• Your organization’s stakeholders should determine when the audited financial statements need to be finalized.
• In its letter to management, the auditing firm approaches its evaluation from two directions.
• Your first step in preparing for a nonprofit audit is to look at the financial statements of your organizaiton.
• If your organization is preparing for its next audit—or undergoing one for the first time—reach out to Dimov Audit for a consultation.

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• Although they can be costly and time-consuming, they are typically worth the investment once you reach a certain size.
• Better yet, after you hire your auditors, talk with them to collaborate on a timeline that works well for all parties.
• In addition to gathering documents, it is essential to categorize them appropriately.
• Send out an RFP and hire an independent firm to conduct your financial statement audit.

This plan should include timelines for implementation, responsible parties for each action item, and mechanisms for monitoring progress. One of the quirks of working in the nonprofit sector is understanding that not all organizations are required to undergo an audit. Typically, smaller nonprofits, especially those with limited funding sources, might not face a mandatory audit.

Questions About Generating More Revenue?

The duration of the independent audit can vary according to whom the audit is due, board members, for example. While some expectations can appear generous, the amount of work demanded by the audit may find auditors sweating to make the finish line in time. Selecting an independent certified public accountant with the right experience can take up to 12 months. This commences with extensive research and continues with winnowing the field of auditors with interviews and deeper questions, issuing a request for proposal (RFP) by an auditing firm, and making a final choice.