What Is a Nonprofit Audit? Ultimate Guide + Checklist

Even if not legally mandated, it is advisable to perform regular financial audits to make sure there is strong financial management how to request an audit of a nonprofit and to maintain transparency with donors and stakeholders. By following this checklist, you’ll be well-prepared for your nonprofit audit, reducing the likelihood of surprises and ensuring a smoother audit process. Remember, the goal is to present a clear, accurate, and complete picture of your organization’s financial health to your auditors.

• An audit is more than just a requirement—it’s a chance to improve your organization’s financial health, strengthen internal controls, and boost your credibility with donors and funders.
• It will also make auditing much easier, as you have all the information you need stored and easily accessible.
• The IRS will indicate a time and date for the field audit but will nevertheless work with the organization to establish a mutually optimal day for the audit.
• In the end, this accountant submits an audit report that details the investigative findings such as areas of strength, improvement, weakness, and danger.
• For that task we recommend you connect with the CPA society in your state which may maintain a list of CPAs experienced in audits of tax-exempt organizations.
• A comprehensive financial software stack can help you keep your finger on the pulse of all these questions.
• Yes, the IRS does audit nonprofit organizations, particularly if there are discrepancies in tax filings or other red flags.

Review and implement the auditor’s recommendations.

This means, that you actually shouldn’t charge the entire cost of the letter to fundraising, but also categorize a portion of the cost under program ledger account education. Our team of expert nonprofit accountants will prepare the necessary work papers and schedules for your auditor and coordinate with them to fill out your Form 990. We can also help you with your month-end close so you can stay audit-ready throughout the year. To help you navigate the audit process, let’s dive deeper into some of the steps we’ve presented here and provide some additional context that will help you take action.

What Is a Nonprofit Audit? Ultimate Guide + Checklist

• A report by IBM found that the average cost of a data breach is approximately $4.35 million, highlighting the financial stakes of cybersecurity failures.
• The team should consist of individuals with expertise in various areas of cybersecurity, including network security, data protection, and compliance.
• Reviewing your financial statements and procedures allows you to assess your financial management and improve your strategy going forward.
• Now that we’ve established the basics of nonprofit audits and the main types of audits that can be performed, it’s time to explore some deeper insights into these all-important processes.

An independent nonprofit audit differs from one executed by the IRS in several areas. The independent auditor is a professional CPA unrelated to the agency and is compensated by the audited firm. The audit is free of consultation with the IRS and devoted solely to evaluating internal controls and documentary accuracy. In the end, this accountant submits an audit report that details the investigative findings such as areas of strength, improvement, weakness, and danger. Whether you’re trying to meet government regulations or win over donors, an audit is a way to show that your nonprofit organization is responsible for its financial records.

Simplify Your Audit Management with VComply

Your board will give the auditing committee authority to oversee all audits, including hiring and evaluating an independent auditor. These improvements may involve fundraising opportunities you weren’t aware of and expenses you no longer need. An independent auditor can give your organization an outside perspective when you feel stuck. Adding an audit requirement to Accounting for Marketing Agencies your organization’s bylaws may seem redundant for many nonprofits. The additional cost to perform these audits may even feel improbable, but there are several benefits for nonprofits that perform regular internal audits.

• Supervisors recently received a report from county staff on what it would look like to take control from LAHSA of the county’s funding.
• Many nonprofit leaders ask us what they should be doing at the end of the year to make sure they are ready for an audit, ready to complete their Form 990, and ready to produce an annual report.
• The first thing to know about this report is that if it isn’t clean, that is totally fine!
• It can also determine your compliance with relevant financial regulations and best practices to ensure you follow industry standards.
• The Susan S. Lewis CPA firm performs audit services in Chicago and nationally.
• “The lack of uniform data standards and realtime oversight increased the risk of resource misallocation and limited the ability to assess the true impact of homelessness assistance services.”

Conducting an Internal Review

By systematically evaluating security measures, identifying vulnerabilities, and ensuring compliance, organizations can significantly reduce their risk exposure and safeguard their critical assets. Continuous monitoring and improvement further enhance an organization’s security posture, ensuring ongoing resilience. By implementing these more specific and actionable best practices, organizations can elevate their cybersecurity audits from compliance exercises to strategic tools for enhancing security posture and mitigating risks.