Carefully compare these documents to ensure compliance with grant terms and conditions. Either way, if you need help with this or any stage of the audit process, don’t hesitate to reach out to financial professionals like the experts at Jitasa. Our years of experience working exclusively with nonprofits like yours will help you approach audits with confidence and make the most of them. Regardless of your nonprofit’s reporting deadline (or lack thereof), we recommend completing your financial audit before completing your annual tax return so you can include the changes you’ve made as a result of the audit in it.

• Transforming your technology standing can help you leverage the power of IT solutions to help boost your operational efficiencies through access to comprehensive, real-time views of your entire organization.
• By following these steps, you can ensure that your organization is well-prepared for an audit, minimizing stress and maximizing the opportunity for improvement.
• Yet good donor account management, which is a key component of fund management, calls for just this.
• Many big public donors have multiple departments and offices, highlighting performance differences in like circumstances may also help.
• Doeren Mayhew, a top nonprofit audit firm, is here to help you understand your financials, deliver transparency to stakeholders, keep you compliant on state and federal levels, and meet your organization’s goals.
• Reviewing your controls–such as how financial transactions are handled, recorded, and approved–helps with audit preparation.

Step 1: Selecting an Audit Firm

All of that can make the process of preparing for a nonprofit audit complex, particularly for nonprofit organizations with under-resourced finance functions. Working with an external audit preparation partner accounting services for nonprofit organizations can help organizations take a more proactive approach to their annual financial statement audit. Are you a nonprofit operating across state lines, or simply trying to understand the varying current audit requirements? Understanding the intricate web of audit regulations is crucial for maintaining compliance and ensuring your organization’s financial integrity. With differing state-specific rules layered on top of federal mandates, it’s easy to feel overwhelmed.

• Nonprofit accounting is complex and has many specialized requirements, but Fohrman & Fohrman, Inc., can be your foundation for making informed financial management decisions.
• A nonprofit audit might result from a judicial directive or another agency request, e.g., an agency granting federal funding.
• Are you a nonprofit operating across state lines, or simply trying to understand the varying current audit requirements?
• At G-Squared Partners, audit readiness isn’t an afterthought—it’s built into everything we do.
• Many nonprofits choose to conduct regular audits as best practices, even if it’s not legally required.
• Many leaders today regrettably pay lip service to goals around culture, compliance and internal controls, but they lack the resources to support it.
• One story I often invoke, in part to spice the conversation but equally to remind people of the organic basis for auditing is Shakespeare’s the Merchant of Venice.

Compliance Audit

If your nonprofit relies on grant funding, you’ve probably noticed that these organizations want financial reports that have been audited. Additionally, the Guide includes information about special audit requirements that apply to nonprofits that receive funding from the federal government. It can be overwhelming to add audit preparation to your never-ending to-do list of responsibilities. Fortunately, YPTC is willing and ready to help you prepare for your nonprofit audit and lend our financial expertise to your team. Start by convening an audit committee or relevant board committee to select the auditor you’ll work with.

• Yearly collections falling beneath $25,000 need not file any audited financial records.
• Remember that CPAs and auditing firms work with their clients to improve financial practices and ensure accountability.
• This revenue must be recognized over the period in which these services are provided, aligning with the accrual accounting principle.
• At the end of this process, you’ll meet with the auditor you’ve chosen to finalize your contract and further discuss the details of your arrangement.
• For example, your state might impose audit requirements if your income and spending exceed a certain threshold.

Types of IRS Nonprofit Audits

If you are an auditor, have you also come across the donor delayed funding “operating constraints”. As an auditor, I look for integrity in the budget figures and other similar governance documents. Here’s a list of the top 10 challenges keeping nonprofit auditors up at night, and possible remedies (see link below) to help auditors continue their critical contributions to nonprofits. One of the challenges in nonprofit work is the distance between those paying for the services, the donors and those receiving the services, the clients (check my recent blog post on this). For this reason, value for money is mostly just an abstract idea to donors, just a hedging mechanism. This is one reason why western donors ignore some of the worst crises around the world, until a western face decries it.

Nonprofit-Specific Requirements

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. 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.

When you look closely, you'll see that most of your time and efforts spent on fundraising are likely actually spent on mission education. King was able to reduce Amnesty International USA's overhead spending to 16%, not by spending less, but by improving the organization's joint cost allocation. That being said, you need to spend money to make money – even in a nonprofit. Whittling down your overhead costs too far could result in operational issues, costly employee turnover, and other problems that reduce your impact and https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ hinder your mission. The laws which determine when a nonprofit needs to be audited vary from state to state.

• Our Audit Readiness Services are here to help you navigate these challenges with confidence.
• As an alternative to an independent audit, auditors can provide either a financial statement "review" or a "compilation." Neither a review nor a compilation is a substitute for an audit.
• You must start working with an auditor early enough to meet external and internal deadlines.
• This ensures compliance with legal requirements and enhances credibility among stakeholders.

Highlighting a clean audit or explaining the actions you’re taking to address findings can reinforce confidence in your organization’s financial stewardship. 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. In its letter to management, the auditing firm approaches its evaluation from two directions. From an internal control perspective, the audit report identifies ongoing protocols and processes that deserve revision if efficiency and clarity are to be preserved.