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Do all non-profit organizations need to have an audit? What kinds are there?

Posted Dec 02, 2016

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The term “audit” usually sparks apprehension in us all. Most of us are familiar witshutterstock_462987193h the term from the IRS.  Let’s be honest, none of us “want” to be audited.             However, it’s not always a bad thing.

In actuality, a financial audit most commonly refers to an independent review of an organization’s financial books. Usually conducted annually, it’s really just a part of a reliable checks-and-balances system to make sure everything is in order.

First, it’s important to know if an annual financial audit is required of your organization by the federal government or by your state. These standards vary considerably. The federal government requires any organization receiving federal funds of more than $750,000 in a year to undergo a “Single Audit (formally A-133),” which generally covers the year and program in question.

Another factor to consider is the requirements of funding sources. In addition to the requirements of federal and state governments, some funders may require an independent audit as a condition of funding.

If you do determine that an audit is beneficial (or required), it’s important to know that it must be prepared by a licensed independent certified public accountant (CPA). Once engaged, an auditor performs a series of selective tests that provide a basis for judging whether the financial reports can be relied upon.

Auditors will examine, among other things, bank reconciliation, selected restricted donations (to see that they were handled and recorded properly), and grant letters (to see that receivables are accurately stated). In addition, the auditor reviews physical assets, journals, ledgers and board minutes. Based on this investigation, the auditor issues a formal opinion about the accuracy of the financial reports.

The important thing to remember is that audits are not a bad thing and can be a learning process for your organization.  It’s partially about improving your organizations processes and procedures in order to eliminate the potential for fraud and ensure your book are in good shape.  Your auditor really is there to help.


More information that may be helpful

When Is a Nonprofit Required to Have an Independent Audit? –

70 Percent of Companies Affected by Fraud in the Past Year –


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