Regular audits will keep your Board of Directors and employees accountable for their decisions. One or a group of IRS agents show up to your organization and begin to file through your financial paperwork. Bland said his department has also hired a new IT person who started work this week. That person will work to verify data to make sure that it is correct, complete and consistent, according to the audit recommendations. The audit was particularly critical of Austin Animal Services for its failure to keep the center clean and for housing dogs in temporary crates, which could lead to more infectious diseases in the shelter. While there was support for some of the changes, some members of the public expressed concern that they would result in euthanizing more animals.

• 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.
• Auditing a small nonprofit organization is a necessary process that should not be overlooked.
• The National Council of Nonprofits has created this Nonprofit Audit Guide© to provide charitable nonprofits with the tools they need to make informed decisions about independent audits.
• Here at Jitasa, we file our clients’ Form 990s after they’ve completed their financial audit.
• This can enhance credibility and build trust with donors, grantors, volunteers, and the general public.

In good news, the new Inflation Reduction Act can provide tax credits for nonprofits undertaking green energy projects even if you don’t have taxable income. The main purpose audit of a non-profit organization is for verifying the accuracy and fairness of the financial data present in the financial statements. This analysis helps a Chartered Accountant to give an opinion based upon the observation made with proper implementation of a defined set of accounting and auditing compliances. Auditing a small nonprofit organization is a necessary process that should not be overlooked.

Audit of Non-Profit Organization: A Checklist to Follow

A nonprofit audit might result from a judicial directive or another agency request, e.g., an agency granting federal funding. Common reasons why you might conduct a nonprofit audit are to improve your charitable organization’s financial position, transparency, accountability, and bookkeeping practices. In short, it helps you keep track of your donations and expenses and ensures no malpractice behind closed doors. After reviewing the accounting practices of the nonprofit organisation, the next checkpoint for a smooth audit procedure is evaluating the financial reports.

Most of these verifications and corrections are accomplished by telephone or in writing. However, if the audit process fails to resolve certain matters after a reasonable time period, the correspondent audit could possibly ramp up to a field audit. how to audit a non profit organization This potential occurrence is another good reason why accounting records should be consistently kept in order. It also makes the case for a regular independent audit to flush out issues in advance of an initial contact letter from the IRS.

Nurturing organizational culture is a journey

Kristine Ensor is a freelance writer with over a decade of experience working with local and international nonprofits. As a nonprofit professional she has specialized in fundraising, marketing, event planning, volunteer management, and board development. Immediately after you receive the final auditor report, your nonprofit must begin making all suggested changes.

There are a few situations where your nonprofit organization may be required to conduct an audit. For example, your state might impose audit requirements if your income and spending exceed a certain threshold. And some nonprofit grants require a satisfactory audit before your nonprofit can receive funding. Nonprofits have a huge responsibility and immense pressure of utilizing the contribution of donors in an ethical and transparent manner. So, the next checkpoint for a smooth audit of the nonprofit organisation is analyzing the management of contributions.

The Beginner’s Guide to Nonprofit Auditing (Free Checklist + FAQs)

An audit ensures that the organization is in compliance with these standards and any legal requirements governing financial reporting for non-profits. A nonprofit auditing firm can unearth the discrepancies, relationships, and transactions that activated the IRS audits in the first place. Remedying these things sooner rather than later can preclude unwelcome examination by the federal government. Before issuing the final audit report, the auditors will issue a draft of the audited financial statements and any necessary audit adjustments. You should meticulously review each proposed reclassification or adjustment to ensure they are reasonable and accurate.

• The experts at Jitasa can help your nonprofit find an auditor to review your various financial statements and documents to determine the best course of action forward.
• Such organizations are involved in activities like education, the healthcare sector, scientific and professional service, entertainment, religious acts, and social assistance.
• Below, we’ll walk you through everything you need to know about nonprofit audits.
• These nonprofit audits are conducted by third-party organizations and individuals, providing an outsider’s perspective of your organization.
• Additionally, the pre-filing registration tool with the IRS was launched in late December 2023, offering a streamlined process for organizations to initiate tax credit claims.
• External audits are typically the most reliable auditing option for nonprofits.