The first thing to know about this report is that if it isn’t clean, that is totally fine! What really matters isn’t how many recommendations the auditor made—it’s how promptly and thoroughly you act on them. If your auditor requests access to your accounting system, make sure to grant them the correct level of user permissions (often view- or read-only) before the audit.

• Next, you’ll work with your team to make sure you have everything the auditor needs to review, such as financial statements, bank statements, and tax documents.
• For example, with a slight majority, 26 states require nonprofits to be audited when they reach $1 million in revenue.
• These clients pay nothing or less than the costs, so in what way are they the customers?
• Dedicated audit preparation comes with our standard bookkeeping and accounting services for mid-sized to large nonprofits and is available as an add-on for small organizations.
• Always, but particularly in the current environment, the ability for a nonprofit to show that it takes fiscal compliance and oversight seriously, is as important as ever.
• Gain peace of mind on your nonprofit’s financial health and sustainability with Doeren Mayhew’s nonprofit CPA services.

Understanding the Implications of the House Committee’s Tax-Exempt Review

The Nonprofit Audit Guide will NOT, however, help you identify an independent auditor. 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. 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. Overall, conducting a financial statement audit allows your organization to improve its internal financial management strategy and relationships with external stakeholders. Our nonprofit clients who engage us for outsourced CFO, accounting, and bookkeeping services benefit from year-round audit-ready financials. Clean books, consistent reconciliations, proper fund tracking, and clear documentation aren’t something we scramble to assemble at year-end—they’re part of our standard operating rhythm.

Understand the Scope

The cost of an independent audit varies depending on the geographic region where the nonprofit is located and how large the organization is. Audit fees can be significant for large nonprofits located in major urban areas. An independent audit is an examination of the financial records, accounts, business transactions, accounting practices, and internal controls of a charitable nonprofit by an “independent” auditor. “Independent” refers to the fact that the auditor/CPA is not an employee of the nonprofit but instead is retained through a contract for services, and hence is “independent.”

Federal Audit

As a nonprofit, your relationship with donors and government entities is vital, and has to be built on trust. We don’t just check boxes—we help nonprofit leaders understand their financial health and improve governance. Whether required or voluntary, audits are often essential to long-term credibility and funding success. Get our FREE GUIDE to nonprofit financial reports, featuring illustrations, annotations, and insights to help you better understand your organization’s finances. Partner with the experts at Jitasa to make the most of your nonprofit audit experience. During the research process, your auditing committee must have a clear idea of how long the audit will take and how much working with the auditor will cost.

It Figures Podcast: S3:E12 – Lease Accounting is for EVERYONE

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. However, being audit-ready isn’t something you do every year at the end of the year; it’s something that you do at the end of every month. Then, perhaps, you close with a sentence or two of actual fundraising language, requesting donations.

After all, raising and disbursing funds is sometimes a tedious, monotonous business. Hiring a professional CPA to conduct an independent audit highlights points in the process where details fall through the cracks. So, an independent auditor serves as https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ a means of quality control, helping to avoid backtracking and embarrassing admissions of errors later. This article will cover when and why an independent auditor is necessary for a nonprofit organization as well as the generally accepted accounting principles that serve best when a financial audit is necessary. The Susan S. Lewis CPA firm performs audit services in Chicago and nationally.

Can I Keep Digital Copies of My Tax Records Instead of Paper?

When it comes to managing your nonprofit, it’s important to focus on serving your mission and achieving your organization’s greatest The Key Benefits of Accounting Services for Nonprofit Organizations potential. However, a crucial component driving this success is a good understanding of the organization’s financial health. By providing audited financial reports and annual reports on your website, you’re helping build trust with your donor base.

Our Clients

Sometimes we get comments from new prospects that “CLA is really big, and probably too big to serve us.” We fundamentally disagree. We understand the complexities surrounding the organization, the motivation of leadership and the viewpoint of the people served. Smith Schafer will help you become a more responsible steward of funds and a more efficient provider of services. The best way to do this, to have a substantial record that tells a story and will hold up during an audit, is to use a time-tracking system that’s available to all of your employees on their mobile devices. Nonprofits expending $1,000,000 or more in federal funds are subject to the federal “Single Audit” requirements.

• Leveraging AI tools and a partner you can trust, not only benefits your organizational efficiency but helps grow your mission.
• The AICPA and the individual state governments require auditors to be independent.
• It also makes the case for a regular independent audit to flush out issues in advance of an initial contact letter from the IRS.
• My big lesson was that change may at times be sneaky or elusive but it is never fast.
• The federal government is not the only one that requires regular audits by nonprofits.

These varied requirements present challenges that only experience can overcome, and our experience has earned us a reputation of excellence and dependability in the nonprofit accounting industry. Nonprofits are subject to specific accounting standards, such as the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 958, which governs the presentation of financial statements. This standard emphasizes net asset classification, distinguishing between unrestricted, temporarily restricted, and permanently restricted funds. Understanding these classifications is essential for accurately assessing a nonprofit’s financial health and resource allocation. Click on a state in the map below to find a link to the state law that governs audit requirements (if applicable) for charitable nonprofits in that state. If a nonprofit’s financial position opens it up for an audit, one possible scenario is the field audit.