Security features like data encryption protect sensitive donor, financial, and organizational information, restricting access only to people you have authorized. This should include the history of actions by time, date, user, ledger, and change detail–all of which can be queried and reporting on. Your system must feature a robust audit trail to track all changes and activities, ensuring transparency accounting services for nonprofit organizations and accountability throughout the many tasks, documents, and workflows in the system. This assures them that your nonprofit has what it takes to manage funds responsibly and can be trusted to respect their guidelines.
Detailed State-Specific Requirements
- Although these are rare, IRS audits can occur if an organization’s Form 990 reveals discrepancies or other issues.
- The auditor is an independent professional hired and paid by your nonprofit.
- A nonprofit audit examines financial records, bank accounts, business transactions, accounting principles, and internal controls within a nonprofit organization.
- Choosing between an audit and a financial review is an important decision for any nonprofit.
- An independent CPA must still conduct this review, but it is less comprehensive than an audit.
Our tool integrates with leading CRM tools to help you utilize this data to the max! 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. The best way to determine this for each option is by asking for a request for proposal (RFP). Audits give your nonprofit an excellent overview of where you need improvements. The IRS will audit your nonprofit if there are discrepancies in your tax reports, but instances of this are few and far between. We’re honored that over 120 nonprofits trust us with their bookkeeping and accounting.
How long does the nonprofit audit process take?
- The first thing to know about this report is that if it isn’t clean, that is totally fine!
- These audits assure funders of the organization’s credibility and responsible financial management.
- The auditor assesses the effectiveness of the nonprofit’s internal controls, which are procedures and policies designed to safeguard assets and ensure accurate financial reporting.
- In the nonprofit world, audits are a normal course of business and should not be something to be nervous about.
- The trade-off is that audits offer the highest level of assurance, while reviews provide only a limited amount.
The applicability of these changes may vary depending on an organization’s fiscal year. Organizations in this range now have the option to submit a reviewed financial statement instead of a full audit. An independent CPA must still conduct this review, but it is less comprehensive than an audit. If possible, start implementing changes before you file your nonprofit’s annual tax return so your efforts will be reflected on your nonprofit’s Form 990. Fund accounting allows nonprofits to segregate financial resources based on their intended purpose, ensuring accountability and transparency. Separate ledgers for general funds, restricted funds, and endowments enable accurate tracking of resource allocation and expenditure.
Examining Internal Controls
Here’s a rundown of what each entails and what might be best for your organization. Many nonprofit boards immediately assume that an audit is necessary without fully considering a review — which in many cases will provide the appropriate level of assurance. Understanding the differences between these two financial examinations, their respective benefits and the circumstances under which each is appropriate can help nonprofits make informed decisions. As you prepare for your nonprofit audit, collect your grant agreements and the records of related expenditures. Carefully compare these documents to ensure compliance with grant terms and conditions. Whether you need audited, reviewed, or compiled financial statements for your non-profit organization in any U.S. state or territory, our team of CPAs is ready to assist you.
Internal policies and best practices
We specialize in helping nonprofits with financial management–including audit readiness. Our team will help you go through the checklist and prepare documents for a smooth, stress-free audit process. Specifically, you’ll want to make sure you comply with IRS requirements for nonprofits. Use industry-specific standards to document your compliance with any regulations that govern your organization. Preparing for an audit also helps ensure the accuracy of your financial records, which can help reduce discrepancies found by the audit. A charitable organization using the services of a paid professional fundraiser remains subject to different rules.
