Finding the Right Auditor for Nonprofit Compliance: CLA

This guide will walk you through what financial audits are, why they matter, and how to ensure your next audit not only meets compliance standards but strengthens your nonprofit’s credibility and financial practices. The duration of the independent audit can vary according to whom the audit is due, board members, for example. While some expectations can appear generous, the amount of work demanded by the audit may find auditors sweating to make the finish line in time. Selecting an independent certified public accountant with the right experience can take up to 12 months. 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. Before your audit, it’s a good idea to analyze your internal controls and procedures.

Benefits of Timely Filing:

For instance, if your organization receives federal funding, you will likely need to schedule an audit, even if your state does not require one. This is true whether you receive the federal funding directly or the funding is passed to you by another entity. In the Guide, you can get information about what will happen at every stage of your independent audit. References from other organizations in your field will help you identify firms with experience in the different types of audits for nonprofits.

• Stay up to date on financial and operational issues that could affect your organization by browsing articles, newsletters, and other relevant content written by our Not-for-Profit Practice professionals.
• This highlights the importance of efficient and strategic planning during the audit process to ensure sustainability and growth.
• This proactive approach sets a solid foundation for a smooth and successful audit experience, ultimately contributing to greater financial transparency and accountability within your nonprofit organization.
• This is in contrast to a business where revenue is typically recognized at the point of sale or service delivery.
• State and local governments might also require audits for charitable organizations involved in public fundraising, especially if a nonprofit’s annual revenue or contributions surpass set limits.

When it’s time to find a CPA or audit firm for your charitable nonprofit

In the District of Columbia, as well as 39 of the 50 states, nonprofit charities must be formally registered before fundraising. As mentioned, nonprofit rules vary from state to https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ state, so you must review the rules in your state if you want nonprofit status for your organization. This review allows management to provide feedback, address any factual inaccuracies, and discuss preliminary findings with the auditors. Nonprofit organizations can undergo various types of audits to ensure their financial integrity, compliance, and operational efficiency. Understanding the different types of audits is crucial for nonprofits to select the most appropriate one for their needs.

• They are an integral part of ensuring that nonprofits like the Literacy Lab and Cultural Survival remain effective, accountable, and true to their missions, ultimately leading to a more equitable and just society.
• Auditors will generally send a PCB (Pull by Client) list of additional documents and information they will need to complete the audit.
• Doeren Mayhew has a wealth of experience to offer you in your next nonprofit audit.
• It can help to ensure compliance with laws and regulations, reduce the risk of fraud or other financial irregularities, and improve your overall financial health.
• However, nonprofit audits don’t have to be complicated if you understand, more or less, how they work.
• In fact, one or more IRS agents may participate, depending on the size of the nonprofit organization.

MEET THE TEAM

For charitable organizations with ambitious growth plans, a voluntary audit can also serve as a foundation for refining financial practices and preparing for future funding opportunities. Accounting software designed for nonprofits, such as Araize FastFund Accounting, helps maintain accurate financial records, track fund restrictions, and ensure compliance with accounting standards. It simplifies the preparation process and supports the generation of audit-ready financial statements. Firstly, auditors must reach a complete understanding about reviewing specific financial statements during the audit process.

• Instrumentl is the all-in-one grant management tool for nonprofits and consultants who want to find and win more grants without the stress of juggling grant work through disparate tools and sticky notes.
• While some expectations can appear generous, the amount of work demanded by the audit may find auditors sweating to make the finish line in time.
• One-third of states in the US require regular audits for nonprofits that solicit funds from the state’s residents.
• Another trigger could be notification by any number of other government agencies that the nonprofit organization has failed to operate in accordance with their rules for grant recipients.
• By learning from real-life examples and adopting best practices, nonprofits can overcome common challenges and ensure the accuracy and reliability of their audited financial statements.

Program-specific audits

• Preparing for a nonprofit audit checklist can serve as a valuable tool to keep track of all items listed in the PBC.
• In addition to single audits for larger funding amounts, other federally required audits or reviews may apply, depending on the funding agency’s guidelines.
• You must start working with an auditor early enough to meet external and internal deadlines.
• Gathering the necessary documentation for a nonprofit audit is an essential part of the process that helps to ensure accuracy and compliance with reporting standards.
• Key insights and actionable guidance based on feedback from nonprofit finance and executive leaders.

Additionally, understanding and implementing the matching principle, where revenue is recognized in alignment with program performance, can lead to more accurate and transparent financial reporting. Aligning accounting practices with the organization’s structure, whether it operates on an accrual or cash basis, is also essential. By adhering to these best practices, nonprofits can position themselves as trustworthy and effective stewards of their resources, thereby bolstering their credibility with donors, funders, and the communities they serve. An independent audit may be among the nonprofit audit requirements for those enterprises receiving federal funding. Congress to assure compliance with rules governing federal grant management standards and nonprofit organizations, particularly those that spend more than $750,000 of said funds annually. The same legislation advanced consistent procedures to conduct an independent audit of a nonprofit accounting services for nonprofit organizations organization.