The Beginners Guide to Nonprofit Auditing Free Checklist + FAQs

Your message has been received and we’ll be reviewing your request shortly. Once you’ve made these changes, you can send the audited information and modifications to the IRS to update your 990 forms. Regular audits will keep your Board of Directors and employees accountable for their decisions.

Additional information – Charity and nonprofit audits

However, if you are not required to have an audit and simply need an independent review of your financials, a financial review may be a more cost-effective option. Here is some estimation of the order of magnitude cost of an audit based on the nonprofit organization’s financial size. This is because the auditor will have a comprehensive understanding of the nonprofit’s operations and can offer suggestions on how to improve them.

• One of our Classy experts will reach out to schedule a hands-on walk-through of the platform and demonstrate how our industry-leading solution can help your nonprofit reach its goals.
• That being said, you need to spend money to make money – even in a nonprofit.
• Lastly, auditors determine whether the nonprofit uses donor funds in accordance with their stated goals and objectives.
• An independent audit may be among the nonprofit audit requirements for those enterprises receiving federal funding.
• Verifying records also includes gathering and organizing proper documentation for all employees and contractors.

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

Generally, the IRS issues a closing letter at the end of a compliance check, but not at the end of a compliance check questionnaire. However, certain state and federal government agencies do require audits on a more regular basis, depending on the size of your organization and your spending. This step-by-step guide helps you avoid costly mistakes, ensuring your events are well-planned, impactful, and deliver a strong return on investment while celebrating your organization’s community impact. These types of audits allow the organization to take a step back and determine if there are better ways of doing things than how they’re currently being done. Conducting frequent audits, primarily financial and operational ones, can help identify any potential risk that may impact the smooth running of the organization and its sustainability in the long term.

Where to Find Nonprofit Financial Information

Auditors must also provide a detailed report outlining all findings and recommendations so that nonprofits can take appropriate action to address any issues uncovered during the audit process. This allows organizations to remain compliant while also giving donors greater assurance that their funds are being used properly and in accordance with stated goals and objectives. This is a perfect example of the deficiency inherent in off-the-shelf accounting software in their inability to generate financial statements https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ for your audit. If your auditor creates financial statements for your audit, then they will report a deficiency in operation on your audit report. Audits can cost upwards of $10,000 – $20,000 or more — and that doesn’t include the time spent by staff preparing for the audit or working with auditors.

Areas of Focus in Auditing a Small Nonprofit Organization

An audit helps improve an organization’s financial transparency, builds donor trust, and ensures compliance with regulations. If any of these requirements apply to your nonprofit, that doesn’t necessarily mean you’ll need to conduct an independent audit every year going forward. For example, some nonprofit bylaws require annual audits, but others state that they should occur every two, four, or five years. Or, if your organization doesn’t plan to apply for any grants that request audit reports this year, even though you did so in the past, you may be able to skip this year.