Deeply immersed in the not-for-profit sector, our professionals have significant experience guiding organizations to reach their goals. We provide solutions specific to the nuances, challenges, and operations of not-for-profit organizations—while customizing plans to meet your unique needs. By promptly incorporating these insights, nonprofits can strengthen their accounting services for nonprofit organizations financial practices and show a commitment to transparency and accountability.

• Generally, the funding source of a nonprofit and its yearly budget will determine whether it is required by the federal or state government to schedule an independent audit.
• 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.
• They include cost principle, revenue recognition, materiality principle, and full disclosure principle, among many others.
• Our simple-to-use and powerful features range from Donation Forms and Fundraising Pages to Recurring Donations, Crowdfunding, Peer-to-Peer, Events, Memberships, and more.

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Implementing and updating policies before applying for grants, as well as after receiving them, is imperative. Conducting a gap analysis upon receiving a Notice of Grant Award, and communicating the grant’s terms and conditions across departments will prevent any compliance surprises. Each audit type serves a distinct purpose and empowers nonprofits to operate with confidence and integrity. Sometimes we get comments from new prospects that “CLA is really big, and probably too big to serve us.” We fundamentally disagree.

Strengthen Board Governance

Many nonprofit organizations both large and small need to undergo a financial statement audit every year. Preparing for a nonprofit audit can be overwhelming and anxiety-filled, especially if it’s your first audit or you don’t have a strong and experienced financial team. Certified Public Accounting firms verify that nonprofits comply with federal tax laws and regulations during the audit. By adhering to these standards, you can demonstrate your commitment towards responsible stewardship of resources.

The Auditors’ Report

This revenue must be recognized over the period in which these services are provided, aligning with the accrual accounting principle. Robust accounting systems are essential for tracking and allocating these revenues accurately. During this step, you may also want to review your compliance with labor laws and regulations. If you find issues with employee or contractor documentation, you can remedy them now. Partner with the experts at Jitasa to make the most of your nonprofit audit experience.

An audit can also provide insight into the organization’s financial health and help identify areas of improvement. The Financial Accounting Standards Board (FASB) principles require auditors to issue a report to the board of directors, presenting a professional opinion about the nonprofit’s financial practices. It will determine whether the audited financial statements represent the financial position of the organization without inaccuracies or material misrepresentations. As mentioned above, nonprofits receiving federal funds are often subject to specific audit and compliance standards set by federal agencies.

When determining the scope of an audit, it’s important to consider any areas where there could be potential discrepancies or weak points in operations or governance. Navigating nonprofit audits requires a strategic approach and a collaborative mindset. A valuable lesson from recent SOC 2 compliance initiatives is the significance of having the entire organization aligned towards a culture of compliance. Collaboration across the board is crucial, as evidenced by the Ford Foundation’s experience in addressing their website’s evolving needs.

• And some nonprofit grants require a satisfactory audit before your nonprofit can receive funding.
• Independent audits are performed by a public accounting firm or an individual who is a certified public accountant (CPA).
• By examining financial statement components, revenue recognition, and internal controls, auditors can provide insights that support the organization’s mission and objectives.
• ‍The first step to auditing a small nonprofit is to select the auditor that is right for your organization.

During the research process, your auditing committee must have a clear idea of https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ 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). These improvements may involve fundraising opportunities you weren’t aware of and expenses you no longer need.

• Auditors must verify compliance with these stipulations, ensuring revenue is recognized according to donor intent and applicable accounting standards.
• By taking the necessary steps to implement any improvements suggested by the audit report, nonprofits can further the success of their organization and mission.
• By embracing these benefits, nonprofit organizations not only comply with regulatory requirements but also position themselves for sustained growth and impact.
• You need to get started early (up to a year ahead of time, if you don’t already have a relationship with a CPA for your audits) to ensure everything runs smoothly.
• Finally, nonprofits that understand the benefits of audits will include this requirement in their organization’s bylaws, making this mandatory each year.

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 one-off single audits are a great start, get on a regular cadence with annual audits. This isn’t a complete glossary of auditing and accounting terms, but it’s a good place to start. Terminology is critical in accounting, so don’t be afraid to check a term if you’re unsure what it means. This allows us to deliver audits that are accurate, efficient, and highly informative for your leadership and stakeholders. When the audit report is complete, we will explain what is working for your organization and what areas need improvement.

• To clear up this confusion, let’s begin by answering some common questions about nonprofit audits.
• 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.
• Auditors will also review the organization’s policies and procedures, including its operations and management.
• These articles and related content is not a substitute for the guidance of a lawyer (and especially for questions related to GDPR), tax, or compliance professional.
• Through careful planning and effective risk assessment strategies, organizations are better equipped to deliver accurate financial reports while remaining compliant with all reporting standards.

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This will involve creating controls or procedures to ensure that corrective action is taken should any issues arise during future audits. In addition, proper documentation should be maintained in case further evidence is needed by auditors at a later date. Audited financial statements provide donors and grantmakers with confidence that their contributions are being managed responsibly and in accordance with donor restrictions. Audited financial statements undergo a thorough examination by an independent auditor, providing the highest level of assurance.