Does your nonprofit need to have an independent audit?

Not all charitable nonprofits are required to conduct an independent audit. Circumstances that may trigger the requirement for an independent audit include:

• Federal, state, and local governments may request a copy of the organization's audited financial statements.
• Charitable nonprofits that expend $750,000 or more in federal funds in a year are subject to special audit requirements.
• Some contracts with state and local governments to provide services in the community may require the nonprofit to conduct an independent audit.
• Many state laws require that charitable nonprofits submit a copy of their audited financial statements when they register with the state for charitable solicitation/fundraising purposes.
• Private foundations may request that a nonprofit submit a copy of the nonprofit’s most recent audited financial statements in conjunction with submitting a grant proposal.
• Some banks may require a nonprofit to have an audit as a condition of receiving a loan.

If a charitable nonprofit is small and has not conducted an audit due to the cost, the nonprofit should not be shy about asking the funder if a more affordable method of evaluating the nonprofit's financial positions would be acceptable, such as a review of certified financial statements.

Resources to help you decide what is right for your nonprofit

• Is it Time for an Audit? (Blue Avocado)
• Absent the Audit: How Small Nonprofits Can Demonstrate Accountability Without One shares ideas for options that may work best for your organization to demonstrate accountability (Jeanne Bell and Steve Zimmerman).
• Alternatives to an audit

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