Does your nonprofit need to have an independent audit?

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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.

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