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.
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