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

Nonprofit Audit Guide© Home