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Audits for Not-For-Profit Organizations

This is the time of year audits are conducted  in full force, but not all audits involve the IRS. Most audits are a review of procedures, internal and external management reviews, etc. Many time federal and state governments require a yearly audit for all businesses, whether for profit or not-for-profit. The federal government requires organizations receiving federal funds of more than $500,000 a year to go through a single audit, which is a yearly audit covering and entire year of the program in question.

If it is determined that your business needs an audit, then it is important that a licensed independent certified public accountant prepares it. The accountant will know that proper forms and procedures that the audit will need, and the requirements for the federal and state government.

Once the auditors determine what is required and beneficial then they can prepare to look into you organization. Auditors will examine many procedures during an audit, but you can expect them to look at:

  • Bank reconciliations
  • Selected restricted donations (To ensure that they are handled properly)
  • Grant letters
  • Physical assets
  • Journals
  • Ledgers
  • Board Minutes

Once they have examined everything then they will formulate a report on the accuracy of the financial reports.

If your company undergoes an audit, the board of directors should establish an audit committee that is responsible for selecting the auditor, reviewing the auditor’s outputs, and meeting with the auditor for the pre- and post-audit to address any issues or questions. This committee typically has ongoing responsibilities for the organization that includes the overall financial over-sight and internal financial controls.

Audits do not have to be a scary thing for companies to go through. It is important to review the internal controls and procedures that run the day-to-day part of the organization. It is important that everything runs smoothly, and audit will help with this process.

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