Three Key Reasons to Re-evaluate Your Not-for-Profit Accounting Audit Partner
Non-profit organizations must have their accounting audited on an annual basis. Conducting an independent audit is required to ensure that financial statements and documentation are being properly kept in accordance with current best practices for not-for-profit accounting.
Not-for-profit audits are important for a number of reasons:
- Gain the trust of potential foundation companies. Some companies require audits from nonprofits so that they can prove their reliability. By going through an audit, a nonprofit can get more funds.
- Maintain good relationships with existing donors. An audit can prove that an organization is committed to financial accountability and transparency.
- Get proof that the organization’s financial statements meet all requirements. The audit is carried out by an independent third-party company that has no interest in false reporting.
Overall, the goal of an audit for a nonprofit is to help optimize the organization, not to uncover financial fraud. A proper audit might help an organization to receive funding, uncover potential strategies and tools to protect the nonprofit from fraud, etc.
In addition, non-profits may be required to have their financial statements and records audited if they:
- Apply for fundraising because audited financial statements are a requirement in some states.
- Spend more than $750,000 or more of federal/state funds per year.
- Are requested by federal, state or local officials for a copy of their audited statements.
- Have a contract with the state or local governments that requires providing services.
- Apply to a foundation for funding to satisfy an organization’s request to prove eligibility before becoming a donor.
Clearly, non-profit accounting audits are critical to undertake annually to optimize operations, support future financial stability, and to maintain and enhance credibility with all stakeholders. Equally important is the auditing partner you choose to conduct an audit of your accounts and financial transactions.
Consultance Accounting has helped many non-profit organizations perform audits. In our experience, some key signs indicate you may need to consider changing your non-profit audit accounting firm. Consider the recent case of a non-profit that recently chose Consultance Accounting to take care of their audit. In this case the clear signs that a new audit partner was necessary included:
- Inadequate performance. If your current accounting firm for non-profit auditing is not capable of providing the in-depth and accurate reports that your board and governing bodies require, it can lead to unfair recommendations which may have a negative impact on your organization. The same is true if deadlines are not met, because this may cause penalties and fines to be assessed.
- Governance requirements. Non-profit organizations should consider using a different auditing partner periodically (every three to five years as a best practice and method of financial control.) It is vital not to leave the evaluation and selection of an accounting firm to conduct a non-profit audit too late so there is sufficient time to thoroughly examine, report, and correct any discrepancies, and of course, answer questions your board of directors or other stakeholders may have.
- Change of relationship. In some instances, your current accounting partner may not be able to finalize your audit or their performance is not meeting your needs. In another scenario, they may not be able to continue providing services to your non-profit because they are shifting their services themselves. This is when having an alternative accounting partner ready to transition your non-profit audit to is key.
Consultance Accounting is the auditing partner for many not-for-profit organizations. If you have questions about the requirements for non-profit accounting and audits, please reach out to us for more information.