Understand Why Non-Profit Organizations Needs Certified Audits

Understand Why Non-Profit Organizations Needs Certified Audits The main goal for doing certified audits of a non-profit organization such as a church is to put across an opinion of 2 aspects concerning their financial statements. One is to ensure that financial statements are presented fairly. Yet, the other is to make sure they meet the criteria of the GAAP/generally accepted accounting principles.

These principles are based on the policies and rules established through the body of the accounting profession. Additionally, it may also be done to benefit some outside users like organizational memberships, banks, and government agencies.

Reasons why certified audits are necessary The following reasons can determine whether you may need to do a certified audit: In the case where the by-laws of your non-certified organization, church or any other denomination might require a certified audit, and many times churches only request it after they study their by-laws.

Certified audits may be required with a bank loan contract. Most churches and non-profit organizations are classified in this category. This is also necessary in any other non-profit organization that already has a bank loan contract.

When anticipating a fund-raising/new building campaign, where you need financing for a part of your project, bankers will require viewing your financial audited statements. It’s also much more impressionable to provide an audited statement as to try and answer questions with only a blank stare on your face.

In the case where you are receiving private or government grants, or anticipating in applying for it, certified audits of your financial statements will be necessary. Normally this won’t apply to any churches, although certain auxiliary agencies from churches might qualify. Most granting foundations or agencies won’t release any funds without receiving a certified audit.

To know if your non-profit organization may need independent audits Non-profit charitable organizations might not all require independent audits.

Nonetheless, there are certain circumstances in which independent certified auditing can be required such as the following:

Local, federal, and state governments can request financial audited statements from an organization.

Non-profit charitable organizations that exceed more than a certain amount every year in federal funds can be subjected to special certified audited requirements.

Certain contracts with local and state governments when providing some services within the community might require from a non-profit organization to carry out an independent audit.

A lot of state laws can require from non-profit charitable organizations to submit a financial audited statement copy when registering with their state for any charitable fundraising or solicitation purpose.

Some private foundations might request from non-profit organizations to submit copies of their latest financial audited statements when they submit their grant proposal.

Certain banks also can require financial audited statements incorporated as part of their conditions to receive a loan.

When your non-profit charitable organization is very small without sufficient funds to conduct an audit. Ask the funder to consider a method in evaluating financials that might be more affordable like reviewing financial certified statements.

Why an audit might still be conducted, even if it’s not required by law?

Even when the federal or state legal don’t require audits from certain non-profit charitable organizations, there can still be some reasons why these organizations might decide to do an independent certified audit.

The main reason generally is to demonstrate their commitment to their financial transparency.

To publish these audit reports on the website for non-profit’s, or provide reports to anyone that may request it will be proof of their organization’s transparency. Sometimes the public and donors might expect it from a non-profit charitable organization.

In another case, private and public funders/foundations, as well as governments may require them to submit these financial audited statements to make them eligible for certain funding.

Some charity watchdogs like Charity Navigators, Charity Watch, and Charities Review Councils may require it to rate the organization.

Lastly, it’s a very good practice even with incorporating the cost. Your board of directors might want this assurance that independent audits can offer, and knowing all financial statements will be free from any material misstatements.

The non-profits National Council can encourage these organizations in making the decision together with professional guidance such as accountants that is familiar with procedures of funding and finances sources for non-profits, and also requirements from state’s legal for audits.

A non-profit organization can build their professionalism, reputation of integrity, and transparency through conducting regular independent audits and present it to the public and stakeholders.