Nonprofit Genie (FAQs) | Funds Management

Some nonprofits are legally required to obtain audits. Many states require an audit for nonprofits which receive contributions over a specified amount (the amount varies from state to state) and/or nonprofits who hire a paid fundraiser. You may contact the Secretary of State or Office of the Attorney General for regulations in those states where you raise money. In addition, nonprofits which spend $500,000 or more in direct or pass-through federal funding during a single fiscal year are required to have an audit.

You may choose to obtain an audit even if you are not legally required to do so. Many funders commonly request audited financial statements. In some cases, they will accept statements prepared in-house. Alternatively, they may accept a CPA review (see below.)

In addition to these external requirements, the board may seek reassurance that the financial information they are considering as part of their oversight function is accurate and complete. In cases where financial problems or irregularities in the financial system have occurred, the board and the general public may look to an audit to provide assurance that these problems have been resolved. Also, the audit process can be valuable to your executive director and finance staff since it confirms the financial picture and helps you strengthen internal control procedures.

Finally, an audit signals a new phase in the organization's maturity. As your organization's financial transactions become more complex, undergoing the rigors of an audit will help your staff understand and develop the financial systems required to track and manage finances responsibility. In addition, as others become attracted to your organization's work, many will expect you to be able to provide them with audited financial statements as they are considering making a contribution as a donor and/or a volunteer.