Depending on a nonprofit organization’s annual gross receipts and other factors, the organization may be required by state regulation to hire a certified public accountant (CPA) to audit its books and records. Even when external audits are not mandated, they often are recommended.
Is an Audit Mandated or Not?
According to Marylandnonprofits.org, many organizations are subject to special requirements for audits depending on their geographic location and/or their funding sources. “In Maryland, if a charitable nonprofit receives charitable contributions equal to or exceeding $500,000, an audit must be performed and submitted to the Office of the Secretary of State along with its annual charitable solicitation registration form. Some organizations have a by-law provision requiring an audit. Others are required to complete an audit because their funding sources (i.e., United Way or a government entity) require an audit. The Standards for Excellence® program (in Maryland) calls for audits to be performed for organizations with budgets over $500,000.”
Even if the state or federal legal requirements for audits do not apply to a particular nonprofit, there are many benefits for organizations in obtaining an independent audit.
Benefits of an Audit
Many banks and lenders may require a nonprofit organization to have an audit for financing decisions and for assurance with compliance requirements. These are some other benefits of an audit, whether or not it is mandated:
- Potential donors may be more likely to contribute to the nonprofit. Charity rating websites take into consideration whether a charitable organization has an independent annual audit.
- Fiduciary best practices on the part of the governing board may require an audit.
- An audit can provide an organization with recommendations for strengthening internal control and safeguarding assets.
- Audits performed by an independent CPA, such as Goldin Group, can provide assurance that an organization is operating with integrity and is using acceptable accounting guidelines, providing financial transparency to potential donors and the public.
Since nonprofit organizations rely on public trust and tax-exemption that requires truthful representations, even where not explicitly required by law, nonprofits should consider having an independent audit, audit committee, and/or some form of an audit or review process. If your organization is considering an audit, contact us to learn how we may help.
Trust the Professionals at Goldin Group
At Goldin Group LLC, we understand that as a business owner or non-profit manager, keeping up with accounting and taxes is time-consuming and can even be overwhelming. We can help you with non-profit audits, all of your small business write-offs and tax preparation, and much more! We work with individuals and businesses in Maryland (DC Metro Area), offering a variety of financial services designed to save you time and lower your tax burden. If you are a small business that is looking to outsource your accounting or if you need help managing any aspect of your business’s or nonprofit’s finances, we want to hear from you. Call us at (301) 913-0008 or email firstname.lastname@example.org to make an appointment.