Nonprofit Audits: 5 Reasons to Do One, Even if Not Required
Wondering if you have to perform an audit for your nonprofit? While the IRS doesn’t require nonprofits to obtain audits, some other state and government agencies do. Much of it depends on the size of your organization and its spending. But whether your nonprofit must obtain one or not, it’s highly beneficial to perform one anyway.
Five compelling reasons why your nonprofit should perform an audit:
1 – Gain funding
If you want to obtain additional funding for your nonprofit, conduct an audit. Many banks, lenders, foundations, and funders require audited financial statements to qualify for funding. Also, online watchdogs like CharityWatch and Charity Navigator utilize audited financials as part of their rating analysis. Potential donors often check sites like these before making substantial contributions to a nonprofit.
2 – Increase transparency
Obtaining an audit shows your donors and the public that your nonprofit organization is legitimate and honest. And making your audit results readily available is an assurance that your organization’s financial practices meet accepted standards. If your audit reveals some issues, that’s ok. No one is perfect. Be willing to expose those issues and show how you’re working to resolve them. You’ll likely gain more respect and maybe even more help (in the form of donations, volunteers, etc.) as a result.
3 – Bolster improvements
As mentioned above, audits often show opportunities for improvement. That’s normal and surprisingly beneficial. Audits help nonprofits better understand their financial practices and identify issues before they become big problems. Discovering issues early puts your nonprofit in a better position to make improvements going forward.
4 – Enhance accountability
Nonprofits can gain an excellent reputation for accountability and integrity via regular independent audits. They show that your organization embraces the highest standards for reporting financial information. Strive to make audits a standard practice at your nonprofit and readily offer the results to stakeholders and the public.
5 – Reinforce your readiness
While it’s true that the IRS doesn’t require nonprofits to obtain audits, there are certain instances where it does. For example, an audit may be necessary if your nonprofit receives federal funding, whether directly or through a pass-through entity. One of the best ways to prepare for an unexpected audit (or any situation that requires highly accurate financials) is with fast, reliable, and real-time reporting.
Reporting is a significant theme with all of the reasons we mentioned here. So if you’re still using spreadsheets, we can understand why an audit could trigger some anxiety. Outsourcing your accounting not only offers some genuine relief but also provides other unique benefits. Plus, our expert accounting team at Qbix knows precisely what information auditors want to see. What’s more, we can ensure that your nonprofit is always prepared when you need financials fast. Are you ready to be ready? Let’s chat about how we can make your organization better than ever, all while you gain peace of mind.
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Qbix's goal is to provide the latest cloud-based accounting technology while delivering real-time visibility into your nonprofit's financials 24/7. Numbers are our passion, but providing your nonprofit with the financial expertise needed to facilitate growth and profitability is our top priority. And because no two organizations are the same, Qbix offers the flexibility you need to accomplish your nonprofit's goals.
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