Checklist to Prevent Audit in Non Profit Organisation

Nonprofit audits can be complex. With additional deadlines, exceptions, and requirements than traditional tax filing, nonprofit auditors must take extra precaution to stay compliant. Therefore, it is crucial that an organization starts collecting documents now to prepare itself.

An important policy of any Non Profit organization should include an anti-conflict of interest policy to safeguard officers and members against violating company laws.

Review of Accounting Practices

Review provides less assurance than an audit but still serves an essential function in creating transparency and accountability for nonprofit organizations. A CPA independent of the nonprofit performs a limited examination of financial statements using inquiry and analytical procedures; such review services allow Boards of directors to meet fiduciary responsibilities to their nonprofit as well as satisfy external requirements from grant funders or banks.

Nonprofits must uphold stringent accounting controls and best practices to safeguard donors and prevent any form of financial mismanagement. An audit helps verify these standards are being met, giving donors confidence in their stewardship of donations to this nonprofit organization.

A compilation involves having a CPA prepare financial statements using information provided by a nonprofit. While it does not include auditing or verification procedures, it provides a useful way of organizing nonprofit information so it can be reviewed by third parties.

Review of Financial Reports

IRS does not mandate audits of nonprofit organizations; however, state and federal government agencies might conduct them depending on their size and spending habits. Nonprofits should always practice proper financial recording methods and secure an independent annual audit to protect themselves.

An audit is the ultimate form of financial statement service, giving stakeholders reasonable assurance that financial statements are free from material misstatements. An audit involves an in-depth examination of all records related to finances as well as testing internal controls and third party confirmation services among other services provided.

A compilation is the process of organizing and reformatting financial records to give an accurate representation of their finances, unlike an audit or review which involves assurance procedures.

Review of Management of Contributions

When members of your nonprofit staff incur expenses on behalf of your organization, it is imperative that they can be reimbursed. Your organization should establish a reimbursement policy outlining how expenses should be recorded and reimbursed accordingly.

This policy must include specific instructions for recording revenue, expenses and funding releases as well as outlining any conflicts of interest within your organization.

Conflict of Interest Policies prevent team members from making decisions based on personal financial interests rather than what's best for your nonprofit organization. They help ensure all decisions made are impartial and in the best interest of its donors and the integrity of your nonprofit itself.

Review of Cash Flow

A statement of cash flow is an indispensable report for understanding your nonprofit's income and expenditure. It gives your Board an in-depth picture of how spending and fundraising have progressed over time.

Analyzing your cash flow is an invaluable way of uncovering potential risks or opportunities facing your nonprofit, as well as helping you develop and refine its budget. For instance, it can reveal whether or not it overly relies on service fees or membership payments, and look out for any coding errors or duplicate entries which could negatively impact financial statements or reports.

Internal controls are a set of business practices designed to provide checks and balances on staff (and sometimes board members) that reduce risk associated with theft, misappropriation or misuse of assets. Nonprofits can create internal controls by setting forth policies and procedures such as requiring two signatures before accepting payment on checks.

Review of Policies and Procedures

Establishing policies helps mitigate embarrassing or potentially hazardous situations, inappropriate actions or decisions made, and financial errors. Nonprofits should review their existing policies regularly in order to identify any that need revising or need creating.

Policies should outline who has spending authority and access to financial records, contracting guidelines, document retention guidelines and conflict of interest guidelines to avoid potential conflicts of interest.

Nonprofits must abide by both state and federal laws that dictate how to operate, such as laws that protect whistleblowers from employer retaliation. Furthermore, nonprofits should take extra precaution to prevent tax fraud by accurately allocating overhead expenses; this helps keep overhead spending ratios low so more funding goes directly towards programs supported by donors.