Why Does My Nonprofit Need an Audit?

Recently, Pedro De Armas of Verdeja, DeArmas, Trujillo LLP in Coral Gables, Florida posted on LinkedIn about why a nonprofit should have an audit. This is a question South Florida Philanthropic Consulting Services is asked numerous times by nonprofit leadership, especially those just starting out. This post accurately sums up our response.

“Considering an audit for your organization? Here are a few reasons why you should independently audit your nonprofit and speak to a professional as soon as possible:

1. An audit shows stakeholders that your financial statements are reliable.
2. An audit shows your organization is dedicated to financial transparency.
3. Some foundations and donors require it.
4. Some charity watchdogs take into consideration whether a group has an independent audit when rating a nonprofit.”

It is easy to share your financial statements but when they have been reviewed and evaluated through an audit, they became much more meaningful to those who are asking about your financial status and stability. All your financial successes, and sometimes financial challenges, are right there in clear language for everyone to see.

We have worked with various nonprofits to secure funding through grants and have had to tell their leadership that while a funding source would be perfect for them, their mission and their programs, they are precluded from applying because they don’t have at least one, if not several years of audited financials. As a result, they are missing opportunities to secure even more funding to help them in the work they are doing.

We also work with nonprofits to update and build out their Guidestar and Charity Navigator profiles and one of the first things that needs to be included, if not already there, are the organization’s recent audits and 990 returns. Years ago, an organization we worked with was told by a prospective donor that unless and until they had updated their profile on GuideStar and shared these documents they would not be making a donation to them. Also consider having a link to or posting them on your website.

So, in a nutshell, audits are a major component of a nonprofit’s success and should not be overlooked or ignored.