Nonprofit Audits: Independent Assurance for Better Decisions
A pillar guide to nonprofit financial statement audits and single audits — when one may be required, what the engagement covers, how the process runs, and how Dohan CPA supports readiness.
Assurance Services
Dohan CPA provides nonprofit audits for charitable organizations, foundations, membership organizations, schools, religious organizations, social-service providers, boards, grant managers, and finance teams. Our objective is transparent reporting over mission resources, donor restrictions, grants, governance, and stewardship. This guide explains when the service may be needed, what the engagement addresses, how the process works, and how management can prepare.
Who nonprofit audits are for
Dohan CPA's nonprofit audits are designed for charitable organizations, foundations, membership organizations, schools, religious organizations, social-service providers, boards, grant managers, and finance teams. The engagement is organized around the reporting needs of the people who will actually use the statements, rather than treating the audit as a generic year-end exercise.
The intended result is transparent reporting over mission resources, donor restrictions, grants, governance, and stewardship. Management remains responsible for the financial statements, underlying records, estimates, controls, and representations; the independent CPA is responsible for planning and performing the engagement and reporting in accordance with the applicable professional standards.
When an audit may be needed
A nonprofit may need an audit because of state law, grant or contract terms, lender requirements, bylaws, board policy, or federal-award expenditures. Under revised Uniform Guidance, the federal single-audit threshold is generally $1 million for fiscal years beginning on or after October 1, 2024. A financial statement audit and a single audit are related but distinct scopes.
Before accepting a timetable or quote, identify the reporting entity, fiscal period, financial reporting framework, intended users, required report language, delivery date, and any compliance or supplemental schedules. A requirement in a loan, contract, statute, regulatory agreement, or governing document should be read directly rather than summarized from memory.
What makes this engagement different
Nonprofit reporting must explain not only financial position and operating results but also restrictions, liquidity, functional expenses, grants, contributions, programs, and stewardship. Audit readiness depends on coordination among finance, development, programs, grants, payroll, and the board.
A strong engagement therefore combines technical accounting, industry knowledge, disciplined project management, and timely communication. The audit is more efficient when key schedules reconcile before fieldwork and questions are routed to people who understand the underlying transaction.
Areas commonly addressed
The scope is risk-based and tailored to materiality and the applicable standards. Common areas include:
- Contributions, grants, conditional promises, exchange transactions, restrictions, and releases from restriction
- Cash, investments, endowments, donor-restricted funds, beneficial interests, and fair-value disclosures
- Program, management and general, and fundraising expense classification and allocation
- Grant compliance, allowable costs, subrecipient monitoring, procurement, reporting, and federal award schedules
- Payroll allocation, donated goods or services, related parties, conflicts of interest, and governance
- Liquidity, going concern, commitments, contingencies, subsequent events, and Form 990 consistency
Our audit approach
The exact procedures vary with assessed risks, but a well-managed engagement commonly includes the following work:
- Understand gift acceptance, grant, program, payroll allocation, purchasing, investment, and close controls
- Test contributions and grants for existence, conditions, restrictions, cutoff, classification, and collectibility
- Confirm cash and investments and evaluate donor restrictions, endowments, valuation, and income allocation
- Test expenses and allocations among program, management and general, and fundraising categories
- When applicable, perform Uniform Guidance planning and testing over major programs and prepare required reports
- Communicate with management and those charged with governance about adjustments, controls, and findings
What the audit does and does not provide
A financial statement audit is designed to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether caused by error or fraud, and to support the auditor's opinion. Reasonable assurance is a high level of assurance, but it is not absolute assurance and an audit is not a guarantee that every error, control deficiency, improper payment, or instance of fraud will be found.
An audit also does not replace management's responsibilities, provide legal advice, determine the value of a business or property unless separately engaged, or predict future results. Findings and recommendations should be evaluated in the context of the engagement's objective and the organization's risk tolerance.
A practical timeline
Planning should begin before year-end. During planning, confirm scope, independence, deadlines, material locations, confirmation contacts, specialists, prior findings, and client-prepared schedules. After year-end, management closes the books and delivers reconciled schedules. The CPA performs fieldwork, communicates open items, evaluates adjustments and disclosures, obtains representations, and issues the report after all required evidence and approvals are complete.
Calendar time depends on readiness and responsiveness as much as auditor hours. Missing reconciliations, changing trial balances, incomplete contracts, slow third-party confirmations, and late legal or governance information are common causes of delay.
Why work with Dohan CPA
Dohan CPA brings the perspective of a full-service CPA firm serving South Florida businesses, organizations, owners, and high-value individuals. The objective is a technically sound engagement with direct communication, practical request lists, visible responsibility, and attention to the decisions the financial statements must support.
A proposed engagement should be finalized only after Dohan CPA confirms that the service is within the firm's current capabilities, independence requirements, licensing, staffing, and quality-management procedures.
Frequently asked questions
Does every nonprofit need an audit?
No. Requirements depend on state registration rules, grants and contracts, lenders, bylaws, board policy, and federal-award expenditures. Confirm all applicable obligations each year.
What is a single audit?
A single audit is a compliance-focused engagement under Uniform Guidance that includes financial statement work and testing of major federal programs. It is not simply another name for a nonprofit financial statement audit.
What is the current federal single-audit threshold?
For fiscal years beginning on or after October 1, 2024, the revised Uniform Guidance generally sets the threshold at $1 million of federal awards expended during the fiscal year. Confirm applicability and any agency-specific requirements.
How are donor restrictions different from board designations?
Donor restrictions arise from external donor stipulations. Board designations are internal decisions and generally remain within net assets without donor restrictions, although they should be clearly documented and disclosed as appropriate.
Does the auditor prepare Form 990?
The audit and Form 990 are separate services. A CPA firm may perform both subject to independence and engagement terms, but management remains responsible for the return and should reconcile it to the audited financial statements.
What should the audit committee do?
It should understand scope and independence, meet with the auditor, monitor readiness and findings, oversee corrective action, and provide an opportunity for private communication with the auditor.
Authoritative sources
- Grant FAQs - Uniform Guidance single audit threshold - Health Resources and Services Administration
- Yellow Book: Government Auditing Standards - U.S. Government Accountability Office
- FASB: Accounting Standards Updates Issued - Financial Accounting Standards Board
General educational information only. This page is not accounting, auditing, tax, investment, or legal advice and does not create a CPA-client relationship. Requirements and standards can change and depend on specific facts and agreements.