Do non-profits need yearly audits?
I work for an Association with a couple of non-profit companies and the question was recently asked of "do we need to do yearly audits or can they be changed to every two years"? We are currently doing yearly audits in which the CPA will do the tax returns at the same time. Due to the recent pandemic situation we are wondering about the cost savings of switching and if it is possible to change to biennial audits?
It depends. The bylaws might require an audit every year. Also if you bring in more than two million a year, it might trigger an audit. Check with your bylaws and CPA.
I agree with Jenafer. I have 3 NP's and we don't do annual audit for any of them.
If you are required to have or desire to have an audit that attests the financials are presented according to GAAP, I would have the tax returns done first. So doing will in a sense provide assurances that the CPA knows what he or she is doing.
I don't mind telling a CPA to fix the return he or she prepared before submitting the financials with return to the auditor. I don't mind posing questions to the auditor about how certain elements in the audit report.
I've discovered over the years that not all auditors understand how to treat Restricted Net Assets. And many tax practitioners don't know either since IRS does not require tax returns to be prepared in conformity with GAAP. See Part X of form 990 where IRS asks if the organization if it uses net assets or fund balances. Fund balances makes financials non-GAAP compliant since around 1993. Look up FASB ASC 958 to see the differences.
To get a better answer to your initial question, ask some of the local funding agencies about your particular situation.
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