Fiscal auditing refers to the systematic review and verification of an organization’s financial statements, records, and practices to ensure accuracy, legality, and compliance with established regulations.
A fiscal audit is simply a formal review of an organization’s financial transactions and internal controls alongside reporting processes over a specific fiscal year. It is designed not only to verify accuracy but also to make sure of full compliance with applicable standards as well as regulations.
Fiscal audits are vital in terms of promoting accountability, accuracy, and financial compliance across all sectors—whether it is a nonprofit undergoing its annual fiscal audit, a company preparing for tax season, or a public agency subject to a government fiscal audit.
In this article, we will present what is a fiscal audit, how it differs from a financial audit (fiscal vs financial audit), the role of federal oversight (including the Bureau of Fiscal Services audit), and demonstrate actions that can be taken for effective fiscal audit preparation.
Fiscal auditing is a structured, independent examination of an organization’s financial records, internal controls, and overall fiscal management across a designated fiscal period—typically 12 months.
This process is intended to assess whether financial practices align with legal, regulatory, and budgetary expectations. The key areas that are typically assessed are presented below:
A fiscal audit might be conducted by internal audit teams and third-party accounting firms or government entities—like during a government fiscal audit or a Bureau of Fiscal Services audit. The approach changes in accordance with the organization’s structure and regulatory obligations as well as whether it undergoes an annual fiscal audit.
Several types of organizations are legally required to undergo fiscal audits, while others choose to conduct them voluntarily for transparency and accountability.
Government entities at all levels typically face audit requirements. Federal agencies must comply with the Chief Financial Officers Act and undergo annual audits. State and local governments often have constitutional or statutory audit mandates, with requirements varying by jurisdiction. Many states require annual audits for municipalities above certain revenue thresholds or those managing specific types of funds.
Nonprofit organizations frequently need fiscal audits based on their funding sources and size. Organizations receiving federal grants of $750,000 or more in a fiscal year must obtain a Single Audit under the Uniform Guidance. Many states also impose audit requirements on nonprofits based on revenue levels, typically ranging from $250,000 to $2 million in annual receipts. Private foundations and charities registered for public solicitation often face additional state-specific audit requirements.
Publicly traded companies must undergo annual audits as mandated by the Securities and Exchange Commission (SEC). This requirement extends to all companies listed on major stock exchanges, ensuring investors have access to reliable financial information.
Organizations receiving government funding often trigger audit requirements through their contracts or grant agreements. This includes healthcare providers participating in Medicare or Medicaid, educational institutions receiving federal financial aid, and contractors working on government projects above certain dollar thresholds.
Beyond legal requirements, many organizations choose fiscal audits voluntarily. Banks and creditors may require audited financial statements for loan applications or credit facilities. Board members and donors often request audits to ensure proper financial stewardship. Companies preparing for sale, merger, or seeking investors typically obtain audits to provide credible financial information to interested parties.
The specific audit requirements depend on your organization's structure, funding sources, and applicable regulations in your jurisdiction. Consulting with a qualified accountant or attorney can help determine your specific audit obligations.
The Bureau of the Fiscal Service (BFS), part of the U.S. Department of the Treasury, is responsible for managing the federal government’s finances—including payments, collections, and financial reporting.
It should be recognized that the BFS does not directly conduct audits. Yet, it plays a vital role in the fiscal audit preparation process. The financial data it compiles supports audits led by:
In the context of a Bureau of Fiscal Services audit, the BFS makes sure that all government-wide financial records are accurate and consistent as well as ready for independent evaluation. Its reporting is fundamental in terms of annual fiscal audit of the U.S. government’s consolidated financial statements.
An internal fiscal audit is conducted by an organization’s in-house audit team or finance department. Such audits are designed to assess internal controls and make sure of policy compliance. They flag any irregularities too. Their role is critical in early detection of issues and effective fiscal audit preparation for external reviews.
They are performed by independent auditors—typically licensed CPA firms—an external fiscal audit presents an objective assessment of financial statements. Such audits are useful in verifying that the records are accurate and fully comply with established standards like GAAP (Generally Accepted Accounting Principles) or GASB (Governmental Accounting Standards Board). They are fundamental for publicly accountable entities or those undergoing an annual fiscal audit.
A government fiscal audit applies to public agencies and organizations that receive federal funding, like nonprofits or educational institutions. These audits usually follow GAGAS (Government Auditing Standards, also known as the Yellow Book) or Uniform Guidance rules. Oversight may involve coordination with federal agencies and might be supported by a Bureau of Fiscal Services audit process.
Fiscal audit preparation is key to a successful annual fiscal audit. By performing such preparations ahead of time, the risk of delay can be lowered and accountability can be demonstrated to auditors and stakeholders.
All relevant records should be collected as demonstrated below:
Organizaton’s systems should be evaluated for:
It should be ensured that all internal records match external statements and reports. Early reconciliation might present assistance in locating and resolving discrepancies before the audit begins.
If the last annual fiscal audit revealed any issues, document the steps taken to correct them and demonstrate evidence of improvements.
Running a mock audit with internal staff or an external advisor should be considered in order to identify gaps or control weaknesses.
A clear audit timeline should be established, roles and points of contact must be defined, and secure file-sharing systems should be prepared well in advance.
It should be acknowledged that a fiscal audit is more than a procedural check whether internal or external—it plays a strategic role in the organization’s financial health.
A proper annual fiscal audit can serve as both a compliance tool and a roadmap for smarter financial management.
So, what is a fiscal audit really about? Well, it is more than a regulatory formality—it’s a comprehensive check on how effectively the organization manages, documents, and reports its finances throughout the fiscal year.
Whether you're overseeing a nonprofit, a public agency, or a private business, thoughtful fiscal audit preparation can make the annual fiscal audit more efficient and beneficial. Moreover, it also strengthens internal accountability and reinforces external trust.
Need help getting audit-ready? Dimov Audit provides expert guidance for organizations of all sizes, including those undergoing a government fiscal audit or preparing for a Bureau of Fiscal Services audit.
📋 Download our free audit preparation checklist or reach out to our team to ensure your next audit starts from a place of confidence.
It’s the review of financial activity, controls, and reporting over a fiscal year to assess compliance and accuracy.
No. It maintains federal financial records that support audits by oversight agencies.
Start early with fiscal audit preparation—gather documents, test controls, reconcile accounts, and coordinate with your auditor.
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