Who can request an audit?
An audit for the nonprofit has the potential to originate from inside the organization or be mandated by outside groups. Generally, your board of directors holds the primary oversight responsibility. They might assign this duty to an audit committee. If you don’t have an audit committee, the full board generally remains responsible for audit oversight and auditor selection, while the executive director and staff may help coordinate the process.
Outside groups might also ask for audited financial statements. These groups cover grantmakers, banks, and state regulators, as well as government agencies. If someone suspects tax-exempt abuse, the correct action is generally referring the matter to the IRS — rather than hiring a CPA firm.
Who can request an audit of a nonprofit?
The prompt answer is — several distinct parties have the ability to do so.
Internal decision-makers generally contain the below parties:
- The board of directors
- An audit committee that has authority from the board
- The executive director — working alongside the full board
Outside parties that might require an audit cover:
- A private foundation or other grantmaker
- A bank or lender
- A state charity regulator
- A federal, state, or local government agency
- Federal award rules — which apply when the nonprofit spends $1,000,000 or more in federal awards during your fiscal year
Can one person report a nonprofit and prompt IRS review?
Sometimes, yes, but this takes a distinct path. A donor, employee, volunteer, or member of the public might send information to the IRS in case of suspecting a tax-exempt organization is breaking federal tax laws. The IRS indicates that Form 13909 or a complaint letter works for this purpose. This is not the same as the nonprofit hiring an audit firm for financial statements.
What should a nonprofit do after an audit request?
Begin by looking at the source of the request. Afterwards, align the response with the reason behind it. An annual audit led by the board, a lender requirement, a grant condition, a state filing rule, and a Single Audit requirement all function in a distinct way.
A straightforward way to proceed can be presented as below:
- Verify whether the request comes from the board, a contract, a grant, a lender, state law, or federal award rules
- Determine whether the nonprofit requires a financial statement audit, a Single Audit, or another service
- Collect the basic data before reaching out to CPA firms
Why contact Dimov Audit?
If your nonprofit needs to respond to an audit request, Dimov Audit is ready to review the trigger, explain the specific type of audit needed, and present guidance in preparing for next actions. Reach out to us to discuss the timeline, reporting requirements, and whether the request necessitates a standard financial statement audit or a Single Audit.
