subject: THE GUIDELINES OF SEEK AUDITED "FINANCIAL REPORTS" IN AN NON-PROFITS ORGANIZATION [print this page] This article should be reviewed by everyone in a non-profit organization who is responsible for grant management, including those who prepare grant proposals and those who record and report on grant project activities. Many alternative methods exist for implementing financial management systems, and the organization should choose methods appropriate for its particular scale of operations. In this article I have present that how & when to audit in an non-profit organization, although this is a big area so this is hard to clarify in brusquely but I have tried to explain in short way to discuses this theme, I would like to understanding definition & the explanation about the about the Accountants before going into the main discussion
Inside and Outside Accountants:
Inside accountants are primarily responsible for financial reporting and planning on a daily basis. They pay the bills, collect the money, and keep the books. They plan, prepare, and monitor budgets, see that sufficient resources are available for the tax - exempt mission, and maximize the use of available resources for the benefit of the organization ' s constituents.
The outside accountants evaluate financial reports prepared by inside accountants and inform the public regarding the validity of the financials by issuing a formal opinion. The treasurer, with the help of the finance committee, coordinates the work of both inside and outside accountants. To provide a credible evaluation, the outside accountants must be truly independent, or impartial. They must be free of any vested interest in the organization. Appropriate fiscal control can be achieved only with the division of these duties.
The prudent organization will not rely on a single volunteer treasurer to serve as both its inside accountant, by keeping its books, and its outside accountant, by issuing an opinion about the periodic financial statements stemming from such records.
Introduction: Nonprofits seek audited financial reports for a variety of reasons. Many governmental funding agencies and grantor foundations require an audited financial report. The Office of Management and Budget requires a separate Single Audit of certain federal grants. Some national or statewide organizations require their branches or chapters to obtain audited financial statements.
Audit concern: Although there are few laws or regulations that directly state how non-profit organizations must operate their finances internally, there are many that have a strong indirect impact. These indirect influences include reporting requirements and the accounting standards most funding agencies require supported organizations to follow. In practical terms, these "recommended" standards all but demand certain accounting and other financial practices be followed by nearly all nonprofit organizations
Without an imposed requirement that the organization seek an audit, many organizations consider the expense involved worth the result. The Persons responsible for the nonprofit financial affairs may recommend an audit to satisfy their duty of care, my article discussed Situations that may indicate a need for an audit, rather than a review or compilation, include
The non-profit's funding sources allow for misappropriation. Donations collected by volunteers, sales of donated goods, individual ticket sales for public performances or trade shows are all examples of such funding sources.
The sheer number of financial transactions deserves outside verification.
Activities are conducted in a number of different locations.
Internal control procedures are poor and need scrutiny and suggestions for improvement.
Nonprofit organization staff and advisors with direct financial responsibilities will need to consult other, more detailed resources to gain a sufficiently complete understanding for them to fulfill their duties. However, others who are new to NPO finances, and who are interested in learning about its unique aspects, should find this discussion adequately introduces the main critical issues in nonprofit accounting
Audit principles: Grantees are estimated to maintain a position of audit willingness. This means that records pertinent to the financial and programmatic aspects of their grants must be readily accessible for audit. Failure to provide the auditor with reliable documentation could lead to questioned costs and possibly result in cost disallowances requiring refunds to the Office of Management and Budget (OMB) concerning audits of non-profit organizations, bases the requirements for audit on specific amounts. The requirements are discussed below. The entire Circular should be reviewed to assure proper implementation.
Non-profit organizations that expend $500,000 or more in a year in Federal awards must have an audit conducted for that year in accordance with the provisions,
Non-profit organizations that expend less than $500,000 in a year in Federal awards are not required to have an audit for that year. Costs for audits, evaluations or other reviews sponsored by Federal authorities are not chargeable to grantee organizations.
Conclusion: The objective of this confirmation process is to go beyond the non-profit organization's own record of the transactions. Independent validation enables the auditor to offer its assurance that the reported amounts are correct. Such validation creates an important distinction in the level of reliance that can be placed on an audit as opposed to either a review or compilation. The types of opinions that may be issued by the auditor are: - The financial statements do not fairly present the financial situation or there is a question as to whether the nonprofit is a going concern .
THE GUIDELINES OF SEEK AUDITED "FINANCIAL REPORTS" IN AN NON-PROFITS ORGANIZATION
