A recent trend among granting organizations is to require charities provide audited financial statements.
What are “audited” financial statements?
Generally, this means that a person (usually a CPA or PA) independent of the organization’s management has reviewed the financial statements, accounting practices, internal controls, etc. to ensure accuracy and adherence with generally accepted accounting principles. This is a review that goes beyond your Registered Charity Information Form (T3010).
What does the CRA require?
The CRA recommends audited financial statements if the charity has annual gross income of more than $250,000.
How much does an audit cost?
Because it requires significant staff time on behalf of the auditing firm, an audit, even for a small nonprofit can cost $5,000 or more.
Are there any methods for cost-savings?
- A “remote audit” may be more affordable as it does not require a site visit from an auditor.
- Instead of an independent audit, auditors can provide a financial statement “review” or “compilation.” This may be acceptable to some funders.
- An audit can be scheduled for every few years rather than annually.
Given the expense, why should we engage an audit?
An audit may make sense for your organization if:
- Your organization wants assurance its financial practices and reporting are sound.
- Your funders/potential funders require audited statements.