American Institute of Certified Public Accountants

Clients: Not-For-Profits

Not-for-profit organizations differ from business enterprises in organizational goals, in sources and uses of resources, in measurement of performance, in personnel and management, in accounting and control matters and in constraints on activities.

Organizational goals
Sources and uses of resources
Measurement of performance
Personnel and management
Accounting and control matters
Constraint of activities

These differences have a significant affect on the audit of a nonprofit organization. The audit is, accordingly, more concerned with:

  • identifying restrictions imposed by funding sources (including eligibility requirements) and the organization's compliance with and disclosure of the restrictions
  • the use of a volunteer governing board and personnel and factors that adversely affect personnel turnover, training, and emphasis on accounting and control procedures
  • the formal, approved budget and comparison of actual and budgeted amounts
  • the need to reconcile accounting records kept on the fiscal year or years of one or more programs to the organization's fiscal year
  • the need for charts of accounts and coding systems to be complex to accommodate identification of costs by object, program, budget category and function
  • tax considerations such as liabilities for taxes on unrelated business income or a contingent liability if the organization's tax-exempt status is in jeopardy
  • the need to comply with any audit requirements imposed by funding sources that go beyond generally accepted auditing standards

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Copyright Blythe Paperless 2011