Nonprofit Audit Services and Single Audits

Nonprofit audit services, including single audits and Yellow Book audits, may be required by your state.

You may also want a nonprofit audit to show any grantors, funders, donors or boards you’re working with.

What to look for in a CPA audit firm:

• Registration with the Public Company Accounting Oversight Board (PCAOB)
• Regular peer reviews conducted by an independent CPA audit firm
• Specialized experience in nonprofit audits, not just tax preparation
• CPAs and senior auditors working on your assurance services, not junior staff
• Year-round availability for audit services, not just during tax season

We’ve worked with nonprofit organizations on audit services since our founding in 1976.

Request a FREE quote on your nonprofit audit service. We’ll determine the least expensive audit service that will meet your requirements.

Does Your Nonprofit Need an Audit?

You may be required to complete a nonprofit audit or single audit each year, depending on your state and the amount of federal funding you spend. But in many cases, you could meet your audit requirements with a less expensive compilation or review instead.

Compilations are simpler than audits, cost less, and require less time to complete. You don’t need a CPA to submit an opinion in a compilation, or test your internal controls. Compilations provide the lowest assurance level, so if you need an audit to satisfy a regulatory requirement, it may not be enough.

Yet a compilation still creates a broad overview of your nonprofit’s financial situation. It may be sufficient if you get an audit request from your board, or just need a financial statement for internal use.

Reviews are another option. Reviews provide limited assurance. They still cost less than financial statement audits, and require less time than full audited financials.

Financial statement audits (audited financials) are considered the gold standard. They have the highest assurance level of all of the assurance services. You need a CPA to provide the most important part of the audit, the objective opinion.

The auditor bases their opinion on a review of your books, and the results of your internal controls testing.

Financial Statement Audits Include:

• Confirmations
• Financial Transaction Testing
• Materiality Assessment
• Internal Controls Review
• An objective opinion by a CPA (level of assurance)

We provide multiple assurance services, so you don’t overpay for an audit if you don’t need one. The first time we talk to you, we find out who’s requesting your audit so we can determine which type of assurance service will work best for you.

In many cases, you don’t need the most expensive service.

What Is a Nonprofit Audit? Thresholds and Triggers

Nonprofit audits may be required for any of the following reasons:

• A grantor or major funder requires audited financials
• Your nonprofit crosses a state required reporting threshold
• Your state requires an audit to register your charity
• Your organization's bylaws or board policy requires an annual audit
• A lender requires you to submit audited financial statements

What Is a Single Audit?

A single audit is a federal reporting requirement triggered when your nonprofit spends $1,000,000 or more in federal awards in a single fiscal year, beginning on or after October 1, 2024. This is a recent change. The previous threshold for years prior to October 1, 2024, was only $750,000.

This specific type of nonprofit audit is called a single audit, because prior to 1984, you had to complete a separate audit for each federal grant. Now, you can use a simplified reporting process that combines all of your federal grants into one “single” audit.

Single audits include:

• A financial statement audit
• A Schedule of Expenditures of Federal Awards (SEFA)
• Compliance and internal controls testing

Single Audit vs Yellow Book Audit

Single audits and Yellow Book audits are similar, with one major difference. Single audits contain all of the information you find in a Yellow Book audit (also called GAGAS, which refers to the accounting standard used for Yellow Book audits,) but single audits are also required to contain a Schedule of Expenditures of Federal Awards (SEFA).

A single audit requires a SEFA, but a Yellow Book audit does not.

You usually don’t need a single audit, unless your nonprofit has crossed the $1,000,000 threshold in federal award funds spent during a single fiscal year, beginning on or after October 1, 2024.

Compliance Areas We Test for Nonprofit Audits

Audited financials include testing in several areas, including:

• Internal controls over federal awards
• Allowable costs and a check for vendor suspension or debarment (SAM.gov)
• Functional expense classification

Internal Controls over Federal Awards

Internal controls testing is required in certain nonprofit audits, including single audits. This involves reviewing your financial practices to see how you manage the federal award funds you receive, and how well you document those practices.

Allowable Costs and How You Vet Your Vendors for Suspension or Debarment

You can’t use federal funds to pay a vendor who has been suspended or debarred. We test your process to confirm that you are using the SAM.gov website to vet your vendors.

Functional Expense Classification

When we do your audit, we’ll look at your functional expenses to see if you’re classifying them correctly. If any of your program, administrative and/or fundraising costs are misclassified, we’ll help you correct them, and let you know how to correctly classify your expenses going forward.

Why You Want Clarity Tax & CPAs to Do Your Nonprofit Audit

We’ve been doing nonprofit audits and single audits since the 1970’s, and we’ve established multiple quality standards to help ensure your audits are done correctly and meet appropriate accounting standards.

Here are just a few reasons you want to work with us:

• We’ve been doing nonprofit audits since 1976. You want that level of experience handling your audit and making sure that you meet all of the reporting requirements, especially when you are reporting federal funds you’ve spent.
• We are a PCAOB member firm. The Public Company Accounting Oversight Board (PCAOB) establishes professional and ethical guidelines for CPA audit firms. The PCAOB also sets the accounting standards we use (GAAS and GAGAS) for nonprofit organizations, and provides the continuing education we need to stay on top of legal changes that can affect your audit. We can perform PCAOB audits, but we often find you don’t need a full PCAOB audit, just a GAAS audit completed by a PCAOB member firm. We can do both.
• We believe in the power of peer reviews. Every 18 months, we ask another CPA audit firm to review our audit process and give us their opinion. This type of unbiased collaboration helps us identify any areas where we can improve. We aren’t required to do this, but it’s important to us to have this type of external quality check.
• All of our nonprofit audits are handled by senior audit staff with experience in the nonprofit space and federal award compliance. Not junior associates. Not bookkeepers or seasonal tax preparers doing audits on the side. Professional senior auditors you can reach at any time of the year, because audits don’t stop on April 15th. Someone can request a nonprofit audit from you at any time.
• Our office stays open year-round. Many tax firms close after the end of tax season, but we stay open so you can reach us when you need us.

What to Expect: Our Nonprofit Audit Process and Timeline

We don’t want your nonprofit audit to be stressful. We’ve created a straightforward process to make it go as smoothly as possible.

Step 1: Your Audit Scope and Needs Assessment

First, we determine which type of nonprofit audit you need, whether that’s a Yellow Book audit, single audit, compilation or review. We’ll schedule an initial scoping call with you to see what you need, and learn a bit about your organization, including its size and complexity.

Step 2: Getting Your Books Clean and Audit-Ready

We’ll look at your books to see what shape they’re in. If you’ve reconciled your accounts each month, you might not need any bookkeeping cleanup. But if you do, our bookkeepers can help get your books in order to prepare for your audit. Clean books are one of the secrets to a good audit opinion.

Step 3: Begin Audit Fieldwork and Testing

Once your books are audit-ready, we’ll identify the areas we’d like to test. This involves reviewing your internal processes. We evaluate how you record your financial transactions, including how you classify your expenses for your federal award funds. We look at your processes, but also how consistently you follow those processes.

Step 4: Your Nonprofit Audit Report is Finalized

Most nonprofit audit reports are done within 6-8 weeks, but your timeline depends largely on your responsiveness. If your auditor requests information from you, and doesn’t get it for two weeks, that can definitely cause a big delay.

The two best ways to move your audit along are:

• start out with clean books that are up-to-date
• respond within one business day to your auditor’s requests

If we determine you don’t need a full financial statement audit or single audit, a compilation or review can be done even faster. Compilations take about 1-3 weeks, and reviews take about 3-5 weeks.

Nonprofit Audit Services: Frequently Asked Questions

When does my nonprofit need a single audit?

Nonprofits need a single audit if you spend $1,000,000 or more in federal awards in a single fiscal year, beginning on or after October 1, 2024. This is a recent change. The previous threshold for years prior to October 1, 2024 was only $750,000.

What is the federal award threshold for a single audit?

The federal award threshold for a single audit is $1,000,000 or more spent in a single fiscal year, beginning on or after October 1, 2024. For fiscal years beginning prior to October 1, 2024, the threshold trigger was $750,000.

What is the difference between a single audit and a Yellow Book audit?

The difference between a single audit and a Yellow Book audit is the SEFA (Schedule of Expenditures of Federal Awards). Single audit requirements are triggered when you spend $1,000,000 or more in federal award funds during a single fiscal year, beginning on or after October 1, 2024.

Single audits contain all of the information from a Yellow Book audit (also called GAGAS, the accounting standard used to complete Yellow Book audits.) But single audits have one more requirement, the SEFA. Single audits require a SEFA. Yellow Book audits don’t.

How long does a nonprofit audit take?

Most nonprofit audits are done within 6-8 weeks, but they can take longer if your books are out of date and you haven’t been reconciling your monthly bank, credit card and loan account statements. You also need to respond quickly when your auditor requests information to prevent any delays. We recommend you try to respond to all auditor requests within one business day.