[OMS_MANAGERS] Bookkeeping audit/review

[W Darin Rutledge, Executive Director]

I don’t believe there are any state/federal regulations that require periodic financial reviews, but it’s generally a good thing as most small nonprofits lack full accounting controls and frankly, it’s easy for things to get off track (whether it’s just poor practices or nefarious activities). In my experience, most small nonprofits do a financial REVIEW annually, and only do a full AUDIT every 2, 3, or 5 years. These can be done by most accounting firms, and reviews are less comprehensive and therefore less expensive. Some factors that might dictate shorter/longer cycles between full audits:

 
Staff – Paid staff obviously adds complexity to the financials with payroll, workers comp, and particularly taxes. 
Public Funds – If you receive public funds, more frequent audits are generally good (many public entities require it in their contracts when they commit those funds)
Budget Size – Generally, the larger the budget the more frequently it should be reviewed/audited
Distribution of Risk – If, for example, there is a single volunteer or staff sending invoices, collecting donations, depositing cash, and paying bills, generally more frequent and regular reviews are called for.
Contracts – If most of the work you do is for your organization, generally reviews could be less frequent. If you are executing deliverables through contracts with other agencies or public entities, there’s a lot more at risk and generally, reviews should be more frequent. 
 

The short answer is, performing financial reviews and/or audits is an expense and depending on the size of your budget, it could have a large impact (and take resources away from your programming and events). Sometimes it’s worth it, sometimes it’s not. Two questions your board should ask:

 
“Is a financial review going to simply confirm that we’re doing it right and our books are accurate, or will it reveal better practices that will increase our bottom line or mitigate risk?” and
“What are the potential consequences if we DON’T do regular reviews/audits?” 
 

That’s very over-simplified – hopefully someone with an accounting background can add some color, but it’s a good question. It actually came up in our organization as well. Must be year-end financials and next year’s budget that have people thinking fiscally. 😊

Cheers!
D

 

 

From: OMS_MANAGERS <oms_managers-bounces at listsmart.osl.state.or.us> on behalf of Kelly Haverkate <kellyjhaverkate at gmail.com>
Reply-To: Oregon Main Street program managers <oms_managers at listsmart.osl.state.or.us>
Date: Thursday, December 19, 2019 at 1:20 PM
To: Managers OMS <oms_managers at listsmart.osl.state.or.us>
Subject: [OMS_MANAGERS] Bookkeeping audit/review

 

Hi All

Our board thought it might be a good idea to have someone look over the books (for the first time ever...)  Just to cover ourselves and make sure everything is on the up and up.l.  Do you know what is maybe required and/or what other small non profits do?  Would we need a full on Audit, or does a review of the books look just as good?

We don't have a lot going in and out.  Just event income, sponsorships and donations being deposited and standard insurance, advertising, event bills etc being paid out.

Would love any input and ideas from you guys.

 

Thank you!

 

Kelly Haverkate

Downtown Dayton

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