Audit of non-profit organizations

An audit of non-profit organizations (NPOs) is essential for ensuring transparency and trust in their financial reporting. It is a key instrument of financial accountability towards society and donors and of regulatory compliance. For NPOs that depend on the support of donors, sponsors and the public, a quality review of financial statements is an integral part of successful operation.

The benefits of professional audit services for non-profits are numerous: a high level of professional expertise, prevention of potential financial errors, greater donor and sponsor confidence in management, and compliance with professional standards and regulatory requirements.

What is an audit of non-profit organizations

An NPO audit is a systematic review and assessment of financial reporting, project reporting, operations and compliance, aimed at ensuring transparency and adherence to budgets and legislation. Specialists examine financial transactions, assess internal procedures and confirm the organization’s compliance with regulatory requirements.

This audit differs from the review of commercial structures: the main focus is on the correct use of received resources and adherence to the goals defined by the organization’s charter. Verifying the correct accounting of donor funds is an important part of the engagement.

Types of NPO audit

• Financial audit — verification of the truthfulness of the NPO’s financial statements and an opinion on whether they comply, in all material respects, with the law.
• Compliance audit — assessment of risks and of the organization’s adherence to legal requirements, internal policies and standards; helps avoid legal problems and maintain donor trust.
• Operational audit — assessment of the effectiveness and efficiency of operations; identifying opportunities to improve processes, optimize resources and raise productivity.
• Due diligence — a comprehensive review of the entity before deals or partnerships: identifying potential risks, assessing the financial position and alignment with strategic goals.
• Project audit — an independent review of an individual NGO project: whether donor requirements for financial reporting, resource management, rules and procedures are met, and how effective the project is overall.

The NPO audit process

Planning and preparation. The key stage that defines the scope of work, resources and schedule. For NPOs this means an individual approach reflecting the specifics of their activity — especially transparency in the use of funds for organizations that depend on grants and donations.

Data collection and analysis. Financial documents are examined, the effectiveness of internal control is assessed and possible risks identified. Methods include analysis of financial documentation, staff interviews, review of internal processes, policies and procedures.

Reporting and recommendations. An audit report is prepared with an opinion on the financial position or the targeted use of funds, legal compliance, and recommendations for improving the NPO’s operations.

How to choose an audit firm for a non-profit

Mandatory requirements donors typically set for audit firms:

• at least 5 years of experience auditing non-profit organizations;
• membership of a recognized international network of accounting and audit firms;
• membership of the International Federation of Accountants (IFAC);
• experienced staff.

Why clients choose us

UHY Prostir has specialized in NPO audits for many years — 20 years of experience. We are an official member of IFAC and one of the 20 largest accounting and audit networks in the world, hold Ukrainian and international certificates, and communicate in English and other languages.

Over the years we have studied donor requirements for the content and form of an organization’s internal policies and have a clear picture of the main tax risks non-profits may face and how to minimize them — including personal income tax, military levy and social contribution risks, as well as the threat of losing non-profit status.

To order a consultation, contact our team in any convenient way: e-mail, phone, or Telegram, Viber and other messengers.