If you are a board member, executive director, or a manager in a not for profit entity (“NFP”), then you definitely heard about the need of a not for profit financial statements audit. Why an audit is needed, what’s an audit, and what we do? Here’s a walkthrough of why you need an audit and what to expect if your entity is getting one. A nonforprofit audit can be challenging, below you will know what you need to get a successful audit for your entity.
For nonprofit organizations operating in Texas (and the in US in general), maintaining transparency, accountability, and financial integrity is vital—not only for compliance but also for building trust with donors, grantors, and stakeholders. Most NFP entities need not for profit financial statements audit. One of the most critical aspects of demonstrating sound financial management is obtaining an audited financial statement. But why exactly do nonprofits in Texas need these audits, and how can a CPA help?
The Importance of Audited Financial Statements for Nonprofits in Texas
An audit provides a comprehensive review of your organization’s financial health, ensuring that your financial statements are accurate and compliant with applicable standards such as Generally Accepted Accounting Principles (GAAP). In Texas, certain nonprofits are required by federal and state agencies to have their financials audited annually, especially if they receive significant funding or grants.
Federal regulations often mandate audits for nonprofits that receive $750,000 or more in federal funds in a fiscal year, as per the Uniform Guidance for federal awards. State agencies, including those administering grants or funds from the Texas Comptroller’s Office, may also require audited statements to fulfill their compliance and reporting obligations.
Beyond legal requirements, donors and grantors increasingly demand transparency. An independent CPA’s audit report offers credibility, reassuring these stakeholders that the organization manages funds responsibly. This trust can be crucial in securing future funding and maintaining your nonprofit’s reputation.
When Does a Texas Nonprofit Need an Audit?
While some nonprofits in Texas might opt for reviews or compilations, many large or actively funded organizations are legally required to undergo a full audit. Specific criteria include:
- Receiving federal grants of $750,000 or more in a year
- Having significant state funding or contracts
- Being a nonprofit registered under Texas state law that exceeds a certain size or revenue threshold
organizations that expend $750,000 or more ($1MM in 2025) in federal awards in a fiscal year are required to have a Single Audit performed in accordance with OMB (Office of Management and Budget) guidelines, read more here https://www.ecfr.gov/current/title-2/subtitle-A/chapter-II/part-200/subpart-F
Even if an audit isn’t legally required, it can still be a best practice to demonstrate your organization’s financial integrity, especially when applying for grants or participating in large fundraising campaigns.
How Can a Texas CPA Help Your Nonprofit?
Partnering with a local CPA experienced in nonprofit audits ensures your organization meets all applicable requirements smoothly and efficiently. Here’s what a CPA can do for you:
- Audit Preparation: Assistance in organizing your financial records, internal controls, and compliance documentation to streamline the audit process.
- Conducting the Audit: Providing an independent examination of your financial statements according to GAAS (Generally Accepted Auditing Standards), ensuring accuracy and transparency.
- Report Filing & Compliance: Preparing necessary reports for federal agencies, Texas state authorities, and other stakeholders.
- Consulting & Advisory: Offering insights on financial best practices, internal controls, and techniques to improve your nonprofit’s financial health.
Why Choose a Texas-Based CPA?
A CPA familiar with Texas-specific regulations and nonprofit accounting standards can navigate state requirements more effectively. Rest assured, local expertise means fewer surprises and a smoother audit process.
Final Thoughts
For Texas nonprofits, obtaining an audited financial statement isn’t just a regulatory checkbox—it’s an investment in transparency, stakeholder confidence, and long-term sustainability. By working with a trusted local CPA, your organization can ensure compliance, improve financial practices, and strengthen your reputation in the community.
If your nonprofit is approaching the threshold for an audit or simply wants to enhance credibility with donors, contact us today to learn how our experienced team can assist you with your next audit.
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