Advice on paying for an audit?

[Bram]

I belong to a non-profit "club" of about 100 members. I've served as Treasurer for about 1 1/2 years & we will elect a new one for a 2 yr term @ the end of the year. I'm not at all interested in running for reelection. Our treasury has about $15-18K in it & typically runs over $10K.

When I took over, things were unorganized, messy, & the possibility of some inappropriatness seemed to be there in my eyes. At a minimum the past Treasurer seemed wholly unqualified, IMO. I had never handled other peoples' money before but felt I could do a good job because of honesty, a penchant for numbers, organizing & analytical skills. I don't think the membership in general pays much attention & monthly approval of the reports is perfunctory. However, I have had several people say to me they think I am doing a good job & they appreciate my detailed, but easily understood reports. So they did at least notice improvements I initiated in the reports.

Basically selection of people to run for offices is started out with "is anyone interested?". Then it can progress to please step up to the plate.... PLEASE! So the next person elected as treasurer may be as slap dash as the previous, & only capable in their own mind.

We have in our by-laws that the treasury will be audited annually. Typically the President picks 2 members (with no particular qualifications) to do this & I suspect they don't dig into things too deeply & I seriously doubt anyone's feet would be held to the fire unless there were egregious, blatant errors or misdeeds (it's just a big mostly friendly, trusting group).

So I've been thinking maybe we should hire an outsider to do the annual audit. We might possibly grow to an average balance approaching $20K in the next year or so. Would this relatively small amount be worth it? How much would one pay for this? Would this serve as a deterrent for some small time pilfering? Do small time organizations typically have outsiders audit their books?

Any comments, ideas, or suggestions are appreciated.

 

[pjm-7]

I have some background in payroll audits (small businesses). Consider paying an accountant with audit experience (you don't need a big firm) to review your books. This probably should be done every couple of years when you change treasurers to be sure that everything is OK. Kind of like an annual physical for just a check-up.

Call around to get a few bids or ask some larger local not for profits who they use. Don't necessarily go with the cheapest. Once you get a few bids and recommendations then present it to your board.

 

[trirod]

It's not really worth getting a full audit for those amounts involved - and truthfully the auditor probably could not give you a clean opinion anyway since there is likely to be a lack of internal controls, as with any small organization.

What you might want to do is hire a CPA firm with experience in non-profit organizations to consult with you on the financial issues, the most important being what kind of controls you have on the funds and on how they are collected and spent.

 

[Senator]

An audit would probably run over $2K. Just give the membership a printout of the register, and a bank statement. Hopefully a verified bank statement.

 

[Jimbo125]

I am a CPA and our firm specializes in non-profits. Our minimum fee for an audit is $3,500.
We highly discourage small non profits from having an audit. If you aren't concerned with whether your financial statements are in accordance with Generally Accepted Accounting Principles, then what you really need is what is called "Agreed Upon Procedures". It can be significantly less than an audit and you can specify what you want looked at.

 

[pb4uski]

+1 For the amount involved, I wouldn't do anything as even if things went totally bad each member has less than $200 at risk.

If you decide to do something, what you could to is have the treasurer prepare what is called a "cash proof" that essentially validates that all your banking account transactions have been accounted for. If you want to go further then you could have a CPA apply agreed upon procedures to the cash proof. Note that the cash proof provides some assurance that all cash transactions have been accounted for but not that they have been accounted for correctly. The first on will likely be a pain in the a$$ but it is petty easy once you have done a couple.

 

[Bram]

Thanks so much for the replies...very helpful. Looks like a "real" audit wouldn't be cost effective. I've talked to the Chair of an event we do that brings in money & we're going to put down in writing how the money needs to be handled for this event in the future. So hopefully there will no longer be just one person counting $, for example.

 

[MBAustin]

Definitely concur that an audit is overkill. But documenting procedures as well as documenting what the annual review should include are really good ideas. If the officers know about the procedures, etc., there is more protection against both incompetence and malfeasance going forward.