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Non Profit Organizations and Auditing

A Non-governmental organization (NGO) is an organization which is established by a group of people to render service to the nation and people. NGOS ought to audit their books of accounts annually

What is Audit, one would ask. Audit is the process of checking and ensuring that an organization prepares and keeps its books of accounts and that the financial position of the organization represents a true and fair view.

What shapes financial reporting practices for NGO’s? in most cases the reporting practices are shaped by the requirements of donor agencies and influence of specific stakeholder groups . The need to legitimize their operations also influences the accounting and auditing practices of non-governmental organizations.However, there are a number of other reasons why a charitable non profit organizations may decide to conduct an independent audit.

  • One primary reason is to demonstrate that the charitable organization is commitment to financial transparency. Publishing an independent audit report on a organization website or providing the report to those who request , are examples of transparent practices that donors and the public have come to expect from non-profit organization. Potential donors may want assurance that the organization financial practices meet accepted standards. For example: one of those standards is whether or not the organization follows appropriate procedures to handle contributions consistent with a donor’s intent.
  • Another reason to conduct an audit is that many public and private foundation/ funders require non profits to submit audited financial statements or conduct an audit in order to be eligible for funding. They take into consideration whether organization has an annual independent audit when rating non profits organization regardless of whether an independent audit is legally required for that organization.

In conclusion a non-profit organization can build its reputation for integrity, transparency, and professionalism, by having a regular independent audit conducted and making it available to stakeholders and the public.

(The views contained herein are personal sentiments of the author.)

Bilha Wairimu: Finance Officer - The Institute for Social Accountability (TISA) bilha.wairimu@tisa.or.ke

  • By Caleb
  • May 05, 2015
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