how-to-request-an-audit-of-a-nonprofit

How To Request an Audit of a Nonprofit: A Step-by-Step Guide

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Dan

Exempt organizations play an important role in every community. Thus, it can be disconcerting to suspect a nonprofit of abusing its tax-exempt status. However, there is a way to get to the bottom of a nonprofit’s financial situation — request a nonprofit audit. 

Requesting an audit does not have to be an intimidating process. This nonprofit audit guide explains all of the basics by breaking it into the following sections:

Let’s go!

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What Is a Nonprofit Audit?

The primary purpose of an audit is to examine the financial situation of an organization. In addition to that, it can also involve scrutinizing its operations. For example, the auditor may look into the relationships between the executive staff members and the board members to determine whether potential conflicts of interest exist.

how-to-request-an-audit-of-a-nonprofit-what-isOliver is deep in thought about nonprofit audits.

An audit usually results in one of two outcomes. If everything within the organization appears to be in compliance, the auditor closes the audit. If it seems like something might be amiss, the auditor puts together a proposed plan to fix it.

Pro Tip: An independent audit is different from an IRS audit. An organization decides to use a third-party certified public accountant (CPA) to conduct an independent audit to ensure that its financial statements and internal controls are in order. There are also circumstances where a nonprofit has to conduct an independent audit because it receives federal funding or other grant money, and the grantor wants to review where the funds are going.

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Who Can Request a Nonprofit Audit?

Anyone can request an audit of a nonprofit if they suspect wrongdoing, but they must do so through the appropriate channels. Audits can come from several groups, including the following:

  • General public

  • Congress

  • Federal or state government agency

  • IRS

No matter who requests the audit, the complaint triggers an IRS investigation of the nonprofit. Any irregularities or discrepancies in the organization’s records can cause a change in leadership, a loss of tax-exempt status, or other consequences, depending on the severity of the issue.

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How To Request a Nonprofit Audit

To request a nonprofit audit, you need to follow two simple steps.

Completion

The first step in the process is completing Form 13909, also called the Tax-Exempt Organization Complaint/Referral. It requires some basic information within five sections:

  • Organization information: You must fill in the name and address of the nonprofit organization. 

  • Organization Employer Identification Number (EIN): This is the unique number that the IRS has assigned to the organization.

  • Nature of violation: Form 13909 provides a list of violations to indicate the reason for your complaint.

  • Details of violation: After placing a check next to the appropriate violation, provide more detail about it.

  • Submitter information: You must also provide your contact information. 

If you do not want the IRS to share your identity with the nonprofit, check the box that says, "I am concerned that I might face retaliation or retribution if my identity is disclosed."

Submission

Once you complete Form 13909, you can move on to step two: submitting the form. Submission is easy. Just send the form along with any supporting documents by:

  • Mail

  • Fax

  • Email

You can find the street address, fax number, and email address of the proper IRS departments on the second page of Form 13909.

Pro Tip: Make sure to save a copy of your completed Form 13909 along with all of your supporting documentation. It is rare, but the IRS may lose or misplace your complaint. In which case, you have it ready to send again.

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What Happens After a Nonprofit Audit Request?

After you request an audit, your job is complete. The IRS will begin an investigation and will contact you to acknowledge receiving the complaint.

Acknowledgement Letter

Legally, the IRS cannot disclose any information about a potential investigation. So, the acknowledgment letter will simply state that the IRS has received your complaint.

how-to-request-an-audit-of-a-nonprofit-what-happens-afterEmily is waiting in suspense on what she'll hear back from the IRS.

Potential Paths

An audit investigation can result in four potential paths. These paths are:

  • No action: The IRS determines there is no need for further action. 

  • Later date: The assigned agent decides that an audit is important but wants to give the organization time for preparation. So, they schedule a future date to reevaluate the organization.

  • Committee referral: The assigned auditor sends the complaint to a committee because it requires more expertise than they have. The committee members decide whether or not to follow up with an examination.

  • Warranted examination: Lastly, the IRS may determine that there is enough evidence to warrant an immediate examination.

If the IRS decides that a full audit is the appropriate next step, it will contact the organization to schedule a time to begin. As mentioned above, even if you were the one who submitted the complaint, you will not receive any notification regarding the stages or outcome of the investigation. 

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Final Thoughts

Audits are not designed to find faults in nonprofits; instead, they aim to strengthen exempt organizations by identifying areas and items that need improvement.

If you are considering requesting an audit of a nonprofit, this guide gives you all of the important resources you need. Knowing that professionals have evaluated the financial integrity of a nonprofit makes placing trust in it much easier. Looking at it that way, it also benefits the organization because more individuals want to become members, donors, and volunteers.

Enjoyed the article? Download it to keep or share with others!

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FAQ

💡What triggers a nonprofit audit?

A complaint triggers an IRS audit. However, an organization can also decide to conduct an audit on its own. This type of examination is called an independent audit. Find out more. 

🔑 Who can request a nonprofit audit?

Audit requests can come from any person or entity, including a state government agency and a member of the general public. Find out more. 

📝 Does the IRS audit all nonprofits that they receive a complaint or referral about?

No. Based on the provided complaint and evidence, the IRS determines if further action is required or not. Find out more.

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Dan
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