You’ve met the Covid Response Nurse Team, learned about our trips to Camp Menogyn and how staff create adventures for the people we serve, and visited our house on West Emerson. Now it is time for a story perhaps less flashy, but vital to the growth and strength of our organization. As number crunchers the world over know, a big part of being a nonprofit is being accountable to sponsors, donors, and supporters. And that means sharing information on how our $26M budget is utilized and proof of being good stewards of the money spent to keep the organization moving forward smoothly and with confidence. Here is an article by Ghazi Akailvi, CFO, explaining what and why an independent audit is a critical part of running an organization like Living Well.
The Finance department staff is currently working on the annual independent CPA audit for 2021. Living Well is required by the IRS to undergo this audit by a licensed certified public accountant every year.
What is an audit? According to the National Council of Nonprofits, an independent audit is an examination of the financial records, accounts, business transactions, accounting practices, and internal controls of a charitable nonprofit by an “independent” auditor. “Independent” means the auditor/CPA is not an employee of Living Well but instead is retained through a contract for services.
During the audit, the auditors review the organization’s financial statements to determine whether they follow the accounting principles, that have been created by the Financial Accounting standards Board, known as FASB. These are not law but carry weight and the auditors are required to report if an organization is not following them. They are called Generally Accepted Accounting Principles (GAAP).
After completing the full audit, the auditor is required to issue a report to the board of directors of the nonprofit expressing a professional opinion about the organization’s financial practices. Specifically, whether the financial statements: “fairly present the financial position of the organization” without any inaccuracies or material misrepresentations.
There are four types of reports that an auditor could issue:
—”Unqualified Opinion” this is the cleanest auditor opinion possible (this is what all organizations strive for).
—”Qualified Opinion” —one or two situations where the nonprofit is not following GAAP but overall, there is not a material misstatement of any financial position(s).
—”Adverse Opinion” — auditors found that overall, the organization is not conforming to GAAP).
—”Disclaimer of Opinion” report. Auditor refuses to form an opinion — worst case case (this is not ideal and to be avoided).
Living Well has received Unqualified opinions by all the auditors that have been engaged in recent years.
Benefits of conducting an audit:
—Increased transparency. Our donors and supporters welcome the fact that an audit took place, and we are making needed improvements that result from a deep financial analysis.
—Regular accountability. Conducting audits on regular basis allows us to be held accountable to high standards of controls and reporting.
—Find opportunities for improvement. Even an audit that is not perfect, it allows us to identify opportunities for your organization to improve upon your policies and procedures.
Ghazi is a veteran nonprofit leader, with experience in finance, accounting, and information technology (IT). As the CFO for Living Well Disability Services, he leads the financial and IT affairs of our $26 million nonprofit organization serving the needs of people with disabilities. From 2008 to 2012 he was Director of Finance for the Homeownership Preservation Foundation (HPF), based in Minneapolis. HPF, with a $63 million budget, was formed in the wake of the mortgage crisis in 2007and it ran a phone hotline to help distressed homeowners. Ghazi also served as Director of Finance and Regulatory Services, Housing and Employment Services, for the Amherst H. Wilder Foundation, from 2005 to 2008. From 1990 to 2005, he was CFO for Growing Home, a Saint Paul, Minn.-based, multi-state foster care organization with a $12 million annual budget.