Late Audits, 990's, and Budgets
Waiting until late in your nonprofit organization’s fiscal year to have your audit (if you have one) and/or Form 990 completed, and not having your new fiscal year budget completed before the fiscal year begins, damages your organization’s credibility and hurts your chances of receiving grants. Audits and 990’s
Many nonprofit organizations wait until late in the fiscal year to have their audit done for one of several bad reasons (a good rule of thumb is that even if you don’t have grants that require audited financials, your organization should have an audit if your annual revenues exceed $500,000). There is no good reason not to have the audit done within three months after your fiscal year-end, and up to six months is stretching it but maybe acceptable. And the 990 should then be competed immediately after the audit (the audit should always be done before the 990 if your organization has audited financials). Among the reasons, all bad, often cited by nonprofit organizations for long delays in having audits and 990’s completed are:
- “We get a discount if we wait until after (accounting firm) busy season.”
- “One of our board members recommended the auditor and we don’t want to rock the boat.”
- “We’re busy and don’t have time to deal with it until later in the year.”
- “We can get an extension for our 990 until November 15th (if your fiscal year ends December 31st), so we’re not late until after that.”
- “That’s when we’ve always had it done.”
- “What does it matter?”
It matters because many prospective funders look for signs of fiscal integrity in grant applications. In addition to complete and accurate information, part of fiscal integrity is current or recent information. And when your most recent audit and/or 990 are 18, 20, or 22 months old, that’s not current or recent information. Other applicants that have these reports completed in a more timely manner will shine in comparison to those that don’t.
Few funders will tell you that late audits and 990's are a consideration, but often they are. The executive director of one local, long-time foundation in Dallas recently told me that they don’t even consider grant requests from applicants with audits and 990’s more than nine months old. And if the audit and 990 were completed six to nine months after fiscal year-end, the application will be considered, but not as strongly.
In order to have the best chance at having your grant requests funded, your audit and 990 should be completed within three to six months after your fiscal year-end.
Many nonprofit organizations do not complete their annual budget until after the new fiscal year has begun – and sometimes two or three month into the new fiscal year. In these cases the prior year budget is often still being used for grant requests that require a budget. This means to prospective funders that your organization is temporarily operating without a budget. For those prospective funders looking for signs of fiscal integrity, this is a bad idea.
Your budget process should begin as much as three months before fiscal year-end, and not only should it be completed by year-end, but a couple of months before then if possible. When submitting grant requests during the last couple of months of your fiscal year, most funding you receive from those requests is likely to be received and spent in the next fiscal year, so it’s appropriate to begin sending the next fiscal year’s budget with grant requests even before fiscal year-end.
In order to have the best chance at having your grant requests funded, your budget for the next fiscal year should be completed well before the current year is over.
Recent grants received by our clients include:
$20,000 for an agency providing mental health services to homeless and very low-income families - for genera operating expenses
$20,000 (two grants for $10,000 each) for a day care program - for general operating expenses
$15,750 for an organization providing case management and education for teen mothers - for general operating expenses
$10,000 for a ministry providing to medical and dental services to low-income, uninsured families - for healthcare for women
Murray Covens, Principal