What it is
A not-for-profit audit raises planning issues a commercial audit does not: classifying net assets with and without donor restrictions, deciding whether a grant is a contribution or an exchange and whether it is conditional, allocating expenses among program and support functions, and presenting liquidity. Federal funding adds the single audit.
This memo works alongside the firm’s general planning memo. It records the engagement scope, the understanding of governance and the finance function, a table of the areas that need specific planning with the response for each, materiality and risk assessment, the audit approach, and independence and nonattest services. It states the single audit threshold of $1,000,000 for fiscal years beginning on or after October 1, 2024.
When to use it
- Planning an audit of a charity, foundation, association, religious or other not-for-profit entity.
- The organization receives government grants and may reach the single audit threshold.
- A new engagement, or a year in which funding, donor restrictions or management changed.
What’s inside
- Engagement and scope table, key dates and team
- Understanding of mission, governance, finance function and tax-exempt matters
- Planning table: net assets, contributions and grants, functional expenses, liquidity, endowments, cash receipts, related parties, federal awards
- Materiality, significant risks and fraud inquiries
- Approach, communications with those charged with governance, independence and conclusion
Standard cited
This template follows AU-C 300 / ASC 958 / 2 CFR 200. It is written in our own words, except for phrases the standard requires the document to contain, with [bracketed placeholders] for client details, amounts in USD and dates as MM/DD/YYYY. Check it against the current standard and your firm’s methodology before use. See AU-C 300 explained.
Questions
When is a single audit required?
When a non-federal entity expends $1,000,000 or more in federal awards during a fiscal year beginning on or after October 1, 2024. For fiscal years beginning before that date the threshold was $750,000. Below the threshold other award terms may still require an audit.
What makes a grant conditional for a nonprofit?
Under ASC 958-605, as amended by ASU 2018-08, a contribution is conditional when the agreement includes a barrier the recipient must overcome and either a right of return of assets transferred or a right of release of the donor’s obligation. Revenue for a conditional grant is recognized when the condition is met.
What expense disclosure do all nonprofits give?
An analysis of expenses by both natural and functional classification, in one location, along with the methods used to allocate costs among program and support functions. The audit plan should address the allocation basis and support.
What must the liquidity disclosure show?
Qualitative information on how the organization manages liquid resources and quantitative information on the financial assets available to meet cash needs for general expenditures within one year of the balance sheet date, reduced by donor restrictions and similar limits.
Related templates
- Nonprofit Organization Audit Checklist (ASC 958)
- Audit Program: Nonprofit Organization
- Single Audit Major Program Determination Worksheet
- Disclosure Checklist: Not-for-Profit Entities (ASC 958)
Last updated 11/05/2026. All free templates.