The Annual Audit Report is the Evidence for an Active or Dead Organization?

04-01-2020

By: Adel Salah, CEO | Portal365

 

There are many things that are considered very important in the life of each NGO such as the purpose-driven leadership, the fundraising capacity, the technical skills of the team, the inspiring vision, and the mission that is relevant to the needs of the targeted communities the NGO is planning to serve. 

However, there is a single most important thing that each NGO needs to do at the end of each financial year which is the audit report by an external certified professional accountant or an audit firm.

As we are celebrating the New Year 2020, we have asked this question in the title of this article over our social media pages, it was very surprising that only a few people answered the question correctly, and confidently.

On March 2016, I have met an NGO leader in San Francisco who has been trying to activate the fundraising process for a newly established NGO. My only advice to him was to organize the accounting system and prepare an audit report as quickly as possible and to keep doing it every year because all donors will ask for the audit report before they ever go into partnership agreement with the NGO.

This NGO  worked hard to improve its financial procedures and had their audit report done in January 2017. They kept applying for grants since then and the good thing is that the 1st donor accepted their proposal asked for their audit report and it was ready. I was happy I could advise him at the right time and happier that this NGO was able to improve and receive funds to implement more than 6 projects with great book-keeping and have a great impact in the society.

 

This is not the only story as I have been advising hundreds of NGOs and have gone through the experience myself, it is very rare that donors do not ask for the audit report, which is when the fund is very small (less than 10,000 -20,000 USD), but if your NGO is planning to implement big projects, you will always be asked to provide the audit reports for the last financial year.

Donors such as UNHCR, Country Based Pool Funds, European Commission, and many others are usually asking for at least two audit reports for the last two consecutive financial years. This is because it is the single most and best evidence that the NGO is being active and that it is well capacitated to receive donors’ funds.

If you are still questioning the reason beyond this, the answer will be that the audit report is the single most important thing in the life of the NGO because it helps them to prove that they are being honest and transparent with also proving that they have the needed internal control over their financials.

A final note to leave here is that we advise each NGO to contract with an audit firm as early as possible to have their audit report ready right after the end of each year, so they do not lose any funding opportunity that might happen if they neglect it.


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