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Who Audits Non-Profits

All organizations and entities that receive $750,000 or more in federal funding in a single fiscal period are required to obtain an audit by an independent accountant. This includes an audit of both the institution’s financial statements and the federal award. 

The provision applies to states, local governments, Indian tribes and tribal organizations, institutions of higher education, and non-profit organizations. Collectively, these single audits provide a framework for monitoring the massive sums of federal awards distributed every year. 

In 2020, there was an influx of federal awards and grants related to the COVID-19 pandemic. This means some entities may have been required to obtain a single audit for the first time last year. It’s important for these organizations to obtain an audit from a qualified firm to ensure compliance with often complex federal requirements.

The audit market landscape of non-profit and governmental organizations receiving federal awards varies depending on the breakdown criteria. For example, the auditor market share based on total assets is similar to the overall market share of public companies. However, an analysis of top auditors by their number of clients and federal expenditures reveals more diversity.  

Below is an audit firm market share analysis of non-profit and government clients in 2020. The Audit Analytics Non-Profit database contains 36,192 single audits for the year, performed by 3,239 audit firms. For the purposes of this analysis, all institutions represented in the data are referred to as “non-profits.”

Auditor Market Share of Non-Profits, by Number of Clients 

Firstly, the market share of auditors performing audit services for non-profit organizations, broken down by the number of clients, shows the wide variety of firms participating in these types of audits. 

The top firm, CliftonLarsonAllen, performs audits for nearly double the number of clients as the next closest competitor, Eide Bailly. Worth noting, CliftonLarsonAllen’s 1,274 clients equate to just 3.50% of this overall market, speaking to the large scope of the market.

Furthermore, the top 20 audit firms by number of clients collectively audit less than a quarter of all non-profit institutions. This highlights the wide variety of audit firms covering this specialized market.  

Top Auditors of Non-Profits, by Total Assets 

The market share of non-profits by the total amount of assets audited looks similar to the market breakdown for all public companies. The top 10 audit firms include the Big Four, Grant Thornton, RSM, BKD, BDO, and Moss Adams. CliftonLarsonAllen also makes it into the top 10 auditors in terms of total assets. This partially relates to the high volume of audits they perform in this space. 

For the Big Four, 70% of assets audited in this market belong to higher education institutions. However, only 27% of total federal expenditures awarded in this market belong to higher education institutions audited by the Big Four. This suggests that non-profit institutions with more assets tend to flock to the large global and national firms, regardless of federal expenditure amounts. 

Top Auditors of Non-Profits, by Total Federal Expenditures 

Lastly, the top auditors for non-profit organizations, broken down by the amount of federal grants awarded to auditees, looks very different from the other breakdowns.  

Out of the top 20 auditors by total federal expenditures awarded to their non-profit clients, 14 are state auditors. KPMG tops this list, partially due to their audit engagements with two states: Illinois and Massachusetts.  

This relates to state auditors performing state-wide audits and the amount of federal awards disbursed to states in 2020. For example, 28 of the top 30 institutions, in terms of federal award amounts, were all states. At the top of the list are Texas, Michigan, Pennsylvania, Florida, and Ohio; all audited by their respective state auditors.  

Data in this post extracted from Form SF-SAC filed with the Office of Management and Budget (OMB). Data refers to fiscal year 2020, as of December 2, 2021.  

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