Have you looked recently at the disclaimer and disclosure letter supplied by your external auditor?
Take a look. You might notice that your external auditors do not opine about financial controls. You might think they would comment, if not opine, given the time and energy auditors (not to mention internal staff) put into the process. Nope.
Foundations and other nonprofits spend money and time on their annual external audits, but they are probably not receiving what they think they are. In particular, they are getting no opinion on their financial controls, despite them having been reviewed as part of the audit.
The bottom line is that your audited financial statements are a summary of what your assets were worth on the last day of the fiscal year, not a year-long retrospective.
As a result, it is difficult for a board member to look at audited financial statements and conclude whether an organization has had a good year or a poor year. In addition, many smaller organizations cannot afford these payments to external auditors. Yet these audits are required to apply for almost all grants.
While I appreciate the need and the reasoning behind external audits, I often wish foundation and nonprofit leaders, along with our colleagues in the accounting industry, could devise a better solution – one that provides a useful analysis for larger organizations and isn't a financial burden to smaller ones.