Nonprofit Audits 2025: Are You Compliant?

Are you a nonprofit operating across state lines, or simply trying to understand the varying current audit requirements? Understanding the intricate web of audit regulations is crucial for maintaining compliance and ensuring your organization’s financial integrity. With differing state-specific rules layered on top of federal mandates, it’s easy to feel overwhelmed. This article aims to demystify these requirements, providing a clear roadmap to navigate the complexities and ensure your nonprofit remains compliant.

The National Framework: Federal “Single Audit” and GAAP

At the national level, the most significant audit requirement for nonprofits stems from the federal “Single Audit.” This applies to organizations that expend $1,000,000 or more in federal funds during their fiscal year, beginning on or after October 1, 2024. The “Single Audit” is designed to ensure that federal funds are used in compliance with federal regulations, emphasizing accountability and transparency. It’s a comprehensive process that requires meticulous documentation and adherence to specific guidelines set by the Office of Management and Budget (OMB).

Beyond the “Single Audit,” all U.S. nonprofits are expected to adhere to Generally Accepted Accounting Principles (GAAP). GAAP provides the foundational accounting standards that auditors use to evaluate financial statements. This ensures consistency and comparability in financial reporting across the nation, making it easier for stakeholders to understand a nonprofit’s financial health and for auditors to verify the accuracy and fairness of reported financial information.

Ohio’s State-Specific Audit Landscape

Ohio introduces its own layer of regulatory oversight. The Ohio Auditor of State and the Ohio Attorney General’s office play crucial roles in ensuring nonprofits operating within the state adhere to specific audit and reporting requirements. Ohio’s regulations often go beyond the national baseline, focusing on areas like related party transactions, functional expense allocations, and internal control documentation. Notably, Ohio sets its own thresholds for mandatory audits, which can differ from federal thresholds. This means a smaller organization, not subject to a federal “Single Audit,” might still be required to undergo a state-mandated audit. It’s essential for Ohio nonprofits to stay informed about these state-specific requirements, as failure to comply can lead to penalties and reputational damage. The Ohio Association of Nonprofit Organizations (OANO) is an invaluable resource for staying up-to-date on these state specific rules.

Georgia’s Distinct Audit Requirements

Georgia, like Ohio, also has its own unique set of audit requirements for nonprofits. The Georgia Secretary of State’s office, along with the Georgia Attorney General’s office, oversees charitable organizations, ensuring compliance with state laws. Georgia’s regulations include specific reporting requirements for fundraising activities, board governance, and financial transparency. Similar to Ohio, Georgia establishes its own thresholds for mandatory audits, which may differ from the federal “Single Audit” thresholds. Nonprofits operating in Georgia must be aware of these state-specific rules to avoid non-compliance. It is important to stay aware of the Georgia Center for Nonprofits for up-to-date information regarding Georgia state requirements.

Learn more about individual state compliance requirements.

Navigating the Differences and Ensuring Compliance

The key takeaway is that nonprofits operating across state lines, or even within a single state, must understand the interplay between national and state-specific audit requirements. While federal regulations, particularly the “Single Audit,” provide a baseline for organizations receiving federal funds, state regulations add layers of complexity. Ohio and Georgia, for instance, have their own thresholds, reporting standards, and oversight mechanisms. To ensure compliance, nonprofits should:

Understand Federal Requirements

A fundamental step for any nonprofit is to thoroughly understand federal audit requirements, particularly the “Single Audit” if federal funds expended meet the $1,000,000 threshold, effective for fiscal years beginning on or after October 1, 2024. This involves more than just knowing the expenditure amount; it requires a deep dive into the specific guidelines set by the Office of Management and Budget (OMB) to ensure federal funds are used in compliance with regulations. Furthermore, all U.S. nonprofits must adhere to Generally Accepted Accounting Principles (GAAP), which serve as the bedrock for financial reporting. Familiarity with GAAP ensures financial statements are prepared consistently and comparably, providing a clear and accurate picture of the organization’s financial standing for auditors and stakeholders alike.

Stay Informed About State Regulations

Given the layered nature of audit requirements, nonprofits must proactively monitor and understand state-specific regulations. This means regularly checking for updates from key state offices. For instance, in Ohio, organizations should frequently consult the Ohio Auditor of State and the Ohio Attorney General’s office, as their regulations often go beyond federal mandates, encompassing areas like related party transactions and internal control documentation. Similarly, nonprofits operating in Georgia need to stay abreast of requirements from the Georgia Secretary of State’s office and the Georgia Attorney General’s office, which may include specific reporting for fundraising and board governance. Neglecting these state-specific rules can lead to significant penalties and damage to an organization’s reputation.

Engage with State-Specific Organizations

To navigate the intricacies of state audit landscapes, leveraging the expertise of state-specific nonprofit organizations is invaluable. These organizations serve as critical resources, providing up-to-date information, guidance, and support tailored to the unique regulatory environments of their respective states. For instance, the Ohio Association of Nonprofit Organizations (OANO) is a vital resource for staying informed about Ohio’s distinct audit thresholds and reporting requirements. Likewise, nonprofits in Georgia can benefit immensely from engaging with the Georgia Center for Nonprofits, which offers crucial insights into Georgia’s specific rules, such as those related to fundraising activities and board governance. Actively participating in these networks can help nonprofits remain compliant and access a community of shared knowledge.

Consult with a Qualified CPA Firm

Partnering with a qualified Certified Public Accountant (CPA) firm like Brady Ware is an essential strategy for navigating the complex world of nonprofit audits. It is crucial to select a firm that not only possesses extensive experience in nonprofit audits but also has a deep understanding of both national and state-specific regulations. Such a firm can provide expert guidance on federal “Single Audit” requirements, ensure adherence to GAAP, and advise on the nuances of state-specific rules in Ohio, Georgia, or any other state where the nonprofit operates. A knowledgeable CPA firm can identify potential compliance gaps, assist with meticulous documentation, and help implement robust internal controls, ultimately streamlining the audit process and mitigating risks.

Maintain Thorough Documentation

Robust internal controls and meticulous record-keeping are paramount for any nonprofit striving for audit compliance. Comprehensive documentation serves as the backbone of a successful audit, providing clear and verifiable evidence of financial transactions, program expenditures, and adherence to regulatory requirements. This includes, but is not limited to, detailed financial ledgers, grant agreements, payroll records, expense reports, and internal policies and procedures. Strong internal controls, such as segregation of duties and regular reconciliations, further enhance the reliability of financial data and help prevent errors or fraud. By maintaining thorough and organized documentation, nonprofits can significantly facilitate the audit process, demonstrate accountability, and ensure their financial integrity.

By taking a proactive approach and staying informed, nonprofits can navigate the complex audit requirements of 2025 and ensure their organizations remain compliant and accountable.

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