State Update

Massachusetts updated its financial reporting requirements for non-profits and public charities as part of the Economic Development Bill. In November of 2024, Governor Healy signed into law a $4 billion economic development bill that includes significant changes to the financial statement review and audit thresholds.

• Review threshold: $200,000 increased to $500,000
• Audit threshold: $500,000 increased to $1,000,000

Under the new law, non-profits with over $1,000,000 in gross support and revenue must continue to submit audited financial statements, while those earning between $500,000 and $1,000,000 can submit reviewed financial statements.

What does this mean for Massachusetts Non-Profit Organizations?

For Massachusetts, as of November 20, 2024 the thresholds have changed.

By raising the audit and review thresholds, Massachusetts is making it easier for smaller non-profits to comply with reporting regulations without compromising transparency. The changes will provide greater flexibility and reduce financial reporting burdens. Specifically for the following:

• Fewer Organizations Will Require an Audit: Nonprofits with gross revenue between $500,000 and $1,000,000 now qualify for a review instead of a full audit, saving time and resources.
• Simplified Compliance for Smaller Nonprofits: With the increased thresholds, smaller organizations (those with revenue under $500,000) are exempt from both reviews and audits, reducing administrative overhead for grassroots nonprofits.
• Immediate Applicability: If your organization’s prior fiscal or calendar year financials have not yet been filed with the Massachusetts Attorney General’s Office, the updated thresholds apply immediately. This includes any filings currently in pending status.
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Key Details to Consider

• Evaluate: Non-profit leaders should consider assessing their financial situation to determine their reporting requirement. Since some organizations may no longer need an audit, maintaining rigorous financial controls and transparency remains crucial for donor confidence and organizational success.
• Additional Guidance Available: For more information, please visit the Massachusetts Attorney General’s Guidance on Audits and Reviews.

Federal Update

The Office of Management and Budget (OMB) released an update to the Uniform Guidance back in April 2024 which took effect as of October 1^st 2024.

The OMB is responsible for the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Every five years, the OMB issues an update to the guidelines to address outdated or unclear items.

OMB’s latest update is directed to improve stewardship, ensure equitable access, eliminate burdensome requirements, improve oversight and funding implementation, and clarify misinterpreted sections and requirements. Revisions are to improve the accountability, transparency, accessibility, and coordination of Federal financial assistance.

Changes approved include:

• Increasing the de minimis cost rate from 10% to 15%, 
• Emphasized plain language with clearly communicated requirements,
• Modified procurement standards,
• Emphasize pass through entities are responsible for subrecipient and contractor determination.

Under the new update, for fiscal years beginning on or after October 1, 2024, the single audit threshold (federal expenditures) will increase from $750,000 to $1,000,000. By raising the threshold, it will alter which federal fund recipients are required to conduct a single audit or program-specific audit. Fewer organizations will be required to undergo these audits, as the new, higher threshold would exempt entities that fall below it. Smaller organizations that receive federal funds below the threshold will benefit from the increase threshold, with reduced costs and avoiding audit oversight administrative efforts.

Note, organizations falling below the threshold might still be required to perform program-specific audits, depending on the nature of the federal funds they receive. Federal program compliance requirements remain as well.

To put the higher audit threshold in perspective, in 2022 less than 7% of the 41,368 single audits performed were between $750,000 and $1,000,000. The OMB’s goal with the new updates is to ensure proper use of federal funds and compliance with regulatory requirements while reducing a burden on small organizations.

If you have any questions or concerns about the changes and how they could impact your organization’s reporting requirements, please don’t hesitate to contact us.