New Audit and Review Thresholds for MA Nonprofits: What You Need to Know

Attention all nonprofit organizations! We have exciting news regarding recent legislative changes that may impact your financial reporting requirements. Massachusetts has passed a bill to raise the thresholds for mandatory financial statement reviews and audits for nonprofits – and these changes are effective immediately. As your trusted finance consulting firm, we’re here to walk you through these updates and ensure you’re prepared for the new requirements.

What Are the New Requirements?

The new thresholds for financial statement reviews and audits for nonprofit organizations are designed to ease the administrative burden on smaller nonprofits and ensure that larger organizations maintain transparency and accountability. Here’s what you need to know:

• $500,000 or Higher in Revenue and Support: Organizations with $500,000 or more in revenue and support must now obtain reviewed financial statements.
• $1,000,000 and Higher in Revenue and Support: Organizations with $1,000,000 or more in revenue and support are required to have audited financial statements.

This legislative was voted into law in November 2024 and is effective immediately.

Why These Changes Matter

These adjustments in the thresholds recognize the growing diversity and operational scales among nonprofit organizations. For smaller nonprofits with revenues below $500,000, lifting the review requirement can significantly reduce compliance costs and other associated expenditures, resulting in more funds available for their core missions. On the other hand, ensuring that larger organizations undergo rigorous audits reinforces their accountability and fosters greater trust with donors, stakeholders, and the community at large.

These legislative changes in Massachusetts signify a positive step towards supporting the nonprofit sector’s sustainability and accountability. By raising the thresholds for reviews and audits, many organizations can now allocate more resources directly towards their missions, while still maintaining transparency and trust where it matters most.

Preparing for the Changes

To comply with the new requirements, your organization may need to adjust its financial reporting processes. Here are some steps you can take to prepare:

1. Assess Your Revenue and Support: Determine your organization’s total revenue and support to identify which threshold applies to you. This is crucial for understanding your new reporting obligations.
2. Engage with Financial Experts: If you haven’t done so already, now is a great time to connect with finance professionals who can help guide you through the preparation of reviewed or audited financial statements.
3. Review Internal Controls: Strong internal controls are essential for both reviewed and audited financial statements. Enhancing these controls can help streamline the review or audit process and minimize potential issues.
4. Communicate with Stakeholders: Ensure that your stakeholders, such as your board members, are informed about these changes and understand how they might impact your organization. Transparency is key to maintaining trust and support.

How We Can Help

We, at Insource Services, are here to guide you every step of the way, ensuring you’re compliant with the new requirements and positioned to thrive. We’re committed to supporting nonprofits in navigating financial complexities. Whether you need assistance preparing for a financial statement review, require an audit, or seek advice on strengthening internal controls, our team of experts is here to help.

Let’s work together to ensure your organization meets these new requirements efficiently and effectively, allowing you to continue making a positive impact in your community.

Reach out to us for personalized support and expertise.

Sources:
Bill S.910
Audits and Reviews for charitable organizations | Mass.gov