Are Changes in Store for New Jersey Nonprofit Reporting Thresholds?
Angela Lawrence, Quality Control Coordinator at Klatzkin, contributed to this post.
In New Jersey, nonprofit organizations that reach a specific threshold of the gross revenue received must comply with certain reporting requirements, including the mandatory submission of an audit conducted by an independent certified public accountant. These reporting requirements are outlined in the New Jersey Charitable Registration and Investigation Act. The New Jersey Attorney General raised the mandatory audit threshold in 2011 from $250,000 in gross revenue to $500,000 in gross revenue, including in-kind donations. The New Jersey Attorney General is allowed, by law, to raise, but not lower, the threshold.
The State Senate currently has two bills in committee that, if passed, would make significant changes to nonprofit reporting thresholds. Below is a brief synopsis of the major points of each proposed bill.
- Excludes non-monetary in-kind donations directly related to the mission of the organization from gross revenue for purposes of determining when an audit is required (although not specifically stated, this could include things like food items donated to food pantries or supplies donated to shelters)
- Changes the audit threshold to an annual gross revenue of $500,000 in monetary donations.
- Organizations with gross receipts between $25,000 and $500,000 would be required to file an annual financial report certified by an authorized officer of the organization.
- Raises the audit threshold to $1,000,000 or any greater amount that the Attorney General may prescribe by regulation.
- Allows any annual report required to be filed by a nonprofit corporation while Executive Order 103 of 2020 remains in effect, or up to 180 days after its conclusion, to be filed up until that time limit without incurring any penalties or additional fees.
Compared to other states with an audit threshold, New Jersey’s is among the lowest and hasn’t seen a change in a decade. An audit can be a significant expense for a charity, and many could use that money elsewhere in supporting their mission and projects. Particularly in the current climate, where many nonprofit organizations face hardships due to the COVID-19 pandemic, the financial burden of a mandatory audit could be relieved by changing what is included in a nonprofit’s gross revenue or raising the threshold.
These proposed bills could bring significant changes to which organizations would be required to have an audit, giving some organizations greater flexibility in choosing their financial reporting vehicle.
We will continue to monitor developments relating to both bills and provide updates accordingly. If you have questions about the material outlined above or need assistance with a nonprofit-related issue, Klatzkin can help. For additional information, click here to contact us. We look forward to hearing from you soon.
©2021 Klatzkin & Company LLP. The above represents our best understanding and interpretation of the material covered as of this post’s date and does not constitute accounting, tax, or financial advice. Please consult your advisor concerning your specific situation.