Audit Threshold Increased for NJ Nonprofits

                                       

By: Eitan Balloul

Director, Tax

Many exempt organizations face significant costs from the requirement of providing audited financial statements every year. These expenses could otherwise be directed toward advancing the charitable mission.

The updated non profit audit requirement in NJ helps relieve some of that burden by raising the audit threshold and excluding certain in-kind contributions from revenue calculations.

Key Updates to New Jersey’s Nonprofit Audit Law

On January 18, 2022, Governor Phil Murphy signed Bill No. 844 and 2533, revising financial reporting rules for exempt organizations under the Charitable Registration and Investigation Act (N.J.S.A. 45:17A-24(d)(2)).

The law:

• Raises the nonprofit audit threshold from $500,000 to $1 million in annual revenue.
• Excludes in-kind contributions directly tied to a nonprofit’s mission from revenue totals.
• Extends certain reporting and filing requirements under N.J.S. 15A:4-5.

What This Means for Nonprofits

Effective immediately, any New Jersey nonprofit with annual monetary donations exceeding $1 million must file audited financial statements prepared by an independent CPA along with its annual disclosure report.

Examples of in-kind donations excluded from the threshold include:

• Food donated for food pantries or shelters
• Supplies for housing and shelter programs
• Other mission-related contributions approved by the Attorney General

These exclusions ensure that mission-critical non-monetary support doesn’t unfairly push nonprofits above the new audit requirement.

Why the Change Matters

By raising the audit threshold to $1M, the updated non profit audit requirement in NJ allows many smaller organizations to save on audit expenses while maintaining compliance. That savings can be redirected toward programming and services rather than administrative costs.

Need Guidance on Compliance?

Understanding the nuances of the non profit audit requirement in NJ can be complex. If you need more assistance, please contact Diana Miller, Partner, or Eitan Balloul, Tax Manager – Exempt Organizations for tailored guidance.

More information on the new legislature can be found here.

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