Changes to Mississippi and New Mexico Audit Thresholds and What It Could Mean for Nonprofits Operating in Other States
For nonprofit organizations, their status is determined by the IRS at a federal level. However, they are also required to register at a state level, and each state has their own specific filing requirements—including if an annual audit is required.
In March of 2023, two states—Mississippi and New Mexico—had their financial audit thresholds change for nonprofit organizations. The changes made in these states bring their audit thresholds more in conformity with the Uniform Guidance and federal single audit requirements. Below is an update for those nonprofit organizations operating in Mississippi and New Mexico and what it could mean for other states.
Mississippi
Senate Bill 2077 – This bill is effective July 1, 2023, and raises the state’s audit threshold from $500,000 to $750,000 using a cash basis measurement.
New Mexico
Senate Bill 240 – This bill is effective January 1, 2024, and raises the state’s audit threshold from $500,000 to $750,000 of total expenses. For nonprofit organizations with expenses under the $750,000 audit threshold, they will now need to file a statement of financial position (i.e., balance sheet) that depicts the assets and liabilities of the organization and a statement of activities (i.e., income statement) that depicts the organization’s income classified by general source and expenses classified by object with the state.
As noted above, these states moved to align more closely with federal guidelines. Under the Uniform Guidance, a single audit is needed if an organization expends more than $750,000 of federal awards during its fiscal year. For nonprofit organizations in Mississippi and New Mexico that rely on federal funding opportunities, these changes should help them maintain compliance with state and federal financial and single audit requirements, specifically those organizations that receive and utilize their federal awards in the same fiscal year.
Even though some state audit requirements focus on revenue and the Uniform Guidance and federal single audit threshold focuses on expenditures of federal awards, it is interesting to see if more states bring these thresholds more in line with one another. It will be interesting to see what other states with differing financial audit thresholds do with their annual audit requirements. Only time will tell as bills are discussed and made into law at the state level. These state changes stress the importance of nonprofit organizations staying current with their state’s legislation.
Nonprofit organizations should monitor legislative changes, like changes to their state’s audit thresholds and filing requirements, to help maintain compliance with their state’s tax-exempt organization requirements. This can help mitigate delayed filings, compliance issues, penalties and loss of funding, or even jeopardizing the tax-exempt status of the organization. A great way to stay informed is by monitoring your state’s legislative activity on a regular basis and following content from those keeping pace with legislative changes impacting the nonprofit community. A great resource, for example, is the National Council of Nonprofit’s State Law Nonprofit Audit Requirements website.
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