New Law Raises Mandatory Audit Threshold for Charitable Fundraising in NJ
Law also provides added flexibility for certain report filing deadlines
Updated December 12, 2022
On January 18, 2022, Governor Murphy signed legislation that will provide more flexibility with respect to certain nonprofit filings in New Jersey. S-844/S-2533 (Pou/Greenstein)/A-4635 (Zwicker) (now P.L. 2021, c. 381) includes three main provisions:
- It raises the statutory threshold for which an annual charities registration report must be accompanied by an independent audit to “gross revenue in excess of $1 million in monetary donations.” This is the first increase in this threshold since 2011, when the Attorney General raised the audit threshold from $250,000 to $500,000 in gross receipts.
- It excludes non-monetary in-kind donations from the calculation of gross revenue for the purpose of requiring the submission of an audited financial statement as above. This was of particular importance to food banks and other organizations that receive much of their support in non-monetary donations and were tripping the prior threshold.
- It includes a 180-day automatic filing extension and penalty waiver for the filing of corporate annual reports and annual charities registration renewals with the Department of Treasury and the Division of Consumer Affairs. This is designed to remove uncertainty regarding filing extensions during the pandemic.
The law takes effect immediately.
Most New Jersey charities, or out-of-state organizations that solicit funds in New Jersey, must register with the Attorney General’s Office of Charities Registration and Investigation at least 10 days before fundraising activity begins, and file annual financial reports within 6 months after the close of their fiscal year. The registrations, annual financial reports, and all required fees must be submitted online. Organizations that raise less than $10,000 (gross) annually in contributions and do not use a paid fund raiser (other than its own employees) may be exempt from registration but may choose to register voluntarily. www.njconsumeraffairs.gov/charities
The Center for Non-Profits was a leading advocate of the new law, along with the New Jersey Society of Certified Public Accountants and others. We have long called for an increase in the audit threshold, which prior to the law’s passage was among the lower thresholds in the nation. With a standard audit often costing $10,000 or more, we believe raising the mandatory audit threshold will provide immediate relief and much-needed flexibility and a wider range of responsible options for nonprofits to choose from. Read our statement in support of the legislation.
How the new audit threshold will be rolled out
Responding to an inquiry by the Center for Non-Profits regarding how the new threshold will be applied for charities based on a 2021 fiscal year end, the Division of Consumer Affairs indicated that the new threshold applies to initial and renewal reports with an original due date on or after January 18, 2022. But if a charity’s original due date was before the legislation was signed, then it is bound by the old audit threshold of $500,000 in gross receipts, even if an extension would bring the due date past January 18.
Based on this guidance, organizations with a fiscal year that ended December 31, 2021, should be able to use the new threshold for their financial reports, since those would be due well after January 18, 2022. By contrast, organizations with a June 30, 2021, fiscal year end will be subject to the old threshold – even if they filed for an extension – because their original report due date was prior to January 18.
Why you might still want an independent audit
Even with the new threshold, the decision of whether to continue to have an independent conducted must be considered carefully by nonprofit boards and management. Keep in mind that even if an audit is not required under the Charitable Registration and Investigation Act, other regulations, contractors or public or private funders may nonetheless require one.
Audits are also a powerful tool to demonstrate and uphold high standards of ethics, accountability and transparency. Organizations should strongly consider a CPA review even if an independent audit is not conducted. Nonprofit boards and senior management should weigh carefully, in concert with a knowledgeable attorney or accountant, which option is best for their organizations.
Text of the new law, P.L. 2021, C. 381 – https://www.njleg.state.nj.us/Bills/2020/S1000/844_R1.PDF
National Council of Nonprofits:
- Does your organization need to have an independent audit?
- Why a nonprofit might conduct an audit even when the law doesn’t require it
New Jersey Division of Consumer Affairs
- Charities Registration Section home page
- Text of the New Jersey Charitable Registration and Investigation Act, N.J.S.A. 45:17A-18 et seq. (currently does not include the new statute)
- Text of New Jersey’s charitable fundraising regulations, N.J.A.C. 13:48-1.1 et seq. (currently does not reflect the new statute)