INSIGHT

Single audit threshold 2025: What nonprofits need to know 

Shannon Winter • September 18, 2025

Services: Audit Industries: Nonprofit

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The nonprofit sector experienced a seismic shift in compliance requirements when the Office of Management and Budget (OMB) raised the single audit threshold from $750,000 to $1 million in April 2024. This changetakes effect for fiscal years beginning on or after October 1, 2024 and based on when the federal award was granted.  

This adjustment impacts thousands of nonprofits across the United States, fundamentally changing who must undergo the rigorous single audit process and when they must do so. This also impacts organizations documentation regarding when they receive a federal award in needing to understand both rules and guidance.  

The new $1 million threshold and its implications 

The $1 million single audit threshold is effective for federal awards that were issued after October 1, 2024, meaning the new threshold is effective for fiscal years that end on or after September 30, 2025. This is a 33% increase from the previous $750,000 threshold that had been in place since 1997. 

The threshold applies to all non-federal government agencies and nonprofit organizations that expend $1 million or more in federal dollars in a given fiscal year. Federal expenditures include direct federal grants, pass-through funds from state or local governments, cooperative agreements, cost reimbursement contracts, and other forms of federal financial assistance. 

The timing of this change creates a mixed environment where organizations may operate under different thresholds simultaneously, depending on when individual grant agreements were executed. Non-federal entities will need to determine the relevant Uniform Guidance criteria based on the award date, as most will have awards under both existing and revised Uniform Guidance. 

Organizations that previously required single audits but now fall below the new threshold will experience immediate relief from this comprehensive audit requirement. However, maintaining strong financial management practices remains essential, as other audit requirements from grantors or state regulations may still apply. 

State-specific requirements remain unchanged 

While federal requirements have relaxed, state audit thresholds remain independent and often more stringent than federal standards. California requires annual audits for nonprofits registered with the state that have gross income of $2 million or more, while New York State increased its threshold from $750,000 to more than $1 million of gross annual revenue and support as of July 1, 2021. 

Many states have laws requiring charitable nonprofits to conduct independent audits under certain circumstances, with requirements most often triggered by total revenue received or total contributions. These state requirements operate independently of federal single audit thresholds, creating a complex compliance matrix for organizations operating across multiple jurisdictions. 

Projections for 2026 and beyond 

Looking ahead to 2026 and beyond, several trends will likely shape the single audit environment for nonprofits. The increased threshold represents part of broader federal efforts to reduce administrative burden while maintaining accountability standards. 

Actionable compliance strategies 

Organizations approaching the new threshold should implement proactive monitoring systems to track federal expenditures throughout their fiscal year and most importantly be able to track if the funding is before October 1, 2024 or after October 1, 2024. Knowing the timing the award was provided is imperative in knowing the federal compliance and provisions that need to be implemented and followed. Organizations may find themselves needing to document and follow two different standards under old and new federal awards. Create monthly reports that aggregate all federal funding sources, including direct grants, pass-through awards, and in-kind contributions, to avoid threshold surprises. 

Establish relationships with qualified auditors before you need them. Understanding whether your organization will require a Single Audit under the new threshold is crucial for proper planning and compliance. Even organizations below the threshold should maintain audit-ready financial practices, as growth or new funding opportunities can quickly change compliance requirements. 

Document your federal award tracking methodology and ensure consistency across all programs. The single audit focuses heavily on compliance with specific federal requirements, making comprehensive documentation essential for organizations that may cross the threshold unexpectedly. 

Consider engaging experienced nonprofit auditors early in your fiscal year for preliminary assessments. This proactive approach helps identify potential compliance gaps before they become audit findings and helps to ensure smooth transitions if single audit requirements apply. 

Review and update your procurement policies to align with federal requirements, regardless of current audit obligations. Uniform Grant Guidance requires nonprofits receiving federal grants to adopt and consistently follow a procurement policy and having these systems in place before they’re required demonstrates strong financial management. 

Prepare your nonprofit for an uncertain regulatory future 

The regulatory environment for nonprofit organizations continues evolving, with changes in federal priorities, state budget pressures, and donor expectations all influencing compliance requirements. Organizations that build flexible, robust financial management systems today will be better positioned for whatever changes emerge tomorrow. 

The threshold for capital expenditures has been increased from $5,000 to $10,000, allowing for greater flexibility in managing capital assets, and changes have been made to procurement standards to streamline the procurement process. These accompanying changes demonstrate the federal government’s commitment to reducing administrative burden while maintaining accountability. 

Stay connected with professional networks and industry associations that monitor regulatory changes. The rapid pace of updates to federal guidance requires ongoing attention to help ensure compliance strategies remain current and effective. 

Ready to strengthen your nonprofit’s financial management and audit readiness? Understanding single audit requirements is just the beginning of effective nonprofit financial management. Whether you’re approaching the threshold or seeking to optimize your compliance framework, BPM’s nonprofit services provide the support you need to navigate these complex requirements successfully.