Beginning in 2025, many nonprofit organizations will experience an important change to federal audit requirements. The federal government has increased the Single Audit threshold from $750,000 to $1,000,000 in federal expenditures, the first major adjustment to this requirement in decades.
For nonprofits that receive federal grants or other federal financial assistance, this change may affect whether a Single Audit is required and how organizations plan their financial oversight and compliance activities.
Understanding how the Single Audit works—and how it intersects with other nonprofit compliance requirements—can help organizations prepare effectively as funding levels change.
What Is a Single Audit?
A Single Audit is a comprehensive financial and compliance audit required for organizations that expend significant amounts of federal funding. It was established under the Single Audit Act and is governed by federal regulations known as the Uniform Guidance (2 CFR Part 200).
Unlike a standard financial audit, a Single Audit examines two areas:
1. Financial statements
The auditor reviews the organization’s financial records to determine whether financial statements are fairly presented.
2. Compliance with federal grant requirements
The auditor evaluates whether the organization complied with federal rules governing the grants or federal programs it received.
This includes reviewing:
- internal controls over federal programs
- documentation of federal expenditures
- compliance with grant agreements
- reporting requirements tied to specific federal programs
The results of the audit are submitted to the Federal Audit Clearinghouse, where federal agencies can review the findings.
The New Single Audit Threshold
Previously, nonprofits and other organizations were required to undergo a Single Audit if they expended $750,000 or more in federal funds during a fiscal year.
Under updated federal guidance, the threshold has increased to:
$1,000,000 in federal expenditures
The new threshold applies to:
- fiscal years beginning on or after October 1, 2024
- audits for fiscal years ending September 30, 2025 or later
For many nonprofits, this means:
- organizations expending between $750,000 and $1,000,000 in federal funds may no longer require a Single Audit
- organizations expending $1,000,000 or more will still be required to undergo the audit annually.
It is important to note that the threshold is based on federal expenditures, not the amount of grants received. Organizations must track how much federal funding is actually spent during the fiscal year.
Which Nonprofits Must Conduct a Single Audit?
The Single Audit requirement applies to non-federal entities that expend federal funding above the threshold. This includes:
- nonprofit organizations
- state and local governments
- universities and educational institutions
- tribal governments
Federal funds may be received either:
- directly from a federal agency, or
- indirectly through a pass-through entity, such as a state government or another nonprofit.
All federal expenditures are combined to determine whether the organization reaches the threshold.
How a Single Audit Affects Nonprofits
Organizations required to complete a Single Audit should expect a more extensive review than a standard financial audit.
Common impacts include:
Increased documentation requirements
Organizations must maintain detailed records supporting how federal funds were spent, including internal control documentation and program-level reporting.
Internal control evaluation
Auditors assess whether the nonprofit has effective internal controls governing the use of federal funds.
Testing of “major programs”
Auditors identify “major programs” based on risk and size and perform detailed compliance testing on those programs.
Reporting and corrective actions
If compliance issues or internal control weaknesses are identified, the nonprofit may be required to submit corrective action plans.
While this process can be demanding, it also provides federal agencies with assurance that grant funds are being used appropriately.
Planning for the New Threshold
The increase to $1,000,000 may reduce the audit burden for some nonprofits that previously exceeded the $750,000 threshold. However, organizations approaching the new limit should still plan carefully.
Best practices include:
- tracking federal expenditures throughout the year
- coordinating with finance teams and grant managers
- engaging auditors early if the threshold may be exceeded
- maintaining consistent documentation practices
Organizations receiving federal funding often experience fluctuations in grant activity, and crossing the threshold can happen quickly as programs expand.
How Single Audits Relate to Charitable Solicitation Compliance
Although Single Audits are federal grant compliance requirements, nonprofit organizations must also comply with state charitable solicitation laws when fundraising from the public.
Many states require:
- independent financial audits once revenue reaches certain thresholds
- submission of financial statements as part of charitable solicitation registration renewals
These state requirements operate independently of federal Single Audit rules.
For example, a nonprofit might:
- fall below the $1 million federal Single Audit threshold, but
- still be required to provide audited financial statements to one or more states as part of its charitable solicitation registration filings.
Because these requirements operate simultaneously, organizations fundraising nationally often manage:
- federal audit requirements
- state audit thresholds
- multi-state registration filings
- renewal deadlines across multiple jurisdictions
Understanding how these requirements interact is an important part of maintaining overall fundraising compliance.
Final Thoughts
The increase in the Single Audit threshold represents a meaningful change for nonprofits receiving federal funding. Organizations that previously required a Single Audit may find that they no longer meet the threshold, while others approaching $1 million in federal expenditures will still need to plan for comprehensive federal compliance reviews.
At the same time, federal audit requirements are only one part of the broader compliance landscape. Nonprofits operating across multiple states must also manage charitable solicitation registrations, financial statement requirements, and other state-level reporting obligations tied to fundraising activity.
Maintaining clear financial tracking systems and understanding how federal and state compliance requirements interact can help organizations avoid disruptions as their funding and fundraising programs continue to grow.