Part of the Multi-State Fundraising Compliance Series. It is design to provide practical guidance on charitable solicitation registration and multi-state fundraising compliance.
Video Overview:
Many nonprofit leaders understand what an audit is—but far fewer understand when a financial review may be required instead, or how states distinguish between the two. For organizations fundraising across multiple states, this distinction can significantly impact compliance planning, budgeting, and renewal timelines.
In this video, we explain the key differences between reviewed and audited financial statements, how states determine which is required, and how revenue thresholds drive those requirements. We also explore how multi-state fundraising complicates financial reporting obligations and why nonprofits often need to meet the most stringent requirement across jurisdictions.
By understanding when reviews versus audits are required, nonprofits can better plan ahead, avoid delays, and ensure their registration filings remain compliant as they grow.
This video explains the difference between reviewed and audited financials and when states require each for registration.
This video is part of the Multi-State Fundraising Compliance Series, which explains charitable solicitation registration and nonprofit fundraising compliance requirements across the United States.
Key Topics Covered
- Difference between reviewed and audited financial statements
- What an audit includes vs. what a review includes
- Why audits provide higher assurance than reviews
- How states determine financial reporting requirements
- Common revenue thresholds for reviews vs. audits
Who This Video Is For
- Executive directors launching fundraising expansion
- Development teams building online campaigns
- Finance and compliance staff overseeing registrations
- Boards evaluating regulatory risk
- Organizations expanding fundraising beyond their home state
Video Summary
Understanding the difference between reviewed and audited financial statements is essential for nonprofits managing charitable solicitation registration. While both involve independent CPA oversight, they serve different purposes and are required at different revenue levels depending on state law.
An audit provides the highest level of financial assurance. It involves detailed testing, verification procedures, and a formal opinion issued by a CPA firm. Because of its scope, an audit is more time-consuming and costly but provides the greatest level of confidence in financial reporting.
A financial review, by contrast, provides limited assurance. It involves analytical procedures and inquiries but does not include detailed verification testing. Reviews are less expensive and are often required at mid-level revenue thresholds before an audit becomes mandatory.
States require different levels of financial reporting to promote transparency and protect donors. As nonprofit revenue increases, reporting requirements become more rigorous. Many states use tiered thresholds—for example, allowing basic reporting below a certain level, requiring a review at mid-level revenue, and requiring an audit above higher thresholds.
A key source of confusion is how revenue is calculated. In most cases, thresholds are based on total organizational revenue or total contributions—not just donations raised within a specific state. However, definitions vary. Some states exclude certain funding sources, such as government grants, while others include them.
Multi-state registration adds complexity. Each state may have different thresholds, definitions, and requirements. An organization may only need a review in one state but require a full audit in another. To simplify compliance, many nonprofits adopt the highest required level of financial reporting across all states.
As organizations grow, they are often caught off guard by these requirements. Rapid revenue increases, expansion into new states, or failure to plan CPA engagements in advance can lead to delays in renewal filings. By monitoring thresholds, aligning financial reporting with renewal schedules, and planning proactively, nonprofits can manage these requirements effectively and maintain compliance.
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About the Multi-State Fundraising Compliance Series
The Multi-State Fundraising Compliance Series is an educational video series explaining charitable solicitation registration, multi-state fundraising compliance, and related nonprofit regulatory requirements. Each video addresses a specific compliance question commonly faced by nonprofit executives, development teams, and finance leaders.
Full Video Transcript
FAQs: Reviewed vs Audited Financials
What is the difference between a financial review and an audit?
An audit provides a higher level of assurance through detailed testing and verification, while a review provides limited assurance using analytical procedures and inquiries.
When do states require a financial review instead of an audit?
Some states require a review at mid-level revenue thresholds, before an audit becomes mandatory at higher thresholds.
When are audited financial statements required?
Audits are typically required once a nonprofit exceeds a state’s revenue threshold, though thresholds vary widely.
Can a nonprofit need a review in one state and an audit in another?
Yes. Requirements differ by state, which can create complexity for multi-state nonprofits.
How do nonprofits handle different requirements across states?
Many organizations prepare financial statements that meet the most stringent requirement to simplify compliance.
Do audits need to be GAAP-complaint?
Yes, some states require GAAP-complaint audits. Though other states will accept any financial statements provided.
Related Compliance Videos
- What Is Charitable Solicitation Registration?
- Which States Require Charitable Solicitation Registration?
- Charitable Solicitation Registration Explained for Nonprofits
- Do Small Nonprofits Need to Register in Every State?
Related Compliance Resources
- Where Nonprofits Must Register
- Charitable Solicitation Registration Audit Thresholds
- Multi-State Charitable Solicitation Registration Guide
Need Help Evaluating Your Registration Requirements?
If your organization is evaluating fundraising expansion or navigating multi-state registration requirements, you may schedule a consultation to discuss your situation.