Is a nonprofit 501(c)(3) required to have an audit?
Not by the IRS. Tax-exempt status under section 501(c)(3) depends on how the organization is organized and operated, not on an audit (IRS). An audit becomes mandatory through federal awards (2 CFR 200.501), state charity law, or a funder or lender agreement.
Last verified: 2026-09-20 · Every figure links its source.
Does the IRS require 501(c)(3)s to be audited?
No. What the IRS requires is the annual information return — Form 990, 990-EZ or the 990-N e-Postcard depending on size (IRS) — and that the organization keeps meeting the exemption requirements: organized and operated exclusively for exempt purposes, no earnings inuring to a private shareholder or individual, no substantial lobbying, and no political campaign activity (IRS). Filing nothing for three consecutive years costs the exemption automatically (IRS) — but that is a filing rule, not an audit rule.
Source: IRS, exemption requirements for 501(c)(3) organizations · IRS, which Form 990 to file · IRS, Form 990-N (e-Postcard) · Last verified: 2026-09-20
When does a 501(c)(3) need a single audit?
When it expends $1,000,000 or more in federal awards in its fiscal year (2 CFR 200.501). That counts direct awards and subawards received through a state, county, city or another nonprofit (2 CFR 200.332), measured by when the activity occurs (200.502).
Source: 2 CFR 200.501 · 2 CFR 200.332 · 2 CFR 200.502 · Last verified: 2026-09-20
Which states require 501(c)(3) audits?
Several, at thresholds that differ widely. From the statutes we have verified: California at $2,000,000 of gross revenue excluding government grants and contracts; New York above $1,000,000 of gross revenue and support; Massachusetts above $500,000 of gross support and revenue, with a review permitted up to $1,000,000; Pennsylvania at $750,000 of annual contributions; Illinois above $500,000 of contributions; Michigan at $575,000 of contributions for registration statements filed in 2026. The full table with citations is on nonprofit audit requirements by state.
Source: Cal. Gov. Code § 12586 · N.Y. Exec. Law § 172-b · Mass. Gen. Laws ch. 12, § 8F · Pennsylvania Bureau of Corporations and Charitable Organizations · Illinois Attorney General, audit threshold · Mich. Comp. Laws § 400.273 · Last verified: 2026-09-20
What is a complete audit of a 501(c)(3)?
At minimum: financial statements with the notes and an independent auditor's report. Where federal awards are involved it also includes the schedule of expenditures of federal awards, the reports on internal control and compliance, the schedule of findings and questioned costs, the summary schedule of prior audit findings and the corrective action plan (2 CFR 200.512(c), 200.515).
Source: 2 CFR 200.512 · 2 CFR 200.515 · Last verified: 2026-09-20
Questions and answers
Is a nonprofit 501(c)(3) required to have an audit?
Not by the IRS. An audit is required when federal awards expended reach the single audit threshold, when state charity law requires one, or when a funder or lender does.
What is a complete 501(c) audit of a nonprofit organization?
Financial statements, notes and the auditor's report; plus, when federal awards are involved, the schedule of expenditures of federal awards, the compliance and internal control reports, the schedule of findings and questioned costs, the prior findings schedule and the corrective action plan.
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