Audit Requirements for Illinois Nonprofits in 2025: What You Need to Know

Exceptions and Special Cases

A charitable organization using the services of a paid professional fundraiser remains subject to different rules. For these entities, the audit threshold remains unchanged at $25,000 in annual contributions.

The Rationale for the Changes

The revised thresholds aim to address equity concerns and improve resource allocation in the nonprofit sector. The previous $300,000 audit threshold was among the lowest in the United States, placing a disproportionate burden on smaller organizations. Full audits can cost between $6,000 and $12,000, which represents a significant expense for smaller nonprofits.

Why These Changes Matter

These revisions represent a significant shift in Illinois’ approach to nonprofit financial accountability. The state aims to balance oversight with operational flexibility for charitable organizations by raising the audit threshold and introducing a financial review option.

The changes allow nonprofits, particularly smaller ones, to allocate more resources to their missions while maintaining the financial transparency expected by donors and regulators. Understanding and adapting to these new rules is crucial for nonprofits to achieve ongoing compliance and effective operation.

How These New Requirements in Illinois Compare to National Standards

While the new Illinois thresholds align more closely with national trends, they remain conservative compared to many states:

• 18 states and the District of Columbia have no audit requirement.
• 30 states require reviews or audits starting at $500,000 or higher.
• Federal regulations require a “single audit” for grantees expending over $750,000 in federal funds annually.
• The Better Business Bureau Wise Giving Alliance recommends audits for organizations with annual contributions exceeding $1 million.

Some states periodically adjust their audit thresholds and some of them allow alternatives to full audits, such as IRS Form 990.

Financial Review vs. Full Audit

A financial review, now an option for organizations in the $300,000–$500,000 range, involves an examination of financial statements in accordance with generally accepted accounting principles. While less comprehensive than a full audit, it still provides a level of assurance to stakeholders.

A full audit, required for organizations receiving $500,000 or more in annual contributions, offers reasonable assurance about whether an organization’s financial statements are free from material misstatement.

What Your Nonprofit Should Do Next

As these new requirements are now in effect, Illinois nonprofits must ensure they’re in compliance.

Here are key steps to take:

• Assess your organization’s annual contributions to determine which category you fall into.
• Review your fiscal year-end and corresponding reporting deadlines.
• If you’re in the $300,000–$500,000 range, decide whether to opt for a financial review or continue with a full audit.
• Update your financial reporting processes to align with the new requirements.
• Seek professional guidance to ensure full compliance with Illinois and government agencies’ standards.