On February 20, 2018, two important Acts (Act 71 - HB 1420 and Act 72 - HB 1421) become effective, after being signed into law by Governor Tom Wolf on December 22, 2017. Both Acts amend the Pennsylvania Solicitation of Funds for Charitable Purposes Act (“Charities Act”).
Increased Audit and Review Thresholds
Act 71 increases the thresholds for an audit, review, or compilation of the financial reports required to be submitted by charitable organizations that register to solicit in Pennsylvania. Prior to Act 71, audited financial statements by an independent CPA were required to be filed with charitable registration and renewal filings if annual contributions exceeded $300,000 (excluding membership dues and government grants and contracts); and a CPA review was required if contributions were $100,000 to less than $300,000 (a written audit waiver can be requested pursuant to 10 Pa. C.S. § 162.5j).
Effective February 20, 2018, the audit threshold increases from $300,000 to $750,000, and the CPA review threshold increases from $100,000 to $250,000. Also, charitable organizations which receive annual contributions of $100,000 to less than $250,000, are required to have a compilation, review or audit of their financial statements performed by an independent CPA. A compilation, audit or review is optional for any charitable organization which receives annual contributions of less than $100,000.
Required Financial Statements
|Gross Annual Contributions Under Current Charities Act||
New Gross Annual Contributions Under Act 71, Effective 2/20/ 2018
|Audit||$300,000 or more||$750,000 or more|
|Audit or review||$100,000 to less than $300,000||$250,000 to less than $750,000|
|Audit, review or compilation||$50,00000 to less than $100,000||$100,000 to less than $250,000|
|Audit, review, compilation or internally prepared||Less than $50,000||Less than $100,000|
Act 71 thresholds for audit, review, or compilation of financial reports will be applied to charitable registration filings due on or after February 15, 2018 (3/31/2017 FYE), and to all new charitable organization registrations filed on or after February 20, 2018.
Due Date Based on Postmark for Annual Charitable Registration Renewal Filings
Act 72 clarifies that annual charitable registration filings must be postmarked by the due date (15th day of the eleventh month following the close of the organization’s fiscal year), instead of the date received at the Bureau of Charitable Organizations. Act 72 due dates will be applied to all charitable registration renewals due on or after February 15, 2018 (3/31/2017 FYE).
The increased audit and review thresholds are welcome changes for charities, especially smaller organizations that may no longer be required to incur the expense of having an independent CPA prepare audited or reviewed financial statements. Also, a due date based on the postmark affords charities at least a few extra days to file their registration renewal timely without incurring a state-imposed late fee.
This article is provided for informational purposes only and should not be considered, or relied upon, as legal advice.