In March 2024, the Wisconsin State Legislature announced it’s updating the financial statement requirements (specifically the thresholds) for charitable organizations to reduce burdens on the organizations. Changes include (but are not limited to) dollar amount revisions for review and audit requirements and waiver applications. These changes may have a profound effect on how charitable organizations prepare financial statements and maintain financial integrity. This article explores the changes in the Wisconsin State Legislature in 2024 and its potential implications for charitable organizations.
Overview of the Wisconsin State Thresholds
The thresholds for the State of Wisconsin are based on the level of contributions received during the year. A contribution is defined as a grant or pledge of money, property or other item of value given to a charitable organization. It does not include government grants or donations of food, used clothing or household goods. These regulations ensure transparency, accountability, and efficiency in the use of donor funds.
Important Dates
The changes apply to the fiscal years that begin on or after March 23, 2024.
Changes in the Wisconsin State Legislature and Its Potential Implications
1. Increased Review Threshold in State Financial Assistance
The revised State Legislature raises the review threshold from $300,000 to $500,000.
“A reviewed financial statement for the most recently completed fiscal year of the charitable organization, if the charitable organization received contributions in excess of $500,000, subject to adjustment under sub. (8), but not more than $1,000,000, subject to adjustment under sub. (8), during its most recently completed fiscal year.”
2. Increased Audit Threshold in State Financial Assistance
The revised State Legislature raises the audit threshold from $500,000 to $1 million.
“An audited financial statement for the most recently completed fiscal year of the charitable organization, if the charitable organization received contributions in excess of $1,000,000, subject to adjustment under sub. (8), during its most recently completed fiscal year.”
3. Increased Threshold in Waiver Applications
The revised State Legislature raises the waiver application thresholds. Organizations may apply for an audit waiver under the following circumstances:
- In the last fiscal year, the organization received $1,000,000 (previously $500,000) or more in contributions; AND during the fiscal year for which the waiver is being requested the Organization received one or more contributions from one contributor that exceed $700,000 (previously $400,000); AND in each of the preceding 3 years, the Organization received less than $300,000 (previously $100,000) in contributions.
Organizations may apply for a review waiver under the following circumstances:
- In the last fiscal year, the organization received in excess of $500,000 (previously $300,000) but not more than $1,000,000 (previously $500,000) in contributions; AND during the fiscal year for which the waiver is being requested the Organization received one or more contributions from one contributor that exceed $300,000 (previously $200,000); AND in each of the preceding 3 years, the Organization received less than $300,000 (previously $100,000) in contributions.
The waiver requirement may be an option for your organization, this allows you to submit a financial statement as part of its annual report. There are a few options: your organization may choose to submit a form #1952 and form 990 or form #308 “Charitable Organization Annual Report”.
These changes will ultimately decrease review and audit costs for organizations that will no longer be required to have a review or an audit. However, keep in mind that reviews and audits can still be valuable tools for ensuring financial integrity, operational efficiency, and public trust.
Charitable Organizations Should Proactively Prepare
The changes in the Wisconsin State Legislature for charitable organizations in 2024 will likely have a significant impact on how charitable organizations prepare financial statements and maintain financial integrity. Charitable organizations should proactively prepare for these changes by staying informed, seeking guidance from relevant authorities, and adopting necessary adjustments to ensure the financial statements are up to par if it’s not prepared by an independent accounting firm. By adapting to the new requirements, charitable organizations can continue serving their communities effectively while maintaining transparency and accountability in their use of state funds.
Please contact your Hawkins Ash CPAs representative to see if your organization will need an audit or review in 2025 and discuss more proactive ways to prepare for these significant changes.
