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Massachusetts has one of the nation’s oldest and most established charitable oversight systems, requiring nonprofits to provide increasing levels of financial transparency as they grow. For many organizations, exceeding $1 million in gross support and revenue means an independent financial statement audit becomes part of their annual reporting responsibilities.

Under Massachusetts law, a public charity with more than $1 million in gross support and revenue for the fiscal year generally must submit audited financial statements prepared by an independent Certified Public Accountant (CPA). The audit accompanies the organization’s annual reporting through the Massachusetts Attorney General’s Non-Profit Organizations/Public Charities Division. (M.G.L. c. 12, § 8F; Massachusetts AGO, Audits and Reviews for Charitable Organizations)

Unlike states that base their reporting requirements solely on charitable contributions, Massachusetts uses gross support and revenue, excluding gains or losses from the sale of a capital asset for purposes of the statutory threshold. This makes it important for nonprofit leaders to understand which income sources affect the reporting requirement. (M.G.L. c. 12, § 8F)

Whether your organization serves Boston, Worcester, Springfield, Lowell, Cambridge, New Bedford, Pittsfield, or communities throughout the Commonwealth, preparing for an audit before reaching the threshold can make the annual filing process significantly easier.

Massachusetts Audit Requirements at a Glance

Quick Answer

If your Massachusetts charitable organization has more than $1 million in gross support and revenue for the fiscal year, Massachusetts generally requires audited financial statements prepared by an independent CPA. Organizations with more than $500,000 but not more than $1 million may submit reviewed financial statements in lieu of an audit. (M.G.L. c. 12, § 8F; Massachusetts AGO, Audits and Reviews for Charitable Organizations)

When Does Massachusetts Require a Nonprofit Audit?

Massachusetts determines its financial reporting requirements using gross support and revenue rather than charitable contributions alone. The current thresholds require a CPA review once gross support and revenue is more than $500,000, while an audit is required when it is more than $1 million. (Massachusetts AGO, Audits and Reviews for Charitable Organizations)

Organizations reporting:

Because the reporting requirement is based on gross support and revenue, organizations should review significant funding sources each fiscal year to determine whether they have crossed the review or audit threshold. For statutory purposes, gains or losses from the sale of a capital asset are excluded from gross support and revenue. (M.G.L. c. 12, § 8F)

Form PC: Massachusetts’ Annual Charity Filing

One feature that makes Massachusetts different from many other states is Form PC, the annual financial report filed by public charities through the Attorney General’s Charity Portal. (Massachusetts AGO, Online Charity Filing Portal)

Annual filings generally include the online Form PC, the applicable IRS Form 990, required audit or review documentation, and the appropriate filing fee. (Massachusetts AGO, Frequently Asked Questions about Charitable Organizations)

• Form PC
• A copy of the organization’s IRS Form 990
• Audited or reviewed financial statements, when required
• Applicable filing fees and supporting documentation

Because these materials are filed together, organizations should coordinate the audit timeline with preparation of Form PC and IRS Form 990 to avoid delays in completing the annual filing. Massachusetts requires charitable registrations and annual filings to be submitted through the Charity Portal. (Massachusetts AGO, Online Charity Filing Portal)

For nonprofits preparing for their first audit, understanding how these reporting requirements fit together can make compliance much more efficient.

Massachusetts Law at a Glance

The Massachusetts Attorney General’s Non-Profit Organizations/Public Charities Division oversees charitable registrations and annual financial reporting throughout the Commonwealth. (Massachusetts AGO, Non-Profit Organizations/Public Charities Division)

Massachusetts uses a graduated reporting system. Organizations with more than $500,000 but not more than $1 million in gross support and revenue may submit a CPA review in lieu of an audit, while organizations with more than $1 million must submit audited financial statements. (M.G.L. c. 12, § 8F; Massachusetts AGO, Audits and Reviews for Charitable Organizations)

Because the reporting threshold includes both support and revenue, nonprofits should monitor multiple income sources throughout the year instead of focusing solely on charitable donations. The statute excludes gains or losses from the sale of a capital asset from the threshold calculation. (M.G.L. c. 12, § 8F)

Preparing for a Massachusetts Nonprofit Audit

Organizations approaching the audit threshold should begin planning several months before fiscal year-end.

Your CPA will typically request:

• General ledger
• Trial balance
• Gross support and revenue schedules
• Contribution records
• Grant agreements
• Program service revenue schedules
• Bank reconciliations
• Board meeting minutes
• Investment statements
• Fixed asset schedules
• Internal control documentation
• IRS Form 990
• Prior-year Form PC filings
• Prior-year financial statements

Maintaining organized records throughout the year can simplify both the audit engagement and the annual Form PC filing.

Common Reasons Massachusetts Nonprofits Reach the Audit Threshold

Many Massachusetts nonprofits exceed the audit threshold because of steady organizational growth rather than a single fundraising event.

Common examples include:

• Expansion of educational or healthcare programs
• Growth in program service revenue
• Large foundation grants
• Capital campaigns
• Increased corporate sponsorships
• Significant year-end charitable giving

Monitoring gross support and revenue throughout the fiscal year allows nonprofit leadership to anticipate audit requirements before annual filing deadlines arrive.

Benefits Beyond Compliance

Although Massachusetts requires audited financial statements above the statutory threshold, an independent audit can provide benefits beyond regulatory compliance. Audits of nonissuer financial statements are performed under applicable AICPA Statements on Auditing Standards. (M.G.L. c. 12, § 8F; AICPA, Statements on Auditing Standards)

A financial statement audit can help your organization:

• Increase donor confidence
• Strengthen board oversight
• Improve internal financial controls
• Enhance grant competitiveness
• Improve financial reporting accuracy
• Demonstrate accountability to regulators
• Support long-term organizational growth

For many nonprofits, these benefits continue well after the annual Form PC has been filed.

Why Choose ELT CPA LLC?

ELT CPA LLC provides independent nonprofit financial statement audit services for charitable organizations throughout Massachusetts.

Our professionals understand nonprofit accounting standards, Form PC reporting requirements, and the expectations of the Massachusetts Attorney General’s Non-Profit Organizations/Public Charities Division. We work collaboratively with nonprofit leadership to complete efficient audit engagements while minimizing disruption to daily operations.

Whether your organization is preparing for its first required audit or has completed audits for many years, ELT CPA LLC can help you navigate Massachusetts’ nonprofit reporting requirements with confidence.

Frequently Asked Questions

Does Massachusetts use contributions or revenue?

Massachusetts bases its reporting requirements on gross support and revenue, not charitable contributions alone. For the statutory threshold, gains or losses from the sale of a capital asset are excluded. (M.G.L. c. 12, § 8F)

What is Form PC?

Form PC is the annual financial reporting form filed with the Massachusetts Attorney General by public charities subject to the annual reporting requirement. When required, audited or reviewed financial statements are submitted with the annual filing through the Charity Portal. (Massachusetts AGO, Online Charity Filing Portal; Massachusetts AGO, Frequently Asked Questions about Charitable Organizations)

What happens between $500,000 and $1 million?

Organizations with more than $500,000 but not more than $1 million in gross support and revenue may generally submit financial statements accompanied by an independent CPA’s review report instead of audited financial statements. (M.G.L. c. 12, § 8F)

Who oversees charitable organizations in Massachusetts?

The Massachusetts Attorney General’s Non-Profit Organizations/Public Charities Division administers charitable registrations and annual financial reporting requirements. (Massachusetts AGO, Non-Profit Organizations/Public Charities Division)