QUICK TAKEAWAY
Primary Insight: California imposes its own audit requirement that has nothing to do with federal funding. A nonprofit accruing $2 million or more in gross revenue in any fiscal year must have audited financial statements, regardless of whether it receives a single federal dollar.
Key Fact: The Attorney General has extended the filing deadline for all charities whose renewal filings were due between January 7, 2025 and August 31, 2026. Those organizations have until August 31, 2026 to file, and no request is needed to receive the relief.
Best Suited For: Executive directors, finance directors, and board members at California nonprofits approaching or exceeding $2 million in gross revenue.
Most nonprofit audit guidance is written for a national audience, which means it explains the federal Single Audit and stops. For a California organization that is the less important half of the picture. California has its own audit requirement, it is triggered by total revenue rather than federal spending, and it catches organizations that have never touched a federal grant.
The trigger sits inside a filing most executive directors treat as routine paperwork. The RRF-1, the annual registration renewal report every registered California charity files with the Attorney General, reports the revenue figure that determines whether an audit was required for that year. Organizations discover the requirement by crossing it, usually after the fiscal year has already closed.
This guide covers the California audit threshold, how it differs from the federal Single Audit rule, what the RRF-1 requires and when it is due, the current filing relief, and what a board should do when the organization is approaching $2 million.
The California audit threshold is $2 million in gross revenue
A California charitable corporation must prepare annual financial statements audited by an independent certified public accountant once it accrues $2 million or more in gross revenue in any fiscal year. The requirement comes from the Nonprofit Integrity Act, codified at Government Code section 12586(e)(1), and the Attorney General’s summary of the audit requirements sets out the details.
Four specifics matter more than the headline number:
- Government grants can be excluded. The $2 million threshold excludes grants received from governmental entities if the nonprofit must provide an accounting of how it used the funds. An organization with $2.3 million in total revenue that includes $600,000 in accountable government grants falls below the threshold.
- The statements must follow GAAP, and the independent CPA must follow generally accepted auditing standards. A review or a compilation does not satisfy the requirement.
- Yellow Book independence applies when the accounting firm performing the audit also provides non-audit services to the nonprofit. In that case the firm must follow the independence standards issued by the U.S. Comptroller General.
- There is a nine-month publication deadline. Audited financial statements must be available for inspection by the Attorney General and the public no later than nine months after the close of the fiscal year they cover.
The requirement applies to charitable corporations, unincorporated associations, and trustees required to register and report to the Attorney General. It is triggered in any fiscal year the organization accrues the threshold amount, which means a single unusually large year can create an audit obligation for an organization that normally operates well below $2 million.
Crossing $2 million also requires an audit committee
California charitable corporations at or above $2 million in gross revenue must also establish and maintain an audit committee appointed by the governing board, under Government Code section 12586(e)(2). This is the provision organizations most often miss, because it is a governance obligation rather than an accounting one and nothing on the RRF-1 asks about it directly.
The composition rules are specific, and they exist to keep the people being audited away from the people overseeing the audit.
| Audit committee rule | Detail |
|---|---|
| Who appoints it | The governing board |
| Who may serve | Members may include people who are not on the governing board |
| Who may not serve | Staff members, the president or chief executive officer, and the treasurer or chief financial officer |
| Overlap with the finance committee | Finance committee members may serve, but may not make up 50 percent or more of the audit committee |
| Chairperson restriction | The audit committee chair may not be a member of the finance committee |
| What it is responsible for | Recommending the hiring and firing of the independent CPA to the board, and it may negotiate the CPA’s compensation on the board’s behalf |
| What it must do | Confer with the auditor to satisfy itself that the organization’s financial affairs are in order, review the audit and decide whether to accept it, and approve any non-audit services from the audit firm |
For a small board this takes planning. An organization with a five-person board where two members sit on the finance committee and the treasurer is excluded may not have enough eligible people, which is why the rule permits non-board members to serve on the audit committee.
The federal Single Audit is a separate test, and the threshold changed
The federal Single Audit requirement applies to organizations that expend $1,000,000 or more in federal awards during a fiscal year, under 2 CFR 200.501. An entity expending less than $1,000,000 in federal awards is exempt from federal audit requirements for that year, though its records must remain available for review by the federal agency, the pass-through entity, and the Government Accountability Office.
That figure was raised from $750,000, and a great deal of nonprofit guidance still cites the old number. If your organization has been budgeting for a Single Audit based on $750,000 in federal expenditures, it may no longer be required, and the audit fee may be avoidable.
The two tests measure different things and neither one substitutes for the other:
| California audit requirement | Federal Single Audit | |
|---|---|---|
| What triggers it | Gross revenue of $2 million or more in a fiscal year | Federal awards expended of $1,000,000 or more in a fiscal year |
| Measured on | Revenue accrued, excluding accountable government grants | Federal money actually spent, not received |
| Authority | Government Code section 12586(e)(1) | 2 CFR 200.501 |
| Scope of the audit | Financial statements under GAAP | Financial statements plus federal award compliance and internal controls |
| Who oversees it | California Attorney General | Federal awarding agency and pass-through entities |
An organization can easily be subject to both, to one, or to neither. A California nonprofit with $2.4 million in program service revenue and no federal funding needs the state audit and not the Single Audit. A smaller organization spending $1.1 million in federal pass-through funds needs the Single Audit and possibly not the state audit.
What the RRF-1 is and when it is due
The RRF-1 is the Annual Registration Renewal Fee Report that every registered California charity must file with the Attorney General’s Registry of Charities and Fundraisers. Per the Registry’s annual renewal guidance, it is due four months and fifteen days after the end of the organization’s fiscal year, unless the IRS has granted an extension.
Every nonprofit public benefit corporation, unincorporated association, or trustee holding assets for charitable purposes must file it annually, regardless of whether the organization files an IRS Form 990. Organizations formed in other states are also covered if they solicit, conduct business, or hold charitable assets in or from California.
The filing is a package rather than a single form. It consists of the RRF-1, the renewal fee, and either a copy of the IRS Form 990, 990-EZ, or 990-PF as filed, or Form CT-TR-1 for organizations that do not meet the revenue requirements to file a 990 or 990-EZ. Organizations that file any of the 990 series with the IRS must file the same with the Registry regardless of revenue, and do not file CT-TR-1.
One detail causes repeated problems: Schedule B is not requested or required by the Registry, and all pages of it must be excluded from the filing, including the first page. Redacted or public-view versions should not be substituted. The Registry also does not require a copy of Form 990-N.
Due dates by fiscal year end, before any IRS extension:
| Fiscal year ends | RRF-1 due | Fiscal year ends | RRF-1 due |
|---|---|---|---|
| January 31 | June 15 | July 31 | December 15 |
| February 28 or 29 | July 15 | August 31 | January 15 |
| March 31 | August 15 | September 30 | February 15 |
| April 30 | September 15 | October 31 | March 15 |
| May 31 | October 15 | November 30 | April 15 |
| June 30 | November 15 | December 31 | May 15 |
The two bolded rows cover the most common fiscal year ends. A June 30 year end, standard across much of the nonprofit sector, produces a November 15 deadline, which is why the audit conversation belongs in July and August rather than October.
The Attorney General has extended the current filing deadline
The Registry of Charities and Fundraisers has granted filing deadline relief to all charities. Per the Registry’s current notice, charities whose renewal filings were due between January 7, 2025 and August 31, 2026 have until August 31, 2026 to file, and organizations do not need to contact the Registry to obtain the relief.
The relief was announced ahead of the launch of a new Online Filing Service, which the Registry expects to make available to all existing registrants and submission types during 2026. Existing systems, including the Registry Search Tool, are slated to be replaced. Charities registered before October 2025 cannot use the new service yet.
The Registry also honors all IRS extensions for annual renewal deadlines, including for the RRF-1, CT-TR-1, and the 990 series. Organizations granted an IRS extension should file with the IRS first and then submit the complete package to the Registry.
If your organization has been carrying a delinquent status or has a filing it did not complete, this window is the opportunity to resolve it. Deadlines set by state agencies do move, so confirm the current date on the Attorney General’s site before relying on it.
The RRF-1 renewal fee is based on total revenue
The renewal fee accompanying the RRF-1 is set on a sliding scale tied to the organization’s total revenue, under 11 Cal. Code Regs. sections 301-307, 311, and 312. Total revenue is defined by reference to IRS Form 990 and 990-PF, Part I, line 12, or Form 990-EZ, Part I, line 9.
| Total revenue | Renewal fee |
|---|---|
| Less than $50,000 | $25 |
| Between $50,000 and $100,000 | $50 |
| Between $100,001 and $250,000 | $75 |
| Between $250,001 and $1 million | $100 |
| Between $1,000,001 and $5 million | $200 |
| Between $5,000,001 and $20 million | $400 |
| Between $20,000,001 and $100 million | $800 |
| Between $100,000,001 and $500 million | $1,000 |
| Greater than $500 million | $1,200 |
The fee schedule shown reflects fees as of January 1, 2022. Download the current Form RRF-1 from the Attorney General’s site before each filing, since the Registry updates the forms and the schedule periodically.
Organizations with revenue under $50,000 still file. They submit Form CT-TR-1 alongside the RRF-1, and they still owe the $25 fee. Registration and annual reporting are required once an organization operates in California, regardless of asset or revenue level.
What happens if the filing is missed
Missing the annual filing moves an organization to delinquent status with the Registry, and the consequences extend well past the Attorney General’s office. The Registry lists penalties, administrative or legal action, and loss of tax exemption status with the Franchise Tax Board among the results of failing to file on time.
The Form RRF-1 itself carries a further warning: failure to submit the report annually within four months and fifteen days after the end of the accounting period may result in the loss of tax exemption and the assessment of a minimum tax of $800, plus interest, and fines or filing penalties.
There is also an operational consequence that arrives sooner. A delinquent registrant may not operate or solicit in California until the required reporting and fees are submitted, which puts fundraising at risk during the period the organization is out of compliance.
An incomplete filing creates a softer version of the same problem. Submitting a package missing a required element can move the registration from Current to Current – Reporting Incomplete, and the Registry will mail a notice specifying what is needed. Questions about a specific delinquency or its consequences are worth raising with your attorney, since the answer depends on the organization’s particular circumstances.
What a board should do when the organization nears $2 million
Approaching the threshold calls for action a year ahead, because an audit cannot be arranged retroactively at any reasonable cost or quality. The organizations that handle this well treat $1.6 million to $1.8 million as the planning trigger rather than waiting to cross $2 million.
- Project gross revenue before the fiscal year ends, separating out government grants that carry an accounting obligation, since those are excluded from the threshold calculation.
- Form the audit committee early, ideally a full year ahead, because the composition rules may require recruiting people who are not currently on the board.
- Budget for the audit as a line item in the year it will be required, along with the internal staff time it will consume, which is routinely underestimated.
- Get the books audit-ready first. Auditors bill for the time they spend reconstructing records, so a clean close and complete supporting schedules directly reduce the fee.
- Engage the auditor months before year end, not after, since capacity tightens considerably in the months following common fiscal year ends.
- Calendar the nine-month publication deadline for making the audited statements available to the Attorney General and the public.
The preparation work is where most of the cost is decided. Consistent fund accounting, monthly reconciliations, and documented grant allocations turn an audit into a routine engagement rather than a reconstruction project, which is the practical argument for building nonprofit accounting systems before the threshold arrives rather than after.
Frequently asked questions about California nonprofit audit requirements
When does a California nonprofit need an audit?
A California nonprofit needs an audit once it accrues $2 million or more in gross revenue in any fiscal year, under Government Code section 12586(e)(1). The threshold excludes grants received from governmental entities if the organization must provide an accounting of how it used those funds, so total revenue and threshold revenue are not always the same figure.
What is Form RRF-1?
Form RRF-1 is the Annual Registration Renewal Fee Report that every registered California charity files with the Attorney General’s Registry of Charities and Fundraisers. It is filed with a renewal fee and either a copy of the IRS Form 990, 990-EZ, or 990-PF as filed, or Form CT-TR-1 for organizations below the 990 filing thresholds.
When is the RRF-1 due?
The RRF-1 is due four months and fifteen days after the end of the organization’s fiscal year, unless the IRS has granted an extension, which the Registry honors. An organization with a June 30 fiscal year end has a November 15 due date, and a December 31 year end produces a May 15 due date.
Does a small nonprofit have to file the RRF-1?
Small nonprofits must file the RRF-1 regardless of revenue or asset level once the organization operates in California and is registered. Organizations with revenue under $50,000 that do not file an IRS Form 990 or 990-EZ file Form CT-TR-1 alongside the RRF-1, and the minimum renewal fee is $25.
What is the difference between the California audit requirement and a federal Single Audit?
The California audit requirement is triggered by $2 million or more in gross revenue, while a federal Single Audit is triggered by expending $1,000,000 or more in federal awards during a fiscal year under 2 CFR 200.501. They measure different things, and an organization may be subject to one, both, or neither.
What happens if a California nonprofit files the RRF-1 late?
Filing the RRF-1 late results in delinquent status with the Registry, and a delinquent registrant may not operate or solicit in California until the required reporting and fees are submitted. The Registry also lists penalties, administrative or legal action, and loss of tax exemption status with the Franchise Tax Board among the consequences.
The Threshold Arrives Before the Audit Can Be Arranged
The difficulty with the $2 million threshold is not that it is hard to understand. It is that organizations cross it during a year that already feels like a success, and the obligation only becomes visible once the year is closed and the numbers are final.
Boards that avoid the scramble do one thing differently. They forecast gross revenue against the threshold before the fiscal year ends, they form the audit committee while there is still time to recruit for it, and they treat audit readiness as a year-round accounting standard rather than a project that starts when the auditor calls.
At MBS Accountancy, we work with California nonprofits on fund accounting, Form 990 preparation, RRF-1 filings, and audit readiness, including the year of preparation that determines what an audit actually costs. If your organization is approaching $2 million, or if you are not certain whether last year already crossed it, that is worth a conversation.
Ready to talk about your situation? Schedule a free 20-minute call.