California Nonprofit Audit Requirements: Filings and Penalties

California nonprofit audit requirements kick in at $2 million in annual gross revenue: any charitable corporation, unincorporated association, or trustee that receives or accrues that amount in a fiscal year must have its financial statements audited by an independent certified public accountant.¹ Organizations below that line still have annual filing duties with the Attorney General’s Registry of Charities and Fundraisers and the Franchise Tax Board, and missing any of them can cost you the right to solicit donations in the state.

Who Must Get an Audit

The $2 million figure is gross revenue for the fiscal year. One carve-out matters: grants from government entities and contracts for government services are excluded from the calculation, but only when the government agency requires a separate accounting of those funds.¹ A nonprofit that takes in $3 million overall but $1.5 million of that is government grant money with a separate accounting requirement has countable gross revenue of $1.5 million and falls below the threshold.

Below $2 million, state law requires neither a full audit nor a formal financial review. Funders are another matter. Many grantmakers require audited or reviewed financials on their own terms, so what you actually owe your board and funders may exceed the legal minimum.

The Audit Committee

Hitting the audit threshold also triggers a governance requirement: the board must appoint an audit committee, and its composition rules are strict.¹

No staff members can serve, including the CEO and CFO.
If the organization has a finance committee, finance committee members may sit on the audit committee but must make up less than half of it.
The chair of the audit committee cannot be a member of the finance committee.
Compensation to audit committee members cannot exceed what the organization pays board members for board service.
No member may have a material financial interest in any entity doing business with the organization.

The committee’s job is to recommend whether to hire or fire the auditor, and it can negotiate fees on the board’s behalf. It also meets with the auditor to confirm the organization’s financial affairs are in order, reviews the completed audit and decides whether to accept it, and verifies that any non-audit services the same firm provides comply with auditor independence standards. If your nonprofit is controlled by another corporation, the audit committee can sit on that parent corporation’s board instead.

Standards the Auditor Must Follow

Financial statements must be prepared under Generally Accepted Accounting Principles, and the audit itself must be performed under Generally Accepted Auditing Standards. A full audit gives reasonable assurance that the statements are free of material misstatement, a meaningfully higher level of confidence than the limited assurance a review provides.

Independence is not optional. The auditor cannot be a staff member, officer, or director. When the same firm also handles non-audit work such as bookkeeping or tax preparation, both the firm and its individual auditors must follow the auditor independence standards in the Government Auditing Standards, commonly called the Yellow Book, issued by the U.S. Comptroller General.¹ The Attorney General can also prescribe different independence standards by regulation. If you are considering using the same firm for extra work, take it to the audit committee before signing anything.

Annual Filings With the Attorney General

Every registered California charity files annually with the Registry of Charities and Fundraisers, regardless of size.² The package:

Form RRF-1, the Annual Registration Renewal Fee Report, from every registrant every year.
The same federal Form 990, 990-EZ, or 990-PF you file with the IRS. Organizations not required to file any federal 990 file Form CT-TR-1 instead.
Audited financial statements, but only for organizations at or above the $2 million threshold.

The filing is due four months and fifteen days after the close of your fiscal year. For a calendar-year organization, that is May 15. The Registry honors IRS-granted extensions automatically; you do not have to request state extension relief separately. Do not file with the Registry before filing with the IRS. File federally first, then send the complete package to the Registry.

The RRF-1 fee scales with total revenue:³

Under $50,000: $25
$50,000–$100,000: $50
$100,001–$250,000: $75
$250,001–$1 million: $100
$1,000,001–$5 million: $200
$5,000,001–$20 million: $400
$20,000,001–$100 million: $800
$100,000,001–$500 million: $1,000
Over $500 million: $1,200

Organizations subject to the audit requirement must also make their audited financial statements available for inspection by both the Attorney General and the public no later than nine months after the close of the fiscal year, in the same manner prescribed for IRS Form 990 under Internal Revenue Code Section 6104(d).¹ In practice, that means providing copies on request.

Filing With the Franchise Tax Board

The FTB filing is separate from anything you send the Attorney General and separate from the federal 990. The form depends on gross receipts:⁴

Gross receipts of $50,000 or less: FTB 199N, the California e-Postcard, filed electronically.
Gross receipts over $50,000: Form 199, the California Exempt Organization Annual Information Return.

Missing the FTB filing is one of the most common ways California nonprofits lose their tax-exempt status. The FTB can revoke exemption as of the suspension date and assess a $2,000 penalty per tax year for each return not filed within 60 days of a written demand.⁵

Federal Funding Triggers a Separate Audit

If your nonprofit spends federal award money, a different audit rule applies on top of California’s. Under 2 CFR Part 200, Subpart F, any non-federal entity that expends $1,000,000 or more in federal awards in a fiscal year must undergo a Single Audit.⁶ This $1 million threshold took effect for fiscal years beginning on or after October 1, 2024, replacing the previous $750,000 threshold.⁷

A Single Audit is broader than a standard financial audit because it looks at compliance with the specific terms and regulations attached to each federal grant program, not just the accuracy of the financial statements. The report is submitted electronically to the Federal Audit Clearinghouse. Filing there does not satisfy any California obligation. You still owe the Attorney General and the FTB their own forms.

What Happens If You Don’t Comply

Miss the annual renewal with the Attorney General and your status moves to delinquent. A delinquent charity may not operate or solicit donations in California, including being listed in solicitations or accepting donations through fundraising platforms. Left uncorrected, delinquent progresses to suspended and then revoked. The Registry notifies the Franchise Tax Board, which may independently revoke tax-exempt status.⁸

On the FTB side, failure to file can suspend the organization’s corporate status, revoke tax exemption as of the suspension date, and trigger the $2,000 per-year penalty already mentioned.⁵ The RRF-1 form itself warns that late filing may result in loss of tax exemption, a minimum $800 tax, interest, and additional fines.³

In cases involving mismanagement or fraud, the Attorney General can go further, including court orders to dissolve the organization and bans keeping individual officers from leading any charitable organization in California for years afterward.

1
California Legislative Information. California Code GOV 12586 – Supervision of Trustees and Fundraisers for Charitable Purposes
2
California Department of Justice. Annual Registration Renewal
3
California Department of Justice. Annual Registration Renewal Fee Report to Attorney General of California (RRF-1)
4
Franchise Tax Board. Annual and Filing Requirements
5
Franchise Tax Board. My Business Is Suspended
6
eCFR. 2 CFR Part 200 Subpart F – Audit Requirements
7
U.S. Department of Health and Human Services Office of Inspector General. Single Audits FAQs
8
California Department of Justice. Delinquency