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4/9/2025
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Vargas, Caldwell bill would reduce administrative burden for smaller nonprofits
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STATE HOUSE – Rep. Justine Caldwell and Sen. Lammis J. Vargas are sponsoring legislation to eliminate a costly administrative burden on Rhode Island’s smaller nonprofit agencies, enabling them to direct more of their funding toward their mission.
The legislation (2025-H 5562, 2025-S 0783) raises the revenue threshold at which a charitable organization must submit an annual financial statement audited by an independent certified public accountant to the Department of Business Regulation (DBR).
The current law, enacted in 1999, allows nonprofits whose gross income is $500,000 or less to bypass the audit by providing their IRS Form 990, or a simpler statement of their activities or financial position complied by an accountant. The legislation, which passed the House on April 1 and is now before the Senate, would raise that threshold to $1 million, enabling more of the state’s small and mid-size nonprofit organization to comply with reporting laws without the expense and trouble of an audit.
“Not only are audits a significant expense of at least $10,000 that eats into the budget of smaller nonprofits, it’s difficult to even find someone to do them because of a shortage of CPAs in our state. Additionally, since in-kind donations count toward the revenue calculation, many organizations that cross the $500,000 threshold simply don’t have much cash at their disposal,” said Senator Vargas (D-Dist. 28, Cranston, Providence). “It’s been 25 years since this requirement was enacted. Updating it to align with the value of the dollar today will preserve critical resources for organizations that are doing very important work in our communities.”
Said Representative Caldwell (D-Dist. 30, East Greenwich, West Greenwich), “This bill will affect about 200 nonprofits in Rhode Island, most of which are operating with very slim cash margins. These are groups that provide help to those experiencing hunger, homelessness, mental health challenges, disabilities and more. They serve our elderly, children, animals and the environment. Many have contracts to provide services on our state’s behalf, and their nonprofit status provides a cost savings for taxpayers. Relieving them of this financial burden allows them to use more of their funding for their work, which is especially important now as the economy is pushing more people into need and hurting fundraising.”
Connecticut, New Jersey, New York and the federal government all set their audit threshold for nonprofits at similar or higher levels.
Since smaller nonprofits have to submit other financial documentation to DBR, they will still be accountable for following proper financial procedures.
“This legislation is crucial in ensuring that nonprofits, particularly small and mid-sized organizations, can direct more of their limited resources to serving Rhode Islanders in need, rather than incurring unnecessary financial burdens. Currently, many nonprofits must pay upwards of $10,000 to $15,000 for a financial audit, even when their budgets are modest. These costs divert funding from mission-critical programs, such as afterschool learning, food security, and emergency assistance. Raising the audit threshold would alleviate this financial strain, allowing organizations to invest in direct services and better meet the increasing needs of our communities,” said Kyle Bennett, chief of staff and public affairs officer at United Way of Rhode Island, in testimony in favor of the bill.
The bill has the support of United Way, the Alliance for Nonprofit Impact, many local nonprofits, the Rhode Island Business Leaders Alliance and the Rhode Island Society of CPAs as well as General Treasurer James A. Diossa and Secretary of State Gregg M. Amore.
For more information, contact:
Meredyth R. Whitty, Publicist
State House Room 20
Providence, RI 02903
(401) 222-1923
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