Key Changes for State-Funded Nonprofits

The following article first appeared in the Insights section of Whittlesey’s website. It is reposted here with permission. 

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The Connecticut Office of Policy and Management has issued important updates affecting nonprofit organizations that receive state funding.

A new technical bulletin outlines changes to State Single Audit reporting requirements, effective for fiscal years beginning on or after July 1, 2024.

These updates are crucial for compliance in upcoming audits.

1. Savings Retention for Nonprofits: PA 23-186

Nonprofit organizations that fulfill their contractual obligations under state purchase of service contracts are permitted to retain any savings realized at year-end.

• These retained savings cannot be recovered or offset by the contracting state agencies.
• This provision applies to providers under the Departments of Developmental Services, Mental Health and Addiction Services, Social Services, and Children and Families.

New compliance elements: Under Activities and Costs Allowed/Unallowed, a new audit procedure has been added specifically for retention funds.

Schedule of expenditures of state financial assistance:

• Retained savings must be reported separately in the SESFA in the year they are expended.
• Expenditures of retained savings should appear as distinct line items under the CORE-CT program number approved in the savings retention plan, regardless of the original source of funding.
• Refer to Part 9 of the Compliance Supplement for reporting examples.
• IMPORTANT: Ensure that retained savings are clearly identified in your grant schedule.

2. Audit Implications: New Compliance and Reporting Guidance

OPM’s updated audit guidance is now included in the May 2025 State Single Audit Compliance Supplement. Key changes include:

Changes to State Single Audit thresholds:

• A State Single Audit is now required when expenditures of state financial assistance exceed $500,000 (an increase from the previous threshold of $300,000)
• New Type A program threshold: Greater of $300,000 or 3% of total expenditures of state financial assistance
• New Type B program threshold: $100,000

These revised thresholds will affect audit scope, risk assessment, and program determination for many nonprofit entities.

What You Need to Do

• Review your organization’s state-funded programs to assess whether savings retention applies
• Ensure proper tracking and separate reporting of savings retention expenditures in your SESFA
• Prepare for the increased audit threshold for state financial assistance
• Share this information with your internal finance team and leadership

Resources

• Technical Bulletin
• Single Audit Compliance Supplement (State)