After several years of sweeping accounting updates affecting nearly every nonprofit, the next two years will bring more focused, but still meaningful changes. These updates primarily impact organizations with federal awards, digital assets, trade receivables, or unrelated business income tax (UBIT) exposure.
Below is a summary of key developments and suggested actions as you plan for upcoming fiscal years.
1. Federal Grant Compliance and Single Audit Threshold Increase
Starting with fiscal years ending September 30, 2025, the Single Audit threshold increases to $1 million (from $750,000).
Organizations expending more than $1 million in federal funds annually must undergo a Single Audit under 2 CFR Part 200, Subpart F, in addition to the standard financial statement audit.
Even if your expenditures fall below this threshold, compliance with all Uniform Guidance rules remains mandatory, including procurement, subrecipient monitoring, and reporting.
Additional 2025 Compliance Supplement Updates:
- Dual Compliance Paths: Awards issued under the prior vs. revised Uniform Guidance may follow different requirements.
Action Step: Maintain a tracking schedule of awards by issue date to identify applicable guidance and communicate clearly with program staff and auditors. - Section Revisions: Major updates to Allowable Costs, Equipment, Procurement, and Subaward Reporting reflect a transition from FSRS to SAM.gov and emphasize procurement documentation.
Action Step: Review the new compliance supplement and update compliance policies. - De Minimis Indirect Rate: The allowable rate increases from 10% to 15%, supporting better cost recovery.
Action Step: Update indirect cost calculations and budget templates.
2. Crypto Asset Accounting (Effective 2025 Year-Ends)
For organizations holding cryptocurrency or other digital assets, ASU 2023-08 requires measurement at fair value, with gains and losses recognized in the statement of activities.
This does not affect organizations that immediately liquidate donated crypto assets.
Action: Review your gift acceptance policy to clarify whether crypto is accepted and how it’s handled upon receipt.
3. Practical Expedient for Credit Losses
(Optional Early Adoption; Required for 2026 Year-Ends)
ASU 2025-05 introduces a practical expedient under Topic 326 (CECL) for short-term receivables. Nonprofits can now consider subsequent cash collections after year-end when estimating expected credit losses—simplifying allowance calculations.
Action Step: Discuss early adoption with auditors or the finance committee to streamline your allowance methodology and disclosures.
4. Expanded Income Tax Disclosures (Effective 2026 Year-Ends)
Organizations paying Unrelated Business Income Tax (UBIT) must comply with ASU 2023-09, which adds disclosures on statutory tax rate, total income taxes paid, and carryforward items (e.g., NOLs, credits).
Action Step: Coordinate with tax preparers to ensure your system tracks this data accurately, especially for multi-activity UBIT reporting.
What Nonprofit Leaders Should Do Now
- Assess your exposure – Identify if your organization has federal awards, crypto holdings, trade receivables, or UBIT exposure.
- Update your policies – Review grant, gift acceptance, and accounting procedures.
- Plan adoption timing – Discuss early adoption (especially for CECL) with your auditors.
- Engage your board – These updates may affect audit scope and board oversight.
- Stay informed – Monitor new releases from FASB and OMB for future updates.
Final Thoughts
While the volume of new standards is smaller than in past years, their impact remains significant for certain nonprofits. Proactive preparation now will help ensure compliance and reduce audit surprises.
At Han Group, we help nonprofit leaders anticipate changes, strengthen compliance, and simplify financial reporting. For guidance on how these updates may affect your organization, reach out to your engagement manager or partner.
