Why Your Pledge Timing Matters: When Nonprofits Should Start Thinking About an Audit

Nonprofits often focus on when they receive funds—but did you know when a pledge is made can significantly impact your financial reporting and audit requirements? 

This question came up on a recent call with a prospective client. They mentioned they expected to receive a large donation before their fiscal year-end. Our team clarified an important point: It’s not the receipt of the funds, but the date the pledge is made that determines how it’s accounted for. 

Here’s How It Works: 

Under GAAP (Generally Accepted Accounting Principles), nonprofits are required to recognize revenue when a pledge is made, if it’s unconditional and verifiable, not when the cash hits the bank. 

That means if your organization secures a large pledge before June 30, 2025—even if you don’t receive the cash until later—you need to account for that revenue in your FY2025 financial statements. 

Why This Matters: 

Many nonprofits cross the audit threshold (based on state revenue requirements) because of these large pledges. But often, leaders may not realize that their audit trigger date ties back to the year the pledge was secured—not when the check arrives. This misunderstanding could cause delays or scrambling to find an auditor after the fact. 

Proactive Planning Tip: 

If your nonprofit is closing in on a large pledge or donation, start looking for an audit partner as soon as the pledge is secured. Don’t wait until the funds come in. This will give you time to prepare, avoid falling behind, and ensure compliance with your funders’ or state requirements. 

Final Thought: 

Pledges are exciting—they’re a sign of trust and support for your mission. But they also bring accounting responsibilities that might shift your audit timeline. Having clarity on when pledges affect your financial reporting can save you headaches (and potentially dollars) down the line. 

Ready to Plan Ahead? 

If your nonprofit has recently secured a large pledge or expects one soon, don’t wait until year-end to figure out your audit needs. Our team specializes in helping nonprofits stay compliant and prepared—without the last-minute scramble. 

Contact us today and let’s start the conversation.