Audit Committee Requirements for Nonprofits in California: What Every Executive Director Needs to Know
- BryMar Crew
- Jun 3
- 2 min read
Updated: Jun 25
Why This Matters to Strategic, Impact-Driven Leaders
As an Executive Director, your role is already full—leading a mission-driven team, reporting to your board, ensuring impact in the community, and securing funding. But audit committee compliance isn’t just another checkbox. It’s a core element of good governance that protects your organization’s integrity, eligibility for funding, and stakeholder confidence.
If your nonprofit’s revenues exceed $2 million (excluding government grants), California law requires an audit committee under the Nonprofit Integrity Act of 2004. Understanding what that means—and how to set it up strategically—can reduce audit stress, boost board engagement, and improve long-term sustainability.
At BryMar CPA, we specialize in helping nonprofit leaders like you build strong, compliant systems with less guesswork and more clarity. Here's what you need to know.
Who Needs an Audit Committee?
If your organization has gross annual revenue of $2 million or more (not including government grants), California law requires an audit committee. This group oversees your annual financial audit and ensures you have proper internal financial controls in place.
Key Audit Committee Requirements
1. Separate from the Finance Committee
Your audit committee must be distinct from your finance committee.
While crossover is allowed, the audit committee must act independently.
2. No Staff Allowed
The Executive Director, CFO, or staff may not serve on the audit committee.
This ensures oversight comes from outside day-to-day operations.
3. Board-Only Membership
Members must be part of your Board of Directors.
They cannot have a financial interest in any contracts or decisions under review.
Recommended (but not required): Financial expertise on your audit committee, such as a board member who understands financial statements or accounting principles. This dramatically improves the quality and effectiveness of your financial oversight.
What the Audit Committee Does
Here’s a breakdown of typical responsibilities:
Select & Oversee the Auditor: Ensure independence, manage the engagement, and support audit prep.
Review Financial Statements: Evaluate the final audit and ensure it reflects the organization’s true position.
Assess Internal Controls: Look for gaps in systems or procedures that could lead to misreporting or fraud.
Report to the Full Board: Present findings and any recommendations post-audit.
Oversee Whistleblower Policies: Ensure anonymous, retaliation-free reporting mechanisms are in place.
Compliance + Confidence = Donor Trust
Proper audit committee setup not only fulfills legal requirements—it builds donor and funder confidence, improves audit readiness, and makes Form 990 preparation smoother. It can also reduce audit fatigue by keeping your team focused and informed.
How BryMar CPA Can Help
We’ve guided dozens of California-based nonprofits through audit committee compliance, financial statement audits, and Form 990 preparation. Our team makes the process clear, simple, and even fun (yes, really). We speak your language, respect your mission, and partner with your board and leadership to build systems that support long-term growth and transparency.
Read Our Case Study: Overcoming Nonprofit Audit Challenges: A Success Story
Ready to Strengthen Your Governance?
Whether you’re forming your first audit committee or want to review your current structure, we’re here to help. Contact us today to get started.
