The Canada Not-for-Profit Corporations Act (enacted in 2013) and the soon-to-be enacted Ontario Not-for-Profit Corporations Act contain specific rules surrounding the requirements for financial statement audits – or the ability to avoid conducting an audit.
All incorporated Not-for-Profit organizations should review these requirements to determine if changes can or should be made to the type of report being issued by your Public Accountant.
For further guidance on these issues, the law firm that helped you to reconstitute your corporation under the new Act would be pleased to help.
Canada Not-for-profit Corporations Act
Audited financial statements are an absolute must for Soliciting corporations with annual revenues of more than $250,000 and for Non-soliciting corporations with annual revenues of more than $1 million. A corporation is considered soliciting when it receives more than $10,000 annually in income from public sources. Public sources include gifts and donations from non-members, government grants, and funds from another soliciting corporation. Certain corporations can, by unanimous resolution of its members, dispense with the appointment of a Public Accountant. A summary of the rules is as follows:
|Type of Corporation||Gross Annual Revenues||May Dispense with Public Accountant||Review Engagement||Audit|
|Soliciting||Between $50K and $250K||No||Optional||Default|
Ontario Not-for-Profit Corporations Act
Although this Act was introduced in 2013, it has yet to have all of its regulations enacted. As a result, the rules, as we understand them today, may change prior to the Act becoming enforceable. It remains unclear as to when this Act will come in to force. Under the legislation as currently worded, audited financial statements are absolutely required only for Public Benefit corporations with annual revenues of more than $500,000. A Public Benefit corporation includes a charitable corporation, and a non-charitable corporation that receives more than $10,000 annually in the form of donations or gifts from non-members, government grants or other aid. Certain corporations can, with an 80% in-favour resolution of its members, dispense with the appointment of a Public Accountant. A summary of the rules is as follows:
Type of Corporation
Gross Annual Revenues
Can conduct Compilation rather than Audit or Review Engagement
|Public Benefit||< $100K||Yes||Optional||Default|
|Public Benefit||Between $100K and $500K||No||Optional||Default|