Given that many (although certainly not all) not-for-profit
corporations ("NFPs"), both charitable and
non-charitable, have a December year end and are preparing for
their year end financial reporting, we thought it timely to provide
a reminder about the financial disclosure requirements contained in
their governing corporate legislation.
Ontario NFPs are currently governed by the Ontario
Corporations Act (the "OCA"). The
OCA does not provide much flexibility regarding the appointment of
an auditor or the financial disclosure required by Ontario NFPs.
Specifically, the OCA includes the following requirements:
Is an Ontario NFP Required to Have Audited Financial Statements
and Appoint an Auditor?
Yes, but an NFP can be exempt from the appointment and duties of
an auditor under the OCA for a fiscal year IF:
the NFP's annual income is less than $100,000;
100% of the NFP's members consent, in writing, to
the exemption for the specific year.
NFPs should speak with their accountants/auditors for
further information regarding the accounting standards applicable
Are there any Restrictions on Who may be Appointed as the
The auditor of an NFP may not be:
a director, officer or employee of the NFP; or
a director, officer or employee of an affiliated corporation of
the NFP; or
a partner, employer or employee of a director, officer or
employee of the NFP.
How, When and for How Long is an Auditor Appointed?
An auditor must be appointed by the members of an NFP at their
first meeting following incorporation and at each subsequent annual
members' meeting. An auditor holds office until the NFP's
next annual members' meeting.
What if the Members don't Appoint an Auditor?
If the members don't appoint an auditor at their first
meeting, the directors of the NFP are required to do so. If the
members don't appoint an auditor at a subsequent annual
meeting, the auditor previously appointed remains in office until
another auditor is appointed in the first auditor's place. If
an auditor resigns, the directors can appoint a replacement.
What Notices must be given to an NFP's Auditor?
The auditor of an NFP must be given written notice of the
auditor's appointment and all notices and other communications
relating to members' meetings that the members are entitled to
How is the Remuneration of an NFP's Auditor Set?
The remuneration of an NFP's auditor appointed by the
members is set by the members unless they authorize the directors
to do so. The remuneration of an auditor appointed by the directors
is set by the directors.
Do the Members of an NFP Approve the NFP's Financial
No, the members of an NFP do not approve its financial
statements. However, at each annual members' meeting, the
directors must present the financial statements with the
auditor's report to the members.
The annual members' meeting at which the financial
statements for the year end will be presented must be held not more
than six months after the year end to which the statements
Are there any Restrictions on the Fiscal Year End of an
The first financial statements for an NFP must cover the period
beginning on the date of its incorporation and ending on its
selected fiscal year end. Under the Income Tax Act
(Canada), a fiscal period cannot be longer than 53 weeks.
Subsequent financial statements of an NFP must cover the period
beginning on the first day following the end date of the preceding
Can an NFP Change its Fiscal Year End?
Yes, but only with the consent of the Canada Revenue Agency and
subject to any approval requirements contained in the NFP's
incorporation documents and by-laws.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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