Accounting and audit for charities and not-for-profits

What the work covers

For charities and not-for-profit organizations based in Ontario (for example, with their head office, management and records in Ontario), the work can include:

• Audits and review engagements of financial statements prepared under ASNPO (Part III of the CPA Canada Handbook), including statements required by funders.
• Funder and grant reporting, including schedules showing how a grant was spent.
• The T3010 annual information return for registered charities.
• T2 and T1044 returns for non-profit organizations under paragraph 149(1)(l) of the Income Tax Act.
• Support for the board and treasurer, and for the finance or audit committee.
• Internal controls over cash, donations, and spending.
• GST/HST public service bodies’ rebates.
• Guidance on the basics of charitable receipting and the disbursement quota.

Based in Ontario includes organizations incorporated under Ontario’s Not-for-Profit Corporations Act, 2010 (ONCA) and those incorporated federally under the Canada Not-for-profit Corporations Act (CNCA) through Corporations Canada, as long as their head office, management and records are in Ontario.

Charities outside Ontario

The services on this page are for organizations based in Ontario. Other provinces have their own registration rules for CPAs who provide accounting or tax services, including T3010 preparation, to organizations there.

Audits and reviews of ASNPO statements

Private-sector not-for-profit organizations in Canada can report under Accounting Standards for Not-for-Profit Organizations (ASNPO), Part III of the CPA Canada Handbook. An audit gives reasonable assurance on the financial statements; a review engagement gives limited assurance. Which one is needed depends on who relies on the statements: the statute the organization is incorporated under, its by-laws, and its funders can each set a requirement.

Under Ontario’s Public Accounting Act, 2004, audits and review engagements that a third party can reasonably be expected to rely on are “public accounting” and must be performed by a licensed public accountant. Amir Rosenthal holds a public accounting licence from CPA Ontario (LPA), so audits and review engagements can be done in the same practice for Ontario organizations.

In Ontario, a compilation needs a public accounting licence only in limited cases, such as when a third party is expected to rely on it and the standard compilation report wording is not used. Audits, review engagements and compilations are not offered for organizations outside Ontario. See audit and accounting for how compilations, reviews, and audits compare.

Funder and grant reporting

Grant agreements and funders may ask for audited or reviewed statements, a schedule showing how a grant was spent, or a report in their own format. Planning for those requirements at the start of the year makes the year-end simpler: grants can be tracked in the books the way the funder will ask to see them. Funder and grant reporting is offered to Ontario organizations.

Annual returns: T3010, T2, and T1044

A registered charity files a T3010 Registered Charity Information Return each year, within six months of the end of its fiscal period. The return reports the charity’s revenue, spending, and activities, and much of it is made public by the Canada Revenue Agency. Where help with the T3010 uses financial statements prepared by the charity itself, no audit, review or compilation engagement report is issued.

A non-profit organization described in paragraph 149(1)(l) of the Income Tax Act is generally exempt from income tax, but it still has filing obligations. An incorporated NPO files a T2 corporation income tax return, and an NPO may also have to file a T1044 Non-Profit Organization Information Return, depending on its investment income (such as interest, dividends and rent), its total assets, and whether it had to file one for an earlier year. T2 and T1044 returns are offered to Ontario non-profit organizations.

Board and treasurer support

Volunteer treasurers and board members are responsible for the organization’s finances without always having an accounting background. For Ontario organizations, support can include explaining the financial statements to the board, setting up budget-to-actual reporting, meeting with the finance or audit committee, and answering questions between meetings.

Internal controls

A small organization may rely on a few people for most of its finances. Practical controls help: two approvals for payments, separating who receives donations from who records them, bank reconciliations reviewed by someone other than the bookkeeper, and documented approval of expenses. Advice on internal controls is offered to Ontario organizations.

GST/HST public service bodies’ rebates

Charities and qualifying non-profit organizations may be able to recover part of the GST/HST they paid through the public service bodies’ rebate, claimed on Form GST66 (a qualifying non-profit organization also files Form GST523-1 for each year it claims). Whether an organization qualifies, and at what rate, depends on its status and, for non-profit organizations, on its level of government funding. Help with the rebate is offered to Ontario organizations.

Receipting and the disbursement quota

A registered charity can issue official donation receipts, which must include the information the Canada Revenue Agency requires. A registered charity may also have a disbursement quota: a minimum amount, based on the value of its investments and other property not used in its charitable activities or administration, that it has to spend each year on its own charitable activities or on qualifying gifts and grants, such as gifts to qualified donees. Guidance for Ontario charities covers the basics; the charity’s lawyer is the right adviser on its legal status and objects.

This page is general information. Filing obligations, audit requirements, and rebate eligibility depend on the organization’s status, its governing statute, and its funders.

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