Charity and non-profit accounting in Ontario

ONCA audit, review, and waiver tiers

By default, members appoint an auditor at each annual meeting. They can replace the audit with a review engagement, or waive both, only by extraordinary resolution: at least 80% of the votes cast at a special members' meeting, or the written consent of every voting member. The resolution lasts only until the next annual meeting, so it is passed again each year. Funders or by-laws can require more; see our answer on when a charity needs an audit.

• Public benefit corporation, $100,000 or less in annual revenue: members may waive both the audit and the review engagement.
• Public benefit corporation, more than $100,000 and less than $500,000: members may choose a review engagement instead of an audit.
• Public benefit corporation, $500,000 or more: an audit is required.
• Other corporations: members may waive both at $500,000 or less, and may choose a review engagement instead of an audit above $500,000.

Annual meeting and annual return

The auditor or reviewer must be independent and permitted to do the work under Ontario's Public Accounting Act, 2004. Directors place the approved financial statements and that report before the members at every annual meeting, and must send them at least 21 days ahead to any member who has asked. Not more than one-third of a public benefit corporation's directors may be its employees.

Separately, every Ontario not-for-profit corporation files an annual return under the Corporations Information Act through the Ontario Business Registry within six months of its fiscal year end, using its company key. It is a provincial registry filing and does not replace the T3010 a registered charity files with the CRA.

The Public Guardian and Trustee and charitable property

Ontario's Office of the Public Guardian and Trustee protects the public interest in charitable property. It can inquire into misuse of charitable property, ask a charity to file its financial statements, and ask for a passing of accounts, where a Superior Court judge reviews the accounts. This reaches incorporated and unincorporated charities alike.

Directors and trustees must manage charitable property prudently, keep detailed records of restricted funds, and use donations for the reason they were given. In the books, restricted gifts sit in their own funds and are spent only on the stated purpose.

Paying directors and buying insurance

A director of an Ontario charity generally cannot be paid for serving as a director, though reasonable expenses can be reimbursed. Ontario Regulation 4/01 under the Charities Accounting Act allows some payments for goods or services, such as professional services or rental of space, when its conditions are met; otherwise payment needs a court order or the Public Guardian and Trustee's consent. The regulation also permits directors' and officers' liability insurance, excluding dishonesty or bad faith. Confirm any payment to a director with your lawyer before it is made.

HST, the Ontario PSB rebate, and Employer Health Tax

Ontario charges 13% HST: the 5% federal part plus an 8% provincial part. Registered charities and qualifying non-profits can claim the public service bodies' rebate of 50% of the federal part and 82% of the Ontario part on eligible purchases that do not qualify for input tax credits. The provincial part goes on Form RC7066-SCH with the GST66 application or the GST/HST return, and claims can generally go back four years. Our PSB rebate guide walks through the calculation.

Ontario's Employer Health Tax exemption for eligible employers is currently $1 million. A registered charity can claim it even if its payroll exceeds $5 million, and a charity with more than one qualifying charity campus registered with the Ministry of Finance may claim a separate exemption for each, subject to the rules. The annual return and payment are due by March 15.