Non-Profit Financial Statements & Annual Returns

Non-profit corporations need to prepare a financial statement for every fiscal year. After the end of the fiscal year, non-profits have up to 6 months before the annual meeting to create the financial statements. The financial statement must set out:

• the assets and liabilities of the corporation in the form of a balance sheet
• the corporation’s revenues and expenditures

It must be prepared in accordance with generally accepted accounting principles published by the Charter of Professional Accountants of Canada. There is no set form for financial statements. The financial statement must be signed by at least one director indicating the approval of the board.

Charitable corporations that solicit money or property from the public must have an audit committee. At least three directors must sit on the committee. A majority of the directors on the committee must not be officers or employees of the corporation. The committee reviews the financial statements before they are approved by the directors.

Membership and charitable corporations are required to have their financial statements audited. There are, however, some exceptions to this.

A membership corporation can pass a resolution to not have its financial statements audited. If this is done, the corporation must appoint a qualified person to review the corporation's financial statements unless a resolution is passed to dispense with this as well. Either of these resolutions must be passed by at least two thirds of the members who vote on the resolution. Members who would not otherwise be entitled to vote can vote on these resolutions.

A charitable corporation must have an audit if its revenue exceeded $500,000 in the previous fiscal year. If the charitable corporation's revenue was:

• between $100,000 and $499,999, it can pass a resolution to have a review instead of an audit
• less than $100,000, it can pass a resolution to not have an audit or a review

Either of these resolutions must be passed by 80% of the members who vote on the resolution. Members who would not otherwise be entitled to vote can vote on these resolutions.

If an audit is required, it is conducted by an auditor appointed at the annual meeting.

The auditor must be:

• a member in good standing of a recognized accounting profession that is regulated by The Accounting Profession Act
• independent of the corporation and its directors or officers

Whether an auditor is independent is a question of fact. However, there are situations where an auditor is assumed not to be independent. An auditor is not independent if they:

• are a business partner, a director, an officer or an employee of the corporation or a business partner of any director, officer or employee of the corporation
• own or control, directly or indirectly, a material interest in any security of the corporation
• have been a receiver, receiver‑manager, liquidator or trustee in bankruptcy of the corporation within the last 2 years

If an appointed auditor no longer meets the independence requirements, they must resign at once.

If there are problems with an auditor, they can be removed by majority vote at a special meeting of the members. A new auditor can be then appointed.

Auditors must be given notice of every meeting of the members. They are also entitled to attend at the corporation’s expense. At the meeting, an auditor can speak on any issue related to the audit. Corporations must give the auditor access to any information the auditor needs to do their job.

Auditors must present a report on the finances of the corporation to the membership at the annual meeting. In this report, the auditor verifies the accuracy of the financial records. If the membership does not elect a new auditor at the annual meeting, the current auditor remains in that position for the next year.

An annual return is a filing that corporations must make to the Corporate Registry every year. There is a fee that must also be paid when filing. The annual return must include:

• the financial statements for the previous fiscal year, including any review or audit report
• the number of members in each membership class
• confirmation of current registered office, directors, officers and any power of attorney
• confirmation of the main activity of the corporation
• contact information of the person submitting the return

The annual return must be filed no later than 30 days after the meeting at which the financial statement was presented. Corporations that fail to file an annual return can be struck from the registry.

The Corporate Registry will send the annual return to the corporation at least a month before it is due. It will be sent by email if the corporation has registered an email address. If not, it will be mailed out.

If you have a Corporate Registry account, you can file your annual return online. If you do not have a Corporate Registry account, you complete and return the annual return that is sent to you.