What does the new Ontario Not-for-Profit Corporations Act (“ONCA”) mean for you?

Accountants and lawyers have been busy educating their not-for-profit clients on what ONCA means to the average NPO in Ontario. 

While there have been delays in the in-force date of ONCA, it is  now expected that ONCA will finally be approved in 2016. NPOs will have 3 years from the in-force date to fully comply with the new legislation. Failure to comply could leave your corporation open to liability where your governing documents conflict with ONCA.

The key areas of change surrounding ONCA are the introduction of certain obligations for a new category of “public benefit corporations”; a cap of four years on directors’ terms; enhanced rights for voting and non-voting members; more focus on “classes” of members; new requirements for member meetings; requirements for “articles” which will replace a corporation’s letters patent; and new financial review options for certain not-for-profit corporations.

Organizations should be consulting with their legal counsel regarding most of these changes, as many of them will require by-law amendments, issuance of articles of amendment, and changes to the board and membership structure.

The key factors that will impact your financial accounting and “year-end” requirements will depend on your type of corporation, whether or not you are a public benefit corporation and your organization’s annual revenues. The options that will be available to your organization are as follows:

Non Public Benefit Corporation (less than $10,000 in donations or government funding )

More than $500,000 of annual revenue

Members may pass an extraordinary resolution to appoint comment to conduct a review engagement instead of an audit

$500,000 or less of annual revenue

Members may pass an extraordinary resolution to dispense with both audit and review engagement

Public Benefit Corporation (greater than $10,000 in donations or government funding)

More than $500,000 of annual revenue

An audit is required. Must appoint auditor annually.

Less than $500,000 but more than $100,000 of annual revenue

Members may pass an extraordinary resolution to appoint comment to conduct a review engagement instead of an audit

$100,000 or less of annual revenue

Members may pass an extraordinary resolution to dispense with both audit and review engagement.

Deciding if you require an audit or review engagement should be more than just a financial decision. An audit provides much greater assurance over your organization’s financial reporting than does a review engagement, amongst other consideration factors. You should consult with your external accountant to understand all of the facts.