Does Your Ontario Nonprofit Need an Audit? ONCA's Public Benefit Corporation Rules

If you sit on the board of an Ontario nonprofit, one of the more confusing annual questions is whether your financial statements need a full audit, a lighter "review engagement," or neither. The answer depends on rules under the Not-for-Profit Corporations Act, 2010 (Ontario) — usually called ONCA — and it is not the same for every organization. Getting it wrong can mean an unhappy funder, an awkward annual general meeting, or an avoidable expense.

This article walks through how the nonprofit audit requirement in Ontario generally works, what "public benefit corporation" means under ONCA, and the practical steps your board should take before assuming your organization is exempt from anything.

What ONCA Changed for Ontario Nonprofits

ONCA came into force on October 19, 2021, replacing the old, decades-old Part III of the Corporations Act (Ontario) that used to govern nonprofit and charitable corporations. It is a distinct statute from the Business Corporations Act (Ontario) that governs for-profit companies, with its own rules on governance, membership, and financial reporting for nonprofits.

One of ONCA's core ideas is that not every nonprofit should face the same level of financial scrutiny. A small volunteer-run community group and a large charity that distributes significant public funding are treated differently.

Public Benefit Corporations vs Other Nonprofits

ONCA generally sorts nonprofit corporations into two broad categories for this purpose:

• Public benefit corporations — this generally includes registered charities, along with non-charitable nonprofits that receive a meaningful amount of their funding from public sources such as government grants or donations solicited from the public.
• Other (non-public-benefit) nonprofits — organizations funded mainly through membership dues, program fees, or other non-public sources.

Public benefit corporations are generally held to a higher standard of financial review than other nonprofits. ONCA sets specific dollar thresholds that affect both how a corporation is classified and what level of external review applies — those thresholds can be adjusted over time, so do not assume a number you have seen elsewhere is still current. Confirm the applicable figures with your accountant or lawyer before your board relies on them.

How the Audit-or-Review Decision Generally Works

In broad terms, the higher a nonprofit's annual revenue and the more it depends on public funding, the more likely it is to need a full audit rather than a lower-cost review engagement or no external review at all. Many smaller nonprofits are able to reduce their level of external review, or waive it, if their members agree — but public benefit corporations generally have less room to do this than other nonprofits.

• [ ] Confirm whether your corporation is a public benefit corporation under ONCA's current test
• [ ] Pull your most recent fiscal year's total annual revenue
• [ ] Check your corporation's articles and by-laws for any internal requirement that is stricter than ONCA's default
• [ ] If you want to reduce the level of review, confirm what resolution your members need to pass, and when
• [ ] Verify the current dollar thresholds with your accountant — do not rely on last year's numbers

Can the Members Just Waive It?

Often, yes — within limits. ONCA generally allows members of many nonprofit corporations to vote, by resolution at a meeting, to accept a lower level of financial review (such as a review engagement instead of a full audit) or to waive external review altogether, particularly for smaller organizations. Public benefit corporations typically have less flexibility here, and some funders will require a full audit as a condition of their grant agreement regardless of what ONCA itself would otherwise permit.

What Happens If You Get the Determination Wrong

Beyond the statute itself, practical consequences tend to follow a wrong assumption:

• A government or foundation funder may require audited statements as a condition of a grant, independent of your ONCA minimum.
• A lender or landlord may ask for a higher level of assurance before extending credit or renewing a lease.
• Members may raise the issue at your annual general meeting if they believe the correct process for waiving review was not followed.
• Filings with CRA (for a registered charity) may require financial information consistent with whatever review level was actually performed.

Frequently asked questions