Changes re: financial reviews and audits

The ONCA changes how nonprofits need to report their finances to their members. Any member may request a copy of the financial statements, but you do not have to provide copies to everyone at your annual meeting. Instead, you can report a summary in a document like an annual report. You must send members your financial statements, or a summary of them, at least 5 days before your annual meeting. The regulations  may change this rule, but they haven’t been published yet.

Make sure that your annual meeting date allows you enough time to complete and circulate your financial statements to members at least 5 days before the meeting. If you are a small nonprofit, decide if you want or need to have an audit every year. If not, check what kind of financial report is possible, based on your status and annual income. Be sure to ask your members for permission in advance, by passing a resolution at your annual meeting.

Audits versus review engagements

Audits are an independent assessment of your financial records and position. Under the ONCA, there is more flexibility for small nonprofits to waive the requirement for independent financial reports. Public benefit corporations that receive less than $500,000 a year can have a financial review engagement instead of an audit. At least 80% of your members, voting at your annual meeting, must agree by passing an “extraordinary” resolution. The extraordinary resolution must be renewed at every annual meeting. A financial review engagement still needs to be completed by a certified public accountant who is independent of your nonprofit, but it is less time-consuming and less expensive than an audit.

Public benefit corporations that receive less than $100,000 a year can waive both audits and financial reviews, again by passing an “extraordinary” resolution (80% or more of votes cast at a members’ meeting) at your annual meeting and renewing it each year. You will still need to report on finances to your members, but your report will not have to be independently verified.

Non–public benefit corporations have more flexibility. Nonprofits that receive less than $500,000 a year can agree to waive both audits and financial reviews, again through an extraordinary members’ resolution. They still need to report their finances to their members annually.

Keep in mind that you may need to do an audit because a funder requires it, no matter what the ONCA says.

If, one year, your nonprofit is required to have an audit and you don’t appoint an auditor for that year, any member can ask the court to appoint one.