Understanding Audit Thresholds for Canadian Charities

For Canadian charities, maintaining transparency and accountability is not just a regulatory requirement but a commitment to building trust with donors and the public. One crucial aspect of this commitment is the requirement for audits.

This article outlines the audit thresholds for charities across Canada, drawing on the Canada Revenue Agency (CRA) guidelines and provincial regulations.

General Audit Requirements

In Canada, the Canada Revenue Agency (CRA) sets the baseline requirements for audits of registered charities. These guidelines apply nationwide, but it's important to note that provinces may have additional requirements based on local laws or funding agreements.

  1. Annual Revenue Thresholds:
  • Under $10,000: Charities and nonprofits with total annual revenues below this threshold are not required for an audit or review engagement. However, they must still maintain accurate financial records.

  • $10,000, $50,000, $250,000: Charities within this revenue range must typically have their financial statements reviewed by an independent auditor. A review engagement offers limited assurance that the financial statements are free from material misstatement. Whether nonprofits with these revenue amounts need a review engagement or audit and whether these requirements can be waived should be discussed with the charity's lawyer or accountant, as this will depend on several factors, including whether the nonprofit is incorporated federally or provincially, as well as whether it is soliciting or non-soliciting corporation.  

  • Over $500,000: Charities with revenues exceeding this amount are typically required to have their financial statements audited by a licensed public accountant. An audit provides a higher level of assurance than a review, as it thoroughly examines the charity's economic activities.

Provincial Variations

While the CRA's guidelines provide a framework, specific provinces may impose additional regulations:

British Columbia

In British Columbia, charities must comply with the BC Societies Act, which requires different financial reporting based on the size and type of organization. Charities should know that additional provincial reporting may be necessary if they receive government funding or grants.

Ontario

In Ontario, charities may face additional scrutiny based on the source of their funding. For instance, charities that receive public funds or grants may be required to undergo audits regardless of their revenue levels. This ensures accountability and transparency in how public funds are utilized.

Alberta

Charities operating in Alberta must also be mindful of provincial requirements. Similar to Ontario, if a charity receives public funding, the funding body may mandate specific audit or review requirements. Charities should review their funding agreements to determine any additional obligations.

Special Considerations

Donor Requirements: Some donors may have specific stipulations regarding audits. For example, a government grant may require an audit if the grant amount exceeds a certain threshold. Charities should know these requirements when applying for grants or accepting large donations.

Internal Policies: Many charities implement their internal policies regarding financial oversight, which may call for audits or reviews regardless of the CRA thresholds.

For instance, a charity's board of directors may decide to conduct an annual audit as part of their fiduciary responsibilities.

Charities should remain vigilant and stay informed about any changes in regulations or thresholds, as governments may revise these guidelines periodically. This preparedness will ensure that they are always in compliance.

Conclusion

While the CRA provides a national framework, charities should consider provincial regulations and specific donor requirements that may apply.

For tailored guidance, charities are encouraged to take control of their compliance by consulting with accounting professionals or legal advisors familiar with federal and provincial regulations.

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