Financial Reporting Requirements for Not-for-Profits and Charities: What Organizations Need to Know
In our previous blog, we outlined the tax filing and financial statement obligations for not-for-profit organizations (NPOs) and charities in Canada. While meeting these requirements is essential, the process can be complex—especially for organizations focused on delivering impact in their communities.
This article takes a closer look at financial reporting requirements, providing clarity around the types of financial statements that may be required and how those requirements vary based on an organization’s size, revenue, and applicable legislation such as the Ontario Not-for-Profit Corporations Act (ONCA) or the Canada Not-for-Profit Corporations Act (NFP Act).
Why Financial Reporting Matters
Accurate and compliant financial reporting is vital for building credibility and trust with funders, donors, boards, and regulators. Whether a charity is applying for grants or presenting to stakeholders, having well-prepared financial statements is a key part of organizational transparency and accountability.
Depending on annual revenue and regulatory requirements, an NPO or charity may need to prepare one of the following types of financial statements:
Types of Financial Statements for Not-for-Profits and Charities
1. Audited Financial Statements
Audited statements provide the highest level of assurance. The audit process involves gaining an in-depth understanding of the organization, assessing internal controls, and performing detailed audit procedures. This type of engagement is typically required for larger organizations or those receiving significant external funding.
2. Review Engagements
A review engagement offers limited assurance. It involves inquiry, discussion, and analytical procedures to assess the plausibility of the financial statements. It is well-suited for mid-sized organizations that require a credible level of assurance but do not need a full audit.
3. Compilation Engagements
Compilation engagements provide no assurance, but they involve compiling financial data into a standardized financial statement format. These are often used for internal purposes or when requested by certain funders. While they do not include assurance procedures, they still require preparation by a qualified CPA.
Commonly Asked Questions from Not-for-Profits and Charities
1. How long does it take to prepare the statements?
The timeline can vary significantly based on the complexity of the organization and whether bookkeeping is up to date. Some procedures are essential regardless of the size of the organization, which contributes to the time investment.
2. Who is authorized to prepare these financial statements?
Only Chartered Professional Accountants (CPAs) with a Public Accounting License, or licensed accounting firms in Canada, can perform audit and review engagements. Compilation engagements shall be completed by a qualified CPA.
3. How are financial statements different for NPOs and charities?
Not-for-profits and charities follow the Canadian Accounting Standards for Not-for-Profit Organizations (ASNPO). These standards have unique requirements—particularly around contributions, which may be restricted or unrestricted, and can include donations, grants, sponsorships, membership dues, or ticket revenue. These complexities set NPO accounting apart from standards used by private for-profit enterprises.
Supporting Not-for-Profits Every Step of the Way
Organizations in the not-for-profit and charitable sector face unique challenges—but they don’t have to face them alone. Our team brings extensive experience and licensing in preparing all three types of financial statements specifically tailored for the needs of NPOs and charities.
Whether an organization requires an audit, a review, or a compilation, we are committed to delivering reliable, timely, and supportive service—so that NPOs can stay focused on what they do best: serving their communities.
📩 Connect with us today to learn how we can help meet financial reporting obligations—clearly, confidently, and stress-free.
Email: connect@chppc.com
Website: www.chppc.com