Several NPOs are more focused on their mandates and objectives, which leaves little time for administrative tasks like bookkeeping | iStock

NPOs are provincially and federally incorporated, which means they are obligated to file a corporate tax return and not-for-profit disclosure.

When it comes to keeping hard-working charities and not-for-profit (NPO) organizations on track to fulfill their vital roles, professional help with their financial books can make a significant difference.

That’s the message Richmond-headquartered Reid Hurst Nagy Chartered Professional Accountants has for those organizations that may find themselves in need of some assistance.

“In most cases, not-for-profit organizations can be run by volunteers. And typically, that can result in some confusion and lack of information on what they should be reporting and how frequently,” says John Nelson, one of Reid Hurst Nagy’s directors who works mainly with NPOs, charities and First Nation organizations.

“In our practice, we are finding many are so focused on their mandates and objectives, so they don’t always have the time to pay attention to the administrative side of running the organization.”

And that often includes maintaining a set of accounting records and adhering to government requirements for accounting returns.

“Many of these organizations have limited capacity. And although there are legal requirements to submit certain paperwork, it’s maybe not the best use of their time to navigate it all,” Nelson says. “That’s where folks like us come in to solve that.”

Most commonly, NPOs are structured as a society, which are provincially and federally incorporated and are obligated to file a corporate tax return and not-for-profit disclosure.

“That’s almost always overlooked,” Nelson says. “And there are penalties and financial repercussions for not filling those.

“As a result, groups can risk losing their charitable status and ability to market themselves as an organization which can issue tax credits for donations,” he adds.

“We come across groups that have failed to file and have become delinquent, and we work with them, along with the government, to get them compliant and make sure they are not exposing themselves to undue risk of losing their standing they worked so hard to achieve.”

But does the government go easier on NPOs, knowing many lack the resources and expertise on filing the correct financial records in a timely manner?

“No,” says Nelson. “In fact, over the last five to 10 years, CRA (Canada Revenue Agency) has become a lot more strict.

“It used to be we could send CRA a letter with the returns apologizing and asking them not to penalize the organization,” Nelson adds. “That’s changed. There’s a lot more ‘teeth’ to the CRA now, and they are increasingly enforcing penalties.”

The bottom line is the stakes for non-compliant NPOs are high as the current level of scrutiny at CRA is heightened to examine if NPOs are truly not-for-profit and exempt from taxation.

One barrier NPOs have when considering getting professional help with their accounting and tax filing – cost.

“There can initially be some reticence, but once they see things are being filed properly and everything is being brought in order, there’s little feeling of the money being spent improperly,” Nelson says.

Other impediments involve a lack of knowledge of what their responsibilities entail for filing the appropriate paperwork.

“NPOs and charities are mostly run by volunteers and boards that regularly change over, which hampers a continuity of knowledge of what to file and when,” Nelson explains. “That information can be lost each time there is a changeover of people.”

This post has been prepared for general information purposes. It is not advice. The information presented may not fit your unique situation, please consult one of our trusted business advisors at RHN CPA for further clarification and interpretation of your circumstances.