Disclosure and Accountability

Thematic Summary of the Consultations

Access to financial statements

A majority of participants across the country were in favour of the framework proposal that organizations be required to make corporate financial statements available to members, directors, officers, and the Director. However, not all agreed that members should be subject to a fee for copies of the financial statement, and many more disagreed with the proviso to allow exemptions to the requirement.

Those opposed to the requirement were concerned that a requirement to make financial statements available could be burdensome and expensive.

A number of participants at one meeting objected strongly to the Director having access to financial statements at any time. One suggested that the law be written in as narrow a context as possible, only granting the Director a right to information for a specific purpose.

It was proposed that a clearer definition of "financial statement" be developed. A number of participants participant took exception to the notion that financial statements are presented to members "for their approval" (page 45, Draft Framework for a New Not-for-Profit Corporations Act). A suggestion was made to change the language on page 45 to read, "directors would be required to present the audited reports," without mentioning approval or acceptance.

Exemptions:

Several participants in Edmonton, Regina, and Toronto were very concerned about the proposal to allow exemptions from the disclosure requirements, arguing that issuing an exemption would place Industry Canada between the auditor of an organization and the organization itself. Exemptions were seen to contravene the principles of transparency and accountability, and should only be granted according to clearly articulated criteria.

Membership lists

A majority of participants agreed with the framework proposal that would allow members to obtain copies of the membership list of their organization, provided that the framework is narrowly defined and access is restricted. Several asked that the issue of selling lists be addressed. Some participants noted that it would be essential to ensure that the new act mesh with other federal legislation including the Personal Information Protection and Electronic Documents Act and the Anti-Terrorism Act.

In order to circumvent the release of membership lists that include names, addresses, and telephone numbers, it was suggested that an organization charge for undertaking mailings on behalf of members in order to ensure that the privacy of members is not breeched.

The definition of "member" was confusing to some and worrisome to others. Some organizations define members as anyone who receives services while others include donors. The statement on page 35 of the Draft Framework for a New Not-for-Profit Corporations Act ("The Act would contain a provision defining a member as 'anyone designated by the board of directors'") alarmed some participants and elicited a promise to clarify the wording.

Some participants believed that signing an affidavit in order to obtain a membership list would be pointless. The cost--the expense of tracking down individuals to sign the affidavit in the first place and pursuing legal action in the event of an infraction--was also seen as problematic.

In addition, the proposed timelines were questioned. The allotted 15 days for changes was seen as too short, and the requirement to maintain records for six years was viewed as "impossible" for many organizations.

Audit Requirements

Rather than the framework proposal that stipulates a prescribed amount as a threshold above which corporations would be required to have annual audits, most participants across the country favoured a graduated approach, or one based on classification, materiality, or size.

Many supported the Saskatchewan model in which provincially incorporated not-for-profits with revenues of over $100,000 must be audited, those between $25,000 and $100,000 must have at least an internal review, and those with less than $25,000 have no audit requirements. Concurrent with this was widespread support for the adoption of a graduated standard such as a review engagement, which is less than an audit but satisfies an understanding of the costs involved.

Other suggestions included differentiating between organizations that receive public funding and those that do not, or basing it on classification. For example, if an organization is classified as political it should be required to have an audit regardless of its size; a charitable organization with tax benefits should be subject to a threshold; and mutual benefit organizations could determine their own thresholds.

Suggestions were made to adopt the Canadian Generally Accepted Accounting Principles rather than keeping separate books for protection against not-for-profit corporations using their tax benefits to subsidise for-profit activities, or to have separate statutes for charitable and non-charitable organizations.

Auditors:

Representatives of the Canadian Institute of Chartered Accountants (CICA) did not agree with the framework proposal as it pertains to auditor qualifications and proposed that the new act adopt the Canadian Business Corporations Act (CBCA) definition of "auditor". The opposite view was conveyed by representatives of the Certified General Accountants (CGAs) of Ontario. There were several calls to have audits not be restricted to either CGAs or CAs if made mandatory. Some agreed that a smaller organization should be able to agree to an internal review by a non-accountant, provided that individual had no ties to the board.

Two specific suggestions were made about the wording in the Draft Framework for a New Not-for-Profit Corporations Act:

• The last paragraph on page 46 be amended to read, "The auditor meets the standards of the auditing profession."
• Page 47, "Right to attend meetings," implies that the auditor's expenses to attend all meetings would automatically be paid by the corporation, something that might be a burden for small organizations. It was suggested the wording could be changed to "the auditor is entitled to attend at the request of the board, and expenses will be paid."