A Funder Wants an Audit and We’re Under the ONCA Threshold: What an Ontario Nonprofit Should Do (2026)

It is one of the most common calls an assurance practice gets in the autumn. A funder requires an audit, the nonprofit in Ontario is comfortably below the revenue level at which it thought an audit became mandatory, and the board wants to know whether the funder can really insist. The short answer is yes, and the reason is more interesting than it sounds: the funder’s requirement and the statute are not in conflict at all.

This article explains why the contract governs, how accepting the grant can change your statutory position a year later, who is legally permitted to sign the resulting report in Ontario, and what a board should do between the grant agreement and the reporting deadline. Insight Accounting CPA is a Licensed Public Accountant firm and performs these engagements, so this is written from the perspective of the practitioner who has to scope the work.

Can a funder require an audit when ONCA does not?

Yes. A grant agreement is a contract. If it says the recipient will provide audited financial statements within a stated period after its financial year end, that is a term the organisation accepted in exchange for the money, and the Not-for-Profit Corporations Act, 2010 has nothing to say about it. Corporate statutes set a floor for what members are entitled to. They do not cap what an organisation may agree to provide to a third party.

This is worth stating plainly because the framing “we’re under the ONCA threshold, so we don’t need an audit” is a category error. Being under a statutory threshold tells you what your members can excuse you from. It tells you nothing about what a ministry, a foundation or a municipality has required as a condition of funding. Nothing in ONCA prevents a corporation from having a higher level of assurance than the minimum its members could have insisted on — and a funder is entitled to ask for one.

The practical consequence: read the agreement before you read the statute. The questions that matter are what exactly the funder asked for (an audit of the entity, an audit of the funded programme, or a report on how the funds were spent), by when, and whether the requirement is drafted as “audited financial statements” or in looser language that a different engagement might satisfy. Those are negotiable facts; the statute is not.

What does ONCA actually require — and why is “threshold” the wrong word?

This is the part that is almost always described incorrectly, including by people who get the numbers right.

The Not-for-Profit Corporations Act, 2010 starts from a default, not a threshold. Section 68(1) provides that, subject to section 76, at each annual meeting the members shall by ordinary resolution appoint either an auditor or a person to conduct a review engagement. In other words the baseline position for every ONCA corporation is that someone independent reports on the financial statements.

Section 76 is then a waiver provision. It lets members pass an extraordinary resolution to step down from that default, but only within defined revenue bands:

Corporation type	Annual revenue	What members may waive down to
Public benefit corporation	$100,000 or less	No audit and no review engagement
Public benefit corporation	More than $100,000 and less than $500,000	Review engagement instead of an audit
Public benefit corporation	$500,000 or more	No waiver available
Other corporation	$500,000 or less	No audit and no review engagement
Other corporation	More than $500,000	Review engagement instead of an audit

Read the last row of each block carefully. The Act never says “an audit is required where revenue exceeds $500,000.” What happens is that the relief in section 76 runs out, so the section 68(1) default applies unmodified. That is an inference from the structure of the Act rather than a sentence you can quote from it — but it is the correct reading, and it is why the right phrase is “no waiver is available” rather than “section 76 requires an audit”.

Two features of the waiver are routinely missed and both matter to a board:

• It takes 80% of the votes cast. Section 76(4) defines an extraordinary resolution as one passed at a special meeting duly called for the purpose by at least 80 per cent of the votes cast, or alternatively consented to by every member entitled to vote. An ordinary majority is not enough.
• It expires annually. Section 76(3) provides that the resolution is valid only until the next annual meeting. A waiver passed two years ago is not still in force, and a great many organisations believe theirs is.

For the thresholds themselves and the public benefit corporation test in more detail, see our companion article on whether your Ontario nonprofit needs an audit, and the wider obligations in our guide to ONCA compliance requirements.

Does accepting the grant change our ONCA status?

It may — and this is the single most useful thing in this article, because the timing is counter-intuitive.

Section 1(1) defines a public benefit corporation as a charitable corporation, or a non-charitable corporation that receives more than $10,000 in a financial year either in donations or gifts from people who are not members, directors, officers or employees, or in grants or similar financial assistance from a federal, provincial or municipal government or a government agency.

So a government grant above $10,000 can convert an ordinary non-profit into a public benefit corporation — which moves it from the “other corporation” rows of the table above into the far stricter “public benefit corporation” rows. An organisation with $300,000 of revenue that could previously have waived assurance entirely now sits in the band where members can only step down as far as a review engagement.

But not immediately. Section 1(2) provides that a corporation crossing that line is deemed not to be a public benefit corporation in the financial year in which it crosses it, and is deemed to be one in the next financial year. The status change is deferred by a year.

Put the two together and the planning point appears. In year one you have a contractual audit requirement from the funder and no change in your statutory position. In year two the statutory position tightens, independently of the contract. A board that scopes a one-off engagement to satisfy the funder, without noticing that it is about to become a public benefit corporation, will be re-tendering the work twelve months later. The sensible move is to scope once, for both.

Who is actually permitted to sign the report?

In Ontario this is a licensing question with statutory teeth, and it is the point at which a cheap quote can become a worthless deliverable.

Section 2(1) of the Public Accounting Act, 2004 defines the practice of public accounting to include assurance engagements — expressly “including an audit or a review engagement” — provided on a basis independent of the person for whom the services are performed, where it can reasonably be expected that a third party will rely on them. Section 2(2) adds that this applies whether or not an opinion is actually rendered.

Three consequences follow for a funder-driven engagement:

• A review engagement is public accounting too. Stepping down from an audit to a review does not take the work outside the licensing regime. Both require a licensed practitioner.
• A grant report is squarely within the definition. The whole point of the engagement is that a third party — the funder — will rely on it. That is the statutory test, met on the facts.
• The licence is mandatory, not a credential upgrade. Section 3(1) requires an individual practising public accounting to be licensed and a professional corporation to hold a certificate of authorization. Section 13(1) prohibits an unlicensed individual from practising as a public accountant or using the designation “Licensed Public Accountant” or the initials “LPA”, and section 13(3) sets a fine of up to $25,000 for a first offence.

CPA Ontario is the licensing body. Section 18(1) charges it with regulating public accounting in the public interest by licensing and governing its members as public accountants, and section 4(1) requires CPA Ontario membership as a precondition of a licence. ONCA closes the loop at section 69(1), which requires the person appointed to be permitted to conduct the engagement under the Public Accounting Act, 2004 and to be independent of the corporation.

The practical test for a board is short. Ask the firm whether it holds a public accounting licence and whether the individual signing is an LPA. A CPA designation alone does not answer the question — many CPAs work in industry or in tax and are not licensed for assurance. If the answer is anything other than a clear yes, the report may not satisfy the funder and the organisation will have paid for work it cannot use. Our note on nonprofit audits and on nonprofit review engagements sets out what each engagement involves.

Audit, review engagement, or something narrower?

Funders do not always ask for what they think they are asking for, and the wording of the agreement is worth testing before the work is scoped. Broadly, three things get requested:

• An audit of the entity’s financial statements. The highest level of assurance, the most work, and what “audited financial statements” means if the agreement uses that phrase.
• A review engagement. A lower level of assurance on the same statements. Some agreements accept this explicitly; others can be amended to accept it if asked early, particularly where the grant is a modest share of total revenue.
• A report on the funded programme specifically — on a statement of how the grant was spent, rather than on the whole organisation. Where a funder’s real concern is the use of its own money, this can be both more responsive and less expensive than an entity audit. It is a different engagement with different reporting, and whether it satisfies the agreement depends on the agreement.

Insight Accounting CPA will not tell a client to ignore a funder’s requirement, and no article should. But the requirement is a negotiation until the agreement is signed, and often for a while afterwards. The conversation worth having with a funder is specific: here is our revenue, here is the proportion the grant represents, here is what each option would cost and deliver. Funders are generally reasonable when the alternative is well explained and proposed early. They are much less flexible three weeks before a reporting deadline.

What should the board do between now and the deadline?

Six steps, in order. The first three cost nothing.

1. Extract the exact wording of the requirement from the agreement, with the deadline and the reporting period. “Audited financial statements”, “independently audited” and “a report from a licensed accountant” are three different requirements.
2. Determine whether you are a public benefit corporation now, and whether you will be next year. Apply the section 1(1) test to this year’s non-member donations and government grants, then apply the section 1(2) one-year deferral.
3. Check whether a current waiver exists. If your members passed an extraordinary resolution, confirm it was passed at a properly called special meeting, by at least 80% of votes cast, and that it has not lapsed at an annual meeting since.
4. Engage a licensed firm early. An audit is not a document that can be produced in a fortnight, and a first-year engagement takes longer because opening balances and internal controls have to be understood from scratch.
5. Get the records into auditable condition. Bank reconciliations complete, restricted and unrestricted funds separated, grant revenue recognised on a defensible basis, board minutes available. The quality of the underlying records is the largest single driver of how long the engagement takes.
6. If you are a registered charity, align the work with your T3010. The Registered Charity Information Return must be filed within six months of the fiscal year end, and the figures in it should agree with the statements the funder receives.

That last point is worth dwelling on. A registered charity’s obligations under the federal Income Tax Act run in parallel with its Ontario corporate obligations, and the requirements in section 149.1 governing registered charities are a separate regime from ONCA entirely. Inconsistent figures between a T3010 and audited statements given to a funder are a recurring and entirely avoidable problem. For the regional context of this work see our overview of NPO and charity audits in Toronto.

Frequently asked questions

Can a funder require an audit if ONCA does not?

Yes. A grant agreement is a contract, and ONCA does not limit what an organisation may agree to provide to a third party. ONCA sets what members are entitled to and what they may waive. Nothing in it prevents a corporation from obtaining a higher level of assurance than its members could have insisted on.

We are under $500,000 in revenue. Does that mean we never need an audit?

No, for two reasons. First, section 68(1) of ONCA makes an audit or review engagement the default, and the relief in section 76 has to be actively exercised by an extraordinary resolution of the members that expires at the next annual meeting. Second, a funder’s contractual requirement is independent of the statute entirely.

Does a government grant make us a public benefit corporation?

More than $10,000 in a financial year in grants or similar financial assistance from a federal, provincial or municipal government or agency does, under section 1(1) — but section 1(2) defers the status. You are deemed not to be a public benefit corporation in the year you cross the line, and deemed to be one in the following financial year.

Can our regular accountant do the audit?

Only if they hold a public accounting licence and the individual signing is a Licensed Public Accountant. Under section 2(1) of the Public Accounting Act, 2004, both audits and review engagements are the practice of public accounting, section 3(1) requires a licence, and ONCA section 69(1) requires the appointee to be permitted under that Act and to be independent. A CPA designation on its own is not sufficient.

Is a review engagement enough to satisfy a funder?

It depends entirely on the agreement. Some accept a review explicitly, some can be amended if asked early, and some require an audit without flexibility. Because a review engagement is still public accounting under the Act, it must also be performed by a licensed practitioner — the saving is in scope and cost, not in who may do the work.

Reviewed by Bader A. Chowdry, CPA, CA, LPA on October 6, 2026. Every statutory reference in this article was read first-hand from the Ontario e-Laws consolidation of the Not-for-Profit Corporations Act, 2010 and the Public Accounting Act, 2004 on that date. Two statements are flagged in the text as readings of the structure of ONCA rather than quotations from it. Thresholds in these Acts are expressed as “or such other prescribed amount” and can be varied by regulation — confirm current figures before relying on them.