Tax Filing Requirements for Small Canadian Nonprofits

Are non-profit organizations tax exempt in Canada?

Canadian non-profits do not need to pay income tax, but these organizations still have to file a return with the Canada Revenue Agency. Non-profit tax filing requirements vary based on the type of organization, the value of the organization's assets, and other factors. Ref :QuickBooks Mar 29, 2017

Registered Charities

If your non-profit is classified as a registered charity<, you must file Form T3010 (Registered Charity Information Return). This form is due within six months of the end of your fiscalRelating to finances or financial matters. year. For example, if your charity’s fiscal year ends on Oct. 31, your return is due by April 31 of the following year.

T2 Corporate Returns

Non-profits that are not classed as charities must file a T2 Corporate Income Tax Return. This form is eight pages long, but if your organization only does work in a single province or territory, you can fill out the short version of the T2 instead. The short version is only two pages, and it comes with three schedules. T2s are also due six months after the last date of your organization’s fiscal year. If you file late, the CRA charges late penalties< based on the amount of tax you owe. In most cases, this doesn’t apply to non-profits, but the agency also charges a 10% penalty for unreported income, and this rule may apply to non-profits. If the CRA owes your organization a tax refund, there is no penalty for filing late, but you must file within three years to claim your refund.

Financial Control Recommendations for Small Nonprofits

Preserving charitable assets is one of the most important responsibilities of non-profit boardYour board of directors provides governance to your organization. service

Many organizations experience asset losses related to thefts, embezzlements, or other diversions of assets and these trends are mirrored in charities throughout the country. The Department has found that most situations leading to charitable asset diversion are directly related to an organization’s maintenance of reasonable financial records and implementation of meaningful financial controlsFinancial controls are policies that, if implemented by the organization's leadership and staff, will ensure that: the organization's staff and assets are safeguarded, the risk of fraud, misuse of funds and errors is minimized, financial transactions are recorded accurately and financial documents are kept safe, financial reports are reliable, the organization complies with laws and regulations, and expenses are managed in line with the organization's budget and financial goals.. The law requires that nonprofit corporations maintain appropriate financial records

Avoiding Financial Losses

Most financial losses could be easily avoided or quickly identified if organizations implemented basic financial controls, such as regular independent review of bank statements or following a proper expenditure review process. Financial controls are often referred to as internal controls. The following is a list of minimum internal controls that should be in place in any non-profit organization, regardless of size. Additional internal controls should be considered and adapted to the circumstances and operations of the nonprofit.

Analyzing Financial Information Using Ratios

This tool provides the description and calculation of 14 ratios, including a mix of balance sheet and income statement ratios. Once familiar with these ratios, you can use the Ratio Calculation Worksheet< to get started.

 

Nonprofit Financial Ratios

Financial ratios are useful if they are:

• Calculated using reliable, accurate financial reports (such as an annual audit or final report)
• Calculated consistently from period to period
• Used in comparison to benchmarks or goals
• Viewed both at a single point in time and as a trend over time
• Interpreted in the context of both internal and external factors

Restricted Funds

When calculating ratios from the balance sheet, be aware of temporarily, or permanently restricted funds, and how they might affect the ratios. Calculate the ratios using only unrestricted assets to yield the most useful results.

Worksheet

A spreadsheet with these calculations is available to download from our website here<. https://www.propelnonprofits.org/resources/analyzing-financial-information-using-ratios/<

Financial Management

Includes an organization’s Executive Director and managers, but not staff or supervisors. See also definition for “staff.”

for Non-profit Organization: Financial Manager

Financial Management for the Non-Financial Manager is a course designed for managers responsible for the operations of non-profit organizations who will not have direct responsibility for setting up accounts and accounting. The material assumes little to no formal background in accounting and finance.

http://www.sfu.ca/continuing-studies/courses/npm/financial-management-for-the-non-financial-manager.html<

A Project Proposal is a document which you present to potential sponsors to receive funding or get your project approved.

We created this toolkit to simplify the process of creating a project proposal. We know that it can be hard to find templates, samples and guides all on one page. 

If you are familiar with proposals please scroll to the templates< and samples<. If you’re not, please take a look at the About Project Proposals<, Video Guides< and Further Reading< sections to find out more information.

We have compiled a few templates< in this toolkit to help you chose the most appropriate one for your business. For instance, you’ll find templates and generic business proposals, as well as NGO, grant, university and freelance project proposals.
 

This resource draws analogy to not for profits and the similarities it has to the commercial sector

Used broadly to define a group or cluster of agencies that share some commonality. Here ‘the sector’ refers to community based agencies that serve immigrants and refugees in Ontario. Other relevant sectors include the broader non‐profit sector (sometimes referred to as the voluntary sector), and the community social services sector.

. Budgeting and cash management

Includes an organization’s Executive Director and managers, but not staff or supervisors. See also definition for “staff.”

as two areas of financial management that is extremely important exercises for not for profit organization. The resource provides steps for preparing a budget, capital budget (p. 4 –P. 5)   Asset Management (p. 6) the use of fund accounting (p. 7)

Blackbaud (2015) Financial Management of Not-for-Profit Organizations

This resource is a balance sheet with questions to ask about when reviewing your organizations financial statement. These questions form the basis for analysing your organizations finances. 

Financial Fitness 101 Building a Financially Healthy Not-for-Profit Organization

This resource offers some basic tools of financial management

Includes an organization’s Executive Director and managers, but not staff or supervisors. See also definition for “staff.”

. The document takes you through an introduction to some of the key considerations which apply to effectively run organizations. Whether your need is to build a more financially healthy organization in order to create stronger plans to deliver on your core mission, or to access credit facilities to level out irregular revenue flows, a broader understanding of financial matters can assist. The section on budgeting  provide some approaches and support for maximizing effectiveness in using this important planning tool.

Marus, R. (2007) Financial Fitness 101 Building a Financially Healthy Not-for-Profit Organization

The purpose of this document is to identify the kinds of decisions where non-profit organizations need to manage their risks in a strategic fashion, to review what is known about how they approach these decisions, and to offer a conceptual framework that non-profits can use to develop a more sophisticated and effective approach to their risk-management

Includes an organization’s Executive Director and managers, but not staff or supervisors. See also definition for “staff.”

decisions.

Dennis R. Young. How Non-profit Organizations Manage Risk

Financial planning contributes significantly to the success of a non-profit organization and allows it to better accomplish its mission. Planning tasks are challenging and too often are overlooked. In this time of shrinking governmental support for non-profit organizations, astute use of available resources following a well - developed financial plan may be the key to a
non-profit’ s survival. The concepts and techniques presented in this book can simplify the
efforts of financial managers and boardYour board of directors provides governance to your organization. members to be fiscally responsible, or accountable, to the organization ’ s private and governmental funders, to its clients

This term is used here to refer to the service-users that organizations work for and with and provide services to. We have chosen to use clients because of its common currency and ease of use, while acknowledging that it may unintentionally connote a particular ideology of patronage or a purely financial transactional relationships between organizations and the people they serve.

, to the community

The broad group of people who are stakeholders of an organization. Extending beyond the people that enter our buildings and use our services, an organization’s community may include cultural groups, sectoral partners, and other groups of people joined together by common identity, geography, and other bonds. Often where we use ‘community’ the word is actually short for multiple communities.

in which it operates, and to the society benefiting from its work.
 
Jody Blazek. (2008) Non-profit Financial Planning Made Easy