Charities & Not-for-Profit

Charities & Not-for-Profit

Just because profit is not a motive for your organization doesn’t mean that you aren’t entitled to the best possible accounting services. Charities and not-for-profit organizations (or NPOs) operate under special rules, principles and guidelines that are different from for-profit organizations. Our firm knows the difference – our team has worked with many not-for-profits and charities in a diverse range of industries. From religious institutions to municipal sports clubs to medical societies to co-operative residential buildings, our firm has provided accounting services to all kinds of organizations devoted to the betterment of its members and the wider community, and we’re sure we can give your organization the same careful care and attention.

Most NPOs are required to complete annual assurance engagements to meet the requirements set by public and private watchdogs, and assurance services (audits and reviews) are among those that we provide.

NPOs are required to fill out special forms different from the standard corporate T2, including the T3010 Registered Charity Information Return and the T1044 Non-Profit Organization Information Return. Don’t be intimidated by these forms or by any other communications or correspondence you receive from the CRA. We can help you to keep on top of all of these requirements!

Here are some of the services we provide for charities and not-for-profit organizations:

• Audits, reviews and financial statements
• Bookkeeping and payroll services
• Internal accounting services
• T3010 Registered Charity Information Return
• T1044 Non-Profit Organization (NPO) Information Return
• Tax advice and planning
• Correspondence with the CRA
• Projections and forecasts for planning purposes
• Internal process and control evaluations to help prevent errors, fraud & theft
• Answers to questions of the board and management

Assets and Collections

On January 1, 2019, new accounting standards came into effect which affected assets and collections for not-for-profit organizations. These standards apply to tangible capital assets, intangible capital assets, and collections.

Smaller not-for-profit organizations, defined as having revenues lower than $500,000 in both the current and previous year. However, once the $500,000 threshold is exceeded, the new rules are expected to be obeyed from that point forward.

Contributed Tangible Capital Asset

A contributed tangible capital asset (for example a building, machine, vehicle, or piece of equipment) is deemed to be at fair value at the date it was contributed to the NPO, in addition to all costs directly attributable to its acquisition, which includes bringing it into the condition necessary for intended use (shipment costs, installation costs, etc.). When it is practicable, should the capital asset be compartmentalizable (divisible into smaller parts of the whole) then this should be done in order to allow each component to be amortized separately.

Amortization can now also be recorded based on the greater of the cost less salvage value or the cost less residual value, over the useful life of the asset.

A write-down was formerly required when an asset, tangible or intangible, was no longer of any long-term service use to the organization.

Collections Held by a NPO

Collections are defined as works of art, historical treasures, and similar assets. These are rare and unique items which differentiate themselves from other assets. A library of reference materials or fiction widely available elsewhere would not qualify as being part of a collection, and nor would mass-produced artworks, no matter how attractively they are displayed.

Although NPOs used to have the option to capitalize their collections, this option has been removed under the new rules. All collections must be recorded on the statement of financial position at cost or at nominal value. Cost is defined as either the purchase price, or the fair value of the contributed items and all other costs related to their acquisition (brokerage fees, shipping, etc.). The costs of maintaining this collection are repair and maintenance costs and need to be expensed as they are incurred. Amortization cannot be recorded on collections.

Collections do need to be written-down once the carrying value has been reduced or when the costs exceed their fair value. Write-downs may not be reversed. If the collection is able to disposed of, then the difference between the carrying value and the proceeds is treated a gain or loss within the operations of the NPO.

Collections must be recorded separately, within their own special category, of the financial statement and a note of disclosure must be made on any writing-down of the collections.

Conclusion

These new standards are relevant to the organization in many ways. Some guidelines for what to do to make sure that your organization can adjust to these rules in the smoothest way possible:

• Make sure that all collections are recorded separately on the financial statements, at cost or nominal value.
• Assess whether compartmentalization, the separation of an asset into its component parts, is a possibility for your firm.
• Assess your assets to determine impairment and conditions for a write-down.