Post on 12-Jun-2015
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Annual Update for Not-for-Profits
Welcome to the Welch LLP 2014
NPO Update Seminar
Moderator
Garth Steele, CPA, CAIndirect Tax Partnergsteele@welchllp.comwww.welchllp.com @garthsteele
Agenda
• Refresher of Last Year’s Topics
• NPO Income Tax Update
• HST Update
• Audience Q&A
• BREAK
• Compliance after Continuing
• Canada’s New Anti-Spam Law – CASL
• Accounting Update on New Principles
• Governance Best Practices
• How to Prevent Fraud
• Audience Q&A
Shawn Kelso, CPA, CAPartner, Director of Professional Standards skelso@welchllp.comwww.welchllp.com @WelchLLP
Refresher of last year’s topics
Update on AcSB & PSAB Joint Statement of Principles
• Joint Project of AcSB & PSAB
o Proposed improvements
o Impacts private sector NPOs, public sector NPOs or both
o Feedback requested
o Significant number of responses (public accountants & NPO officials)
o Boards mulling over feedback, next steps uncertain
• Accounting for contributions
o Recognize when control funds & amount estimable
o Eliminates accounting policy choice (deferral, restricted funds)
o Eliminates restricted/unrestricted classification
Update on AcSB & PSAB Joint Statement of Principles
• Other proposed changes for private sector NPOs
o Controlled NPOs must be consolidated
o Controlled profit oriented entities - equity method must be used
o Capital assets must be capitalized
o Expenses must be presented by nature and function
Update on AcSB & PSAB Joint Statement of Principles
• Other proposed changes for public sector NPOs
o Follow PSA standards for tangible assets
o Follow PSA financial statement presentation
net debt
budgeted figures
o Controlled/related entities follow PSA standards
Update on AcSB & PSAB Joint Statement of Principles
NPO Income Tax Update
Damian LaflammeSenior Tax Managerdlaflamme@welchllp.comwww.welchllp.com @WelchLLP
• Estate Donations
o New Provisions Will Provide More Flexibility
• Donations of Ecologically Sensitive Land
• Donations of Certified Cultural Property
• State Supporters of Terrorism
• Electronic Filing
Registered Charities/Donors – 2014 Federal Budget Measures
• Federally Incorporated Charities / Continuance Requirement
• CRA Charities Program Update
o Guidance / Outreach / Applying for Registration
o Compliance activities
o Loss of registered status
o Charities and political activities
o Frequent Non-compliance Issues
• Donation Tax Shelter / Assessment Delay
o Ficek
Charities
• NPO Risk Identification Project-Update
• NPO – Rental Income
• NPO – Interest Expense
• Shareholder of a Not-for-Profit Corporation
o Expanded Definition of “Shareholder”
o S.15(1) May Apply
Non-profit Organizations (NPOs)
HST Update
Mona Tessier, CPA, CASenior Manager, Indirect Taxmtessier@welchllp.comwww.welchllp.com @WelchLLP
• What’s New
• ITC Allocation
• Tips & Traps – EHT & HST
Agenda
What’s New?• Hospital parking
o Exempt where provided by a charity or a public sector body
Patients Visitors Volunteers
o Taxable for hospital staff and medical professionals
• Health Care expansion of exemptionso Acupunctureo Naturopath
ITC Allocation
• Memberships – election to make membership fees taxable
• Maximizing ITC allocation
• Fair and reasonable
• Documentation
Tips & Traps• EHT
o Employee vs contractoro Obligation to remit EHT if payroll > $450,000
• HSTo Requirement to self-assess when importing services from
another province (even if service is rendered in that other province – i.e. advertising)
Have questions so far?
Ask us now!
Audience Q&A
We will now have a 15 minute break.
Thank You.
Break
Now What?
Compliance Issues after Continuing
Adam Aptowitzer LL.B.Drache Aptowitzer LLPaaptowitzer@drache.ca
October 22, 2014
Adam Aptowitzeraaptowitzer@drache.ca
226 MacLaren St.Ottawa, OntarioK2P 0L6
Overview
1. Continuances…continued
2. By Laws
3. Controlling Membership
4. Written Resolutions
5. Soliciting Corporations
6. Financial Statements
7. Reporting Obligations
8. CASL
Adam Aptowitzeraaptowitzer@drache.ca
By-laws
• Only two mandatory provisions• Default rules may not be in your best
interests• Making by-law amendments• Borrowing • Fundamental changes
Adam Aptowitzeraaptowitzer@drache.ca
Submitting the Required Documents
• Form 4031 – Articles of Continuance • Form 4002 – Initial Registered Office
Address and First Board of Directors• NUANS Name Search Report, if the name
of the corporation is changing on continuance.
• By-laws do not have to be filed to obtain a Certificate of Continuance.
Adam Aptowitzeraaptowitzer@drache.ca
Controlling Membership
• Members have rights akin to those in private corporations.– They can review information.– Call meetings of the members.– Begin lawsuits in the name of the corporation– Veto certain bylaw changes etc…
KEEP YOUR MEMBERS HAPPY!
Adam Aptowitzeraaptowitzer@drache.ca
Written ResolutionsDirectors and members will be able to pass resolutions in lieu of holding meetings (if signed by all the directors or members entitled to vote on the resolution at the meeting)
When passed, these resolutions have the same effect as if they were adopted at a duly constituted meeting.
Can be signed in Counterpart
Directors will only be allowed to:
a) make by-laws;b) adopt forms of debt obligation certificates and corporate records;c) authorize the issue of debt obligations;d) appoint officers;e) appoint a public accountant to hold office until the first annual meeting of members; f) issue memberships; andg) make banking arrangements
With limited exception, a resolution in writing dealing with all matters required by the CNCA to be dealt with at a meeting of members satisfies all the requirements of the CNCA relating to meetings of members
Copies of every resolution signed by all the directors and all the members must be kept with the minutes of meetings of directors and members respectively.
Adam Aptowitzeraaptowitzer@drache.ca
Soliciting Corporation Definition
A corporation is a soliciting corporation if it receives income during a single financial year in excess of $10 000 in the form of:
• donations or gifts or, in Quebec, gifts or legacies of money or other property requested from any person who is not a member, director, officer or employee of the corporation at the time of the request or related to such a person.
• grants or similar financial assistance received from the federal government or a provincial or municipal government, or an agency of such a government; or
• donations or gifts or, in Quebec, gifts or legacies of money or other property from a corporation or other entity that has, during the most recent financial year, received income in excess of $10 000 in the form of donations, gifts or legacies or grants or similar financial assistance.
Adam Aptowitzeraaptowitzer@drache.ca
Regulatory Differences Between Soliciting and Non-Soliciting
1. Board composition
2. Appointment of a public accountant and waiving the audit requirement
3. Filing annual financial statements
4. Unanimous Member Agreement (UMA)
5. Liquidation of residual assets
Adam Aptowitzeraaptowitzer@drache.ca
Soliciting and Non-Soliciting
Soliciting corporations 50K or less
Between 50K and 250K
More than 250K
Non-Soliciting corporations 1 M or less
More than 1 M
Adam Aptowitzeraaptowitzer@drache.ca
Financial Statements and Public Accountant (PA)
• Qualifications of Public Accountant
Welch LLP
• Financial Statements
Once prepared according to standards get filed. There may be discrepancies with the T3010.
Adam Aptowitzeraaptowitzer@drache.ca
Level of Financial Review
Type of Corporation
Gross Annual Revenues
Appointment of PA
Review Engagement (RE) orAudit
Soliciting 50K or less May be waived
Default to a RE, but members may require audit or no RE at all.
Soliciting 50K to 250K A must Default to an audit but members can pass SR for RE
Soliciting More than 250K
A must Audit
Non-Soliciting Less than 1 M May be waived
Default to RE, but members may require audit
Non-Soliciting More than 1 M A must Default to audit
Adam Aptowitzeraaptowitzer@drache.ca
Reporting Obligations
• File Annual Return (Form 4022)• File Change of Registered Office Address
(Form 4003)• File Changes Regarding Directors (Form
4006)• File financial statements and PA’s report• Keep your articles up-to-date• Send copies of by-laws
Adam Aptowitzeraaptowitzer@drache.ca
Questions
Adam Aptowitzeraaptowitzer@drache.ca
For More Information
Visit our website (www.drache.ca) and sign up for our Charity Law Insights newsletter
or contact me ataaptowitzer@drache.ca
Adam Aptowitzeraaptowitzer@drache.ca
Canada’s New Anti-Spam Law
‘CASL’
Alexandra Tzannidakis LL.B.
Drache Aptowitzer LLPatzannidakis@drache.ca
October 22, 2014
Alexandra Tzannidakisatzannidakis@drache.ca
226 MacLaren St.Ottawa, OntarioK2P 0L6
What is Prohibited?
It is an offence to send or cause to be sent a commercial electronic message, unless 3 major criteria are met.*
*subject to lots of exceptions
Alexandra Tzannidakisatzannidakis@drache.ca
Commercial Electronic MessageElectronic:• E-mails, text messages, social media messages,
any other text/sound/voice/image telecom• Not telephone calls or faxes
Commercial:• Has as a purpose the encouraging of
commercial activity• E.g. buy/sell, ads, promoting a person
Alexandra Tzannidakisatzannidakis@drache.ca
The Big 3
To legally send a CEM, you need:
1. Consent
2. Sender ID
3. Unsubscribe mechanism
Alexandra Tzannidakisatzannidakis@drache.ca
Consent
1. Explicit
Recipient ‘opts in’. Never expires. Only ends when they explicitly withdraw consent.
2. Implicit
In certain circumstances the recipient is presumed to consent. Expires July 1, 2017. Also ends if explicitly withdrawn.
Alexandra Tzannidakisatzannidakis@drache.ca
Sender ID
Any CEM must include:
1. Business name of sender
2. Mailing address of sender
3. Telephone number, e-mail address, or web address of sender
Or a clear link to a page with
this information.
Alexandra Tzannidakisatzannidakis@drache.ca
Unsubscribe Mechanism
• Readily usable
• E.g. Button with word ‘unsubscribe’
Alexandra Tzannidakisatzannidakis@drache.ca
(some of the) Exceptions
1. Implied consent Until July 1, 2017
For NPOs:- Recipient is a member, or- Recipient was a member sometime in prior 2 years
For Registered Charities:- Recipient donated or volunteered sometime in prior 2
years
Alexandra Tzannidakisatzannidakis@drache.ca
(only an exception to the ‘consent’ part of the big 3)
2. Messages that are:• Sent internally, re: org’s activities• Sent between orgs with a relationship, re:
recipient org’s activities• Solicited by the recipient• In satisfaction of a legal obligation• Accessed in a foreign state
(etc.)
Alexandra Tzannidakisatzannidakis@drache.ca
(some of the) Exceptions
(excepts a CEM from all of the big 3)
3. Charity Fundraising
There is a blanket exception for messages sent by registered charities that have the primary purpose of raising funds for the charity.
Alexandra Tzannidakisatzannidakis@drache.ca
(some of the) Exceptions
(excepts a CEM from all of the big 3)
Questions?
Visit our website (www.drache.ca) and sign up for our Charity Insights newsletter
or contact me at:atzannidakis@drache.ca
Alexandra Tzannidakisatzannidakis@drache.ca
Accounting Update on New Principles
Christa Casey, CPA, CAPartner & Director of the Not-for-Profit Sectorccasey@welchllp.comwww.welchllp.com @WelchLLP
Key Accounting Changes
• Employee Future Benefits
Employee Future Benefits
• New section 3462 in ASPE & 3463 in ASNFPO
• Effective for periods beginning on or after Jan 1, 2014
• Immediate recognition method must be used
• No more defer and amortization approach
Employee Future Benefits
• Presentation of remeasurements:
o Recognize directly in net assets
o Present as a separate item in statement of changes in
net assets
o No reclassification to the statement of operations
Employee Future Benefits
• Re-measurements
o Changes in
Fair value of plan assets
Measurement of plan obligation
Asset ceiling
o Past service costs
o Gains/losses from settlements and curtailments
Governance Best Practices
Audit Committee Best Practices
• Audit Committee - Committee of the Board of Directors that
ensures audit quality
• Publication in January 2014 entitled “Oversight of the
External Auditor – Guidance for Audit Committees”
o Chartered Professional Accountants Canada
o Canadian Public Accountability Board (CPAB)
o Institute of Corporate Directors
• Summarizes responsibilities of audit committees with best
practices
Responsibilities
• Some of their responsibilities:
o Oversee the work of the external auditor
o Recommend to the Board the nomination of auditor
With the primary objective to ensure audit quality
Composition of Committee
At least 3 members, all must be:
• Independent
• Financially literate
• Director of entity
Audit Quality
Likely to be achieved by an audit team that:
• Exhibits appropriate values, ethics and attitudes
• Has the requisite knowledge, skills, experience and
sufficient time allocated to perform the audit work
• Applies a rigorous audit process and quality control
procedures that complies with law, regulation and
applicable standards
• Provides useful and timely reports
• Interacts appropriately with relevant stakeholders
Relationships in Financial Reporting Governance
Board of Directors or
Audit Committee
Management
AuditorsCulture of Integrity, Respect and Transparency
Oversee the Work of Auditor
Review overall audit strategy
• What reports will be needed (consolidated, funders, etc.)
• General timing of work and composition of audit team
• Geographical locations to be visited by group auditor
• Results of previous evaluation of auditor that may affect
current year
Oversee the Work of Auditor
Review overall audit strategy – FOCUS ON:
• Rationale supporting critical audit planning decisions and
choices
• Timing of major audit activities
• Whether the auditors’ analysis of risks = sufficient
knowledge of business
• Key audit deliverables
• Resources needed to execute the plan
Oversee the Work of Auditor
Auditor should report any difficulties in executing audit plan:
• Areas where audit was behind schedule and reasons
• Unexpected and extensive auditor effort to obtain
evidence
• Changes in business conditions or circumstances
• Identification of unexpected audit results
Separately meet in camera with auditors and management
Oversee the Work of Auditor
Evaluating Auditor’s Findings
• Primary focus of review of auditor’s communication
o Enough information to recommend approval of financial
statements to board
o Auditors have exercised professional skepticism and
performed a quality audit
Oversee the Work of Auditor
Prompt communication and in-depth discussion with both
management and auditors are required if findings could:
• Require auditors to modify their opinion
• Add an emphasis of matter paragraph to report
• Lead external auditors to question organization’s ability
to continue to operate as a going concern
Recommend Auditors to Board
• Informed decision by doing annual assessment
o Audit quality considerations
Auditor independence, objectivity & professional skepticism
Quality of engagement team provided by auditor
Communication & interaction with auditor
o Quality of service considerations
• Review with auditors to continually improve effectiveness &
performance
• Consider if there are actions that can improve committee’s own
processes
Recommend Auditors to Board
Periodic comprehensive review of auditor
• Fear of complacency & independence concerns
• Recommended every 5 years
• Outcome:
o retain the firm or
o put the audit out for tender
• Identify areas for improvement for both
the auditors and committee
Recommend Auditors to Board
Comprehensive review includes reviewing and evaluating:
• Significant trends and results identified in previous
annual assessments
• Safeguards against independence & familiarity threats
• How the audit firm has responded to past evaluations
Recommend Auditors to Board
Common reasons for audits going to tender:
• Lower fees
o Ensure RFP outlines all of the required services –
avoids misunderstandings and surprise bills
o Evaluate firm’s performance on regular basis
• Complacency and independence
o Enquire about firm’s quality control procedures to
address this risk
o Consider requesting a rotation of certain audit team
members if this is a concern
How to Prevent Fraud
Andre Auger, CGA, CFEGovernment Services Advisoraauger@welchllp.comwww.welchllp.com @WelchLLP
• Definition of Fraud
• Some Statistics
• Occupational Fraud
• Warning Signs
• What to do if You Find Fraud
• Penalties & Offences
• Assessing Susceptibility
• Prevention Measures
• Fraud Risk Assessments
Agenda
• Financial fraud is defined as one or more intentional acts to deceive other persons and cause them financial loss.
• Involves a violation of trust
• The violation of trust is sometimes more harmful than the actual financial loss
• Fraud Triangle
• Internal fraud = Occupational fraud
• External fraud = mortgage fraud, insurance fraud, bankruptcy fraud, money laundering, tax fraud
Definition of Fraud
• The typical business loses 5% of its revenues
to fraud each year
• The avg. loss for small businesses is $140K.
• Occupational fraud is the biggest threat to
small businesses (asset misappropriation,
corruption, F/S fraud)
Some Statistics – CFE Survey
• Financial statement schemes
o improper revenue recognition, inadequate disclosure of related party transactions, improper asset valuations, fictitious fixed assets, improper capitalization, improper deferral of expenses
• Employee schemes
o expense abuse, theft, fictitious documents, forgery
• Bribery and Corruption
o conflict of interest, bid rigging, kickbacks, economic extortion
Occupational Fraud
• Personal characteristics of a fraudster
o intelligent, inquisitive, egotistical, risk taker, rule breaker
• Behavioural red flags
o living beyond means, big spender, keeps unusual work hours, financial difficulties
• Other signs
o cash flow issues despite regular sales’ activity
o decreasing profit margins despite normal market activity
o significant drop in inventories
Warning Signs
• ‘Tone at the Top’ is critical; adopt the zero tolerance approach
• Seek advice from your legal counsel
• Contact your local police force for guidance and advice
• If employees are involved, consider termination of employment
• Pursue recovery strategies; negotiate repayment agreements
• Press charges
• Proceed methodically, do not jeopardize a potential investigation
What to do if You Find Fraud
• Applicable sections under the Criminal Code
121 ‘Frauds against the Government’
122 ‘Breach of Trust’
322 ‘Theft’
380 ‘Fraud’
397 ‘Books and Documents’
• Section 380: where the offence > $5,000, a term of imprisonment not exceeding 14 years; if the offence is< $5,000, a term of imprisonment not exceeding 2 years
• Section 397: falsifying documents, term ofimprisonment not exceeding 5 years
Penalties & Offences
• What sector do you operate in? Are you in a high risk sector?
• What controls do you have in place; are they reasonable & practical for your organization
• Stay away from costly and resource consuming controls
• Is your staff experienced & loyal?
• Emphasize prevention
Assessing Susceptibility
• Be visible, let people know you are watching the money; sign cheques, ask for original documents, ask questions
• Show up on site unexpectedly
• Let people know you are looking for fraud
• Never sign stacks of blank cheques
• Do your homework before hiring employees; background checks, references, etc…
• Have employment contracts in place with clear sections dealing with fraud and consequences
Prevention Measures
• Check the monthly bank statements
• Review your F/S regularly, compare to previous periods
• If you are a small organization, consider hiring an external accountant for a few hours per month to do your bookkeeping and review your records
Prevention Measures
• Helps you identify risks and gaps in your organization’s controls
• Focus is on deterrence
• Not a complicated, costly exercise
• Assesses the risks associated with employees and management
• Assesses the risks associated with outside parties dealing with your organization (vendors, customers, banks, etc…)
• Assesses the likelihood of cash schemes, purchasing schemes, contracting schemes, payroll schemes, theft of inventory, conflicts of interest, etc…
• Looks at the physical controls in placeto deter fraud
Fraud Risk Assessments
Have questions?
Ask us now!
Audience Q&A
All event registrants will receive a
digital copy of the presentation via e-mail.
Event recording & slide content also available soon at www.welchllp.com
Thank you.