If you serve the not-for-profit sector, you are likely aware that entities incorporated under the former Society Act had until November 28, 2018 to transition to the new Societies Act (the Act). Societies that have not already transitioned under the new Act may and should still do so.
We remind practitioners that the Act requires societies to disclose amounts paid to directors, as well as certain employees and contractors.
Reporting on remuneration
All societies, except those defined by the Act and the Societies Regulation (the Regulation) as a “member-funded society”, must include in their financial statements a note about the remuneration paid to all directors and their top ten highest paid employees and contractors earning over $75,000.
The details are set out in Section 36 of the Act and Sections 8 and 9 of the Regulation. The exemption to Section 36 for member-funded societies is set out in Section 196 of the Act.
A member-funded society is funded primarily by its own members to carry on activities for the benefit of those members. Each society must declare whether it is member-funded at the time it transitions under the new Act or becomes incorporated.
A society that receives significant public donations or government funding, a registered charity, a student society, a hospital society, and other societies prohibited by the Regulation cannot be a member-funded society.
A member-funded society, government funding, and public donations are defined in Sections 190 and 191 of the Act and Section 13 of the Regulations. The threshold of what constitutes significant public donations or government funding is determined in Section 12 of the Regulation.
Compliance with laws and regulations
While this disclosure requirement is a legal one, not an accounting standard from the CPA Canada Handbook, it’s important for practitioners to discuss this obligation with their society clients who are not member-funded societies. This is because of assurance providers’ responsibility under CAS 250 Consideration of Laws and Regulations in an Audit of Financial Statements, and CSRE 2400 Engagements to Review Financial Statements. Even if you are providing a compilation engagement only, practitioners need to be mindful that a failure to disclose a statutory requirement could render the financial statements false or misleading.
We encourage practitioners to review the relevant sections of the Societies Act and the Societies Regulation with relevant clients and seek advice from their legal counsel if necessary. Access to both the Act and the Regulation are available on Societies page of the provincial government website.
The Ministry of Finance proposed in July 2019 a number of amendments to the Act, including a change that will require reporting of remuneration paid to all employees and contractors earning over $75,000, not just the top ten. We encourage practitioners to monitor progress on the ministry’s website.