Blog PostDecember 17, 2020 - Educational
Financial Statements - What Are Our Options?
The Financial Statements of your condominium corporation are an important tool. They are used by the owners to make their own assessment on the health of the condominium and they are also included with the Status Certificates so potential purchasers can use them to provide peace of mind when evaluating whether to buy a unit in your community.
AUDITED FINANCIAL STATEMENTS
The Condominium Act of Ontario requires that all condominium corporations that have twenty-five or more units must have an audit completed annually. An audit provides assurance on the accuracy of your condominium’s financial statements. Another benefit of having an audit completed is that the audited financial statements are standardized; they are prepared using the Canadian Standards for Not-For-Profit Organizations. This provides consistency and comparability between any audited statements. Audited financial statements also add credibility; owners and potential purchasers can rely on them knowing that they have been audited by an independent, qualified body.
If your condominium has less than twenty-five units, you have the unique ability to collect unanimous written consent from all of the unit owners to waive the annual audit requirement, although we often find that condominiums under this threshold still choose to have audits completed each year.
NOTICE TO READER FINANCIAL STATEMENTS
Notice to reader statements are a cost-effective alternative for condominiums that have waived the audit requirement. These statements, unlike an audit, do not provide assurance on the accuracy of the financial statements, but they do offer a product that can be distributed or presented to the owners and included in the status certificates.
CORPORATE INCOME TAX RETURNS
Regardless of whether an audit or a notice to reader is completed, the condominium is still required to prepare and file a Corporate Income Tax Return annually to ensure they are meeting their obligations to the Canada Revenue Agency. If certain thresholds are met, the condominium may have to file a Non-Profit Organization (NPO) Information Return. This return must be filed if combined interest and rental income exceed $10,000 in the current fiscal year, if the condominium owned assets valued at more than $200,000 at the end of the previous fiscal year or if the condominium has ever filed an NPO Information Return in the past. It is important to file this return within six months of the fiscal year end, to avoid penalties. This return does not assess tax but can impose penalties if filed late of $25 per day up to a maximum of $2,500.
Every condominium corporation in Ontario has obligations both under the Condominium Act of Ontario and to the Canada Revenue Agency that they must ensure are met. The options available for meeting these obligations can be discussed with your condominium corporation’s auditor.
RLB Chartered Professional Accountants