Introduction

The Ontario Not-for-Profit Corporations Act (ONCA) is a critical regulatory framework for nonprofits operating in Ontario. It aims to modernize nonprofit governance, enhance transparency, and ensure accountability. For nonprofit boards, alignment with ONCA isn’t just about legal compliance—it’s about building a governance structure that supports long-term success.

ONCA came into effect on October 19, 2021, replacing the outdated Corporations Act. While the legislation provides a generous three-year transition period, many nonprofits have yet to complete the necessary work to achieve full compliance. Even organizations that believe they are compliant often discover gaps upon closer examination. This widespread noncompliance highlights the need for thorough board audits and proactive governance practices.

In this article, we’ll explore the key aspects of a nonprofit board audit, common compliance gaps, and actionable steps to ensure alignment with ONCA.

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What is ONCA, and Why Does It Matter?

ONCA establishes legal requirements for nonprofit organizations in Ontario, introducing modern governance standards. Key elements of ONCA include:

• Clear rules for membership and voting rights.
• Enhanced transparency through financial disclosure requirements.
• Streamlined processes for bylaw approval and amendments.
• Provisions for member rights and remedies.
• Defined director responsibilities and liabilities.

Noncompliance with ONCA can have serious consequences, including legal penalties, reputational damage, and the potential dissolution of your organization. Ensuring your board’s alignment with ONCA is not just a legal obligation—it’s an opportunity to strengthen your governance framework and position your organization for sustainable success.

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The Importance of a Board Audit

A board audit is a systematic review of your governance practices, policies, and structures to ensure compliance with ONCA and identify opportunities for improvement. The benefits of a board audit include:

• Ensuring Legal Compliance: Avoid penalties and liabilities by adhering to ONCA’s requirements.
• Improving Accountability: Strengthen transparency and accountability to stakeholders.
• Enhancing Decision-Making: Align governance practices with best practices to improve strategic oversight.
• Building Trust: Demonstrate your organization’s commitment to good governance to funders, members, and the public.

For nonprofits that have already undertaken compliance efforts, a board audit can validate those efforts and uncover areas that might have been overlooked. This ensures that no critical gaps remain unaddressed.

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Key Areas of Focus in a Board Audit

1. Bylaws and Policies

Common Issues:

• Outdated or vague bylaws that conflict with ONCA provisions.
• Lack of policies addressing key governance areas, such as conflict of interest and whistleblower protection.
• Organizations assuming that minor updates made in the past are sufficient for compliance.

Audit Checklist:

• Review bylaws to ensure they align with ONCA’s requirements for membership, voting, and director responsibilities.
• Ensure policies cover essential areas, including financial oversight, conflict of interest, and risk management.
• Confirm that bylaws and policies are reviewed and updated regularly.

Steps to Address Gaps:

• Work with legal counsel or governance experts to update bylaws and draft missing policies.
• Create a schedule for periodic policy and bylaw reviews.
• Use compliance checklists tailored to ONCA to identify areas needing attention.

2. Director Roles and Responsibilities

Common Issues:

• Directors unaware of their legal obligations under ONCA.
• Lack of clarity around the distinction between governance and operational roles.
• Overreliance on a few directors for compliance, leaving others disengaged.

Audit Checklist:

• Confirm that all directors understand their fiduciary duties, including duty of care, loyalty, and compliance.
• Verify that directors receive regular training on ONCA and nonprofit governance.
• Ensure that role descriptions clearly differentiate between board and staff responsibilities.

Steps to Address Gaps:

• Develop an onboarding program that includes training on ONCA and governance best practices.
• Provide ongoing education opportunities, such as workshops or webinars, to keep directors informed.
• Foster a culture of shared responsibility to ensure all directors contribute to governance efforts.

3. Financial Oversight

Common Issues:

• Inadequate financial reporting and oversight practices.
• Failure to meet ONCA’s financial disclosure requirements.
• Assumptions that existing financial practices automatically meet ONCA standards.

Audit Checklist:

• Review financial statements to ensure accuracy and compliance with ONCA.
• Confirm that the board regularly reviews financial reports and conducts annual audits.
• Verify that the organization meets ONCA’s requirements for financial transparency and member access to financial information.

Steps to Address Gaps:

• Engage a qualified accountant or auditor to review financial practices.
• Establish a finance committee to oversee budgeting, reporting, and audits.
• Implement financial training for directors to enhance their oversight capabilities.

4. Membership and Voting Rights

Common Issues:

• Noncompliance with ONCA’s rules for member rights and voting procedures.
• Lack of transparency in member communications and decision-making processes.
• Misunderstanding of the roles and rights of members under ONCA.

Audit Checklist:

• Confirm that membership structures align with ONCA’s provisions.
• Review voting procedures to ensure fairness and compliance.
• Ensure that members are informed of their rights and responsibilities.

Steps to Address Gaps:

• Update membership agreements and communication practices to align with ONCA.
• Provide clear guidelines for member voting and participation.
• Regularly engage with members to build trust and ensure alignment with their expectations.

5. Risk Management and Compliance

Common Issues:

• Absence of a risk management framework.
• Failure to monitor compliance with ONCA and other legal obligations.
• Overlooking the long-term risks of noncompliance.

Audit Checklist:

• Evaluate the organization’s risk management policies and practices.
• Confirm that compliance monitoring is part of the board’s regular agenda.
• Identify potential risks related to governance, finance, and operations.

Steps to Address Gaps:

• Develop a risk management framework that addresses key areas of vulnerability.
• Assign responsibility for compliance monitoring to a designated individual or committee.
• Conduct periodic risk assessments to stay ahead of potential challenges.

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Conducting a Board Audit: Step-by-Step Guide

1. Assemble a Team:

   • Include board members, staff, and external advisors to provide diverse perspectives.

2. Define Scope and Objectives:

   • Identify key areas of focus, such as bylaws, director roles, and financial practices.

3. Gather Documentation:

   • Collect bylaws, policies, meeting minutes, financial reports, and other relevant documents.

4. Evaluate Current Practices:

   • Compare existing governance practices against ONCA’s requirements and best practices.

5. Identify Gaps and Risks:

   • Highlight areas of noncompliance or inefficiency and prioritize them for action.

6. Develop an Action Plan:

   • Create a timeline and assign responsibilities for addressing identified gaps.

7. Implement Changes:

   • Update policies, provide training, and implement new processes as needed.

8. Monitor Progress:

   • Regularly review the action plan and adjust as necessary to ensure sustained compliance.

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Benefits of Proactive ONCA Alignment

Increased Stakeholder Confidence

Funders, members, and partners are more likely to support organizations with robust governance practices. Alignment with ONCA demonstrates your commitment to accountability and transparency.

Enhanced Decision-Making

Strong governance structures enable more effective decision-making, ensuring that your organization can respond to challenges and opportunities effectively.

Reduced Risk

Proactive compliance minimizes the risk of legal penalties, reputational damage, and operational disruptions.

Long-Term Sustainability

An ONCA-aligned governance framework lays the foundation for enduring impact and resilience, even in the face of unexpected challenges.

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Conclusion

Aligning your nonprofit’s governance practices with ONCA is essential for compliance, accountability, and long-term success. A board audit is a powerful tool to evaluate your current practices, identify areas for improvement, and implement changes that strengthen your organization.

At IntraVista Strategic Consulting, we specialize in helping nonprofits navigate ONCA requirements and build strong governance frameworks. Whether your organization is starting from scratch or refining its efforts, we’re here to help. Contact us today to learn how we can support your organization in achieving compliance and maximizing impact.