What is ONCA's position on members' access to a not-for-profit's financial statements?

Financial transparency is a cornerstone of good governance in Ontario's not-for-profit sector. The Ontario Not-for-Profit Corporations Act (ONCA) provides clear rules about when and how members can access their organization's financial statements.

Understanding these requirements helps nonprofits maintain compliance while building trust with their members. This article explores the ONCA Section 98 and what it means for both organizations and their members.

Understanding the Ontario Not-for-Profit Corporations Act (ONCA)

ONCA is the primary legislation governing how not-for-profit corporations operate in Ontario. It sets out the legal framework that nonprofits must follow to remain compliant.

What is ONCA?

The Ontario Not-for-Profit Corporations Act is provincial legislation that regulates not-for-profit corporations in Ontario. It replaced the previous Corporations Act and introduced modern governance standards for the nonprofit sector.

ONCA came into effect on October 19, 2021. The legislation applies to most nonprofits incorporated in Ontario, including charities, membership organizations, and public benefit corporations.

The Act covers everything from incorporation and bylaws to governance, meetings, and financial accountability. Its purpose is to modernize nonprofit governance and make it easier for organizations to operate effectively.

Why Financial Transparency Matters

Financial transparency creates accountability between nonprofit boards and their members. When members can review financial statements, they can make informed decisions about the organization's direction.

Access to financial information builds trust and confidence in leadership. Members who understand their organization's financial position are more likely to remain engaged and supportive.

Transparency also serves a legal purpose. ONCA requires nonprofits to maintain certain standards of openness with their membership. Organizations that fail to provide required access may face legal consequences.

ONCA Section 98: Financial Statement Access Requirements

Section 98 of ONCA establishes the specific rules for financial statement access. This section balances the organization's operational needs with members' rights to information.

Overview of Section 98

Section 98 creates mandatory requirements for retaining and providing access to financial statements. These rules apply to not-for-profit corporations incorporated under ONCA.

The section covers several key areas:

• Where financial statements must be kept
• Who can access them and when
• Whether organizations can charge fees
• How technology can facilitate access
• Circumstances where access might be restricted

Understanding Section 98 helps nonprofit boards establish compliant policies. It also helps members know their rights when requesting financial information.

Corporation's Obligation to Retain Financial Statements

Every ONCA corporation must maintain proper financial records at its principal office. This requirement ensures that documents are available when members request access.

What Must Be Kept on File (Section 98(1))

Section 98(1) requires corporations to keep copies of specific financial statements at their principal office. This includes the organization's own financial statements as well as those of any subsidiaries.

The corporation must also maintain financial statements of any combined corporate body. These documents must be readily accessible during the organization's regular business hours.

The principal office is typically the address listed in the organization's public filings. This is where members should go to inspect financial documents in person.

Key documents that must be retained:

• The corporation's annual financial statements
• Financial statements of subsidiary corporations
• Combined financial statements of corporate bodies
• Any audited or review engagement reports

Organizations should establish a clear system for storing these documents. Digital storage is acceptable as long as members can access the information as required by law.

Members' Rights to Inspect Financial Statements

ONCA grants members specific rights to view and copy their organization's financial information. These rights cannot be restricted by bylaws or board policies.

Free Access During Regular Office Hours (Section 98(2))

Section 98(2) states that members can examine financial statements free of charge during the corporation's regular office hours. The organization cannot impose fees for this basic inspection right.

Members also have the right to make copies or take extracts from the financial statements. This allows members to retain information for their own records or analysis.

Regular office hours means the times when the organization's administrative office is typically open. Many nonprofits operate with limited office hours, so members should confirm availability before visiting.

Members' inspection rights include:

• Viewing complete financial statements
• Taking notes or photographs
• Making photocopies or extracts
• Requesting digital copies at no charge
• Accessing statements during any regular business hours

The organization cannot require members to provide reasons for requesting access. The right to inspect is automatic for all members in good standing.

What "Members" Means Under ONCA

Under ONCA, a "member" is someone who has membership rights as defined in the corporation's bylaws. Membership typically involves voting rights and the ability to participate in members' meetings.

Not all nonprofits have members. Some organizations operate with a board-only structure and do not have a formal membership base.

For organizations with members, the bylaws should clearly define who qualifies for membership. This might include individuals who pay dues, meet certain criteria, or are appointed to membership.

Only persons holding a valid membership at the time of the request can exercise inspection rights. Former members generally cannot access financial statements unless the bylaws specifically allow it.

Remote and Electronic Access to Financial Statements

ONCA recognizes that technology makes it easier to share information with members. The Act permits electronic access as an alternative to in-person inspection.

Online Access Options (Section 98(2.1))

Section 98(2.1) allows corporations to provide remote access to financial statements through electronic means. This might include secure member portals, email distribution, or document-sharing platforms.

Organizations can choose whether to offer remote access. It is an option, not a mandatory requirement. However, many nonprofits find that electronic access makes compliance easier and more convenient for members.

Common methods for remote access:

• Secure member portals on the organization's website
• Email distribution of PDF financial statements
• Cloud-based document sharing services
• Video conferencing for virtual inspection appointments

Technology-based access must be reasonably secure and user-friendly. Organizations should not create barriers that effectively prevent members from accessing information.

No Charges for Remote Access (Section 98(2.2))

Section 98(2.2) prohibits charging fees for electronic access to financial statements. Just as in-person inspection must be free, remote viewing cannot involve member costs.

This means organizations cannot require paid memberships to premium website areas where financial statements are stored. Basic access to financial information must always be free.

However, organizations may charge reasonable photocopying fees if members request physical copies by mail. The Act distinguishes between viewing access (which must be free) and reproduction costs (which may be recovered).

Nonprofits should consider offering financial statements in multiple formats. Providing both PDF downloads and paper copies upon request serves members with different preferences and technology access.

Court Applications to Restrict Access

While ONCA creates a strong presumption in favour of member access, it recognizes that some circumstances might warrant restrictions. The Act provides a legal process for limiting access when necessary.

When Can a Corporation Limit Access?

A corporation may apply to court under Section 98(3) for an order preventing a member from examining financial statements. This application must demonstrate that allowing inspection would be harmful to the corporation or related entity.

The bar for obtaining such an order is high. Courts generally favour transparency and will only restrict access in exceptional circumstances.

Potential grounds for restricting access might include:

• The member plans to use information for commercial gain unrelated to membership
• Inspection would reveal confidential business strategies to competitors
• The request is part of a harassment campaign against the organization
• Disclosure would violate privacy rights of third parties

The corporation must file its court application within 15 days of receiving the member's access request. If the organization misses this deadline, it cannot later seek to prevent inspection based on that particular request.

Court applications should be a last resort. Most member requests can and should be accommodated without legal intervention.

Notification Requirements (Section 98(4))

Section 98(4) requires the corporation to notify the member if it applies to court for an order restricting access. This notification must inform the member about the application and their right to participate in the court proceeding.

The member has the right to appear in court and be heard on the matter. They may present arguments in person or through legal counsel.

This notification requirement ensures fairness in the process. Members can defend their right to access information and respond to the corporation's concerns.

Organizations must provide sufficient notice to allow meaningful participation. Waiting until the day before a court hearing would not satisfy the notification requirement.

Exception for Subsidiary Corporations

ONCA includes a practical exception for subsidiary corporations to avoid duplication of effort. This streamlines compliance for nonprofit groups with complex corporate structures.

When Subsidiaries Are Exempt (Section 98(5))

Section 98(5) states that subsidiary corporations do not need to comply with the financial statement access requirements if their financial information is already consolidated in the parent corporation's statements. This exception prevents unnecessary administrative burden.

For the exemption to apply, the subsidiary's financial information must be included in the holding corporation's consolidated statements. Members can then access the complete picture by reviewing the parent organization's documents.

Requirements for the subsidiary exemption:

• The subsidiary must be wholly owned or controlled by the parent corporation
• Financial statements must be properly consolidated
• Members must have access to the consolidated statements
• The consolidation must comply with applicable accounting standards

This exemption makes sense because members can see the subsidiary's financial position through the consolidated statements. Requiring separate access to subsidiary records would be redundant.

However, if a member specifically requests to see the subsidiary's standalone statements, the holding corporation should consider whether providing them would promote transparency. While not legally required, voluntary disclosure often builds goodwill.

Practical Implications for Ontario Not-for-Profits

Understanding the legal requirements is one thing, but implementing them effectively requires practical planning. Nonprofits should develop clear policies and procedures for managing member access requests.

Best Practices for Compliance

Organizations should create a straightforward process for members to request financial statement access. This might include designating a staff member or volunteer to handle requests and establishing a response timeline.

Recommended practices include:

• Posting financial statements proactively on the organization's website
• Maintaining organized digital and physical filing systems
• Responding to access requests within 5-7 business days
• Providing statements in the member's preferred format when possible
• Training staff and board members on ONCA requirements

Proactive disclosure often eliminates the need for individual requests. Many nonprofits automatically provide financial statements to all members after the annual general meeting.

Creating a members' section on the organization's website can streamline access. Upload approved financial statements promptly after board approval.

Board policies should outline the process for handling access requests. Include details about who receives requests, how quickly responses are provided, and what formats are available.

Common Mistakes to Avoid

Some nonprofits inadvertently violate ONCA requirements by creating barriers to access. Understanding common pitfalls helps organizations maintain compliance.

Mistakes that can cause problems:

• Charging fees for basic inspection or viewing
• Requiring members to submit written requests with justifications
• Imposing unreasonable delays before providing access
• Offering access only during inconvenient hours
• Failing to maintain proper records at the principal office

Another common error is confusing member access rights with public disclosure. While members have broad access rights, nonprofits are not required to share financial statements with the general public unless they are registered charities.

Some boards mistakenly believe they can restrict access through bylaw provisions. However, ONCA rights cannot be eliminated or significantly limited by corporate bylaws.

Organizations should review their current practices against ONCA requirements. Any policies that conflict with Section 98 should be revised immediately.

Conclusion

ONCA Section 98 establishes clear requirements for member access to not-for-profit financial statements, promoting transparency and accountability throughout Ontario's nonprofit sector. If your organization needs guidance on implementing proper financial statement access policies or navigating ONCA compliance, B.I.G. Charity Law Group can help.

Our experienced team provides practical legal advice on nonprofit governance, member rights, and regulatory compliance. Contact us at 416-488-5888, email dov.goldberg@charitylawgroup.ca, or visit CharityLawGroup.ca to learn more.

Schedule a FREE consultation and let us help you build a transparent, compliant organization that strengthens member confidence.

Frequently Asked Questions

These common questions help clarify how ONCA's financial statement access rules work in practice.

Can a not-for-profit charge members to view financial statements?

No. ONCA explicitly prohibits charging fees for members to inspect or view financial statements. This applies to both in-person inspection and remote electronic access.

Organizations may charge reasonable photocopying costs if members request physical copies. However, the inspection itself must always be free.

How quickly must a nonprofit provide access to financial statements?

ONCA does not specify an exact timeline. However, access must be provided during regular office hours, which implies reasonable promptness.

Best practice is responding to requests within 5-7 business days. Organizations should not create unnecessary delays that effectively deny access.

What if a member wants copies of several years' worth of statements?

Members can request access to multiple years of financial statements if the organization retains them. ONCA does not limit requests to the most recent year.

However, nonprofits are only required to maintain statements for the periods specified in their record retention policies. Most organizations keep financial statements for at least seven years.

Can financial statements be provided in digital format only?

Yes. Organizations can provide financial statements exclusively through electronic means if they wish. Members cannot insist on physical paper copies for free.

However, nonprofits should ensure digital access does not create barriers. If a member cannot access electronic documents, the organization should find an alternative solution.

What happens if a not-for-profit refuses to provide access?

A member can apply to court to compel the organization to provide access. Courts take ONCA's transparency requirements seriously and typically order compliance.

The member may also be entitled to recover legal costs if the organization's refusal was unreasonable. Persistent non-compliance could result in penalties for the organization.