CRA Non-Profit Organization (NPO) Audit — Montreal CPA Firm Near You: Purpose, Surplus, and Compliance Defense

A CRA Non-Profit Organization (NPO) Audit examines whether your organization truly meets the definition of an NPO under paragraph 149(1)(l) of the Income Tax Act. An NPO must operate exclusively for a non-profit purpose — such as social welfare, recreation, community benefit, or professional development — and must not be carried on for profit or allow any part of its income to benefit its members personally.
Mackisen CPA Montreal defends NPOs during these audits by documenting purpose, reconstructing records, justifying surpluses, and safeguarding your tax-exempt status.

NPO audits are increasing across Canada due to recurring surpluses, expanded commercial activities, and inconsistent annual filings. Proper governance and documentation are now essential to surviving these reviews.

Legal Foundation

Income Tax Act s.149(1)(l) — tax exemption for NPOs operated exclusively for non-profit purposes and not for profit.
Income Tax Act s.230 — requires adequate books and records for all tax-exempt entities.
Jurisprudence: Tourism Industry Association of Canada (1994 TCC) — incidental surpluses are allowed if they are used to further non-profit objectives, not distributed personally.

Learning insight: CRA does not expect an NPO to be poor — it expects it to be purposeful.

Why CRA Conducts NPO Audits

CRA audits NPOs when risk indicators suggest the organization may be drifting toward profit-oriented or member-benefit activities. Common triggers include:
• large or recurring year-end surpluses
• commercial activities that resemble for-profit operations
• lack of documentation for board decisions or spending approvals
• rental income, sponsorships, or advertising revenue with no cost allocation
• payments to directors, members, or related parties
• missing Form T1044 filings where required
• complaints from members, partners, or donors

Learning insight: CRA is testing whether your purpose aligns with your financial behaviour. Both must support your NPO mandate.

CRA NPO Audit Process

1. CRA requests governing documents, bylaws, meeting minutes, financial statements, and bank records.

2. CRA analyzes whether your activities match your stated objectives.

3. CRA reviews surplus levels, reserves, and capital funds for reasonableness.

4. CRA tests whether expenses benefit members personally.

5. CRA examines revenue streams for commercial vs. NPO character.

6. CRA issues a proposal with concerns; your CPA responds with documentary proof.

7. CRA finalizes acceptance, compliance agreements, or revocation of exempt status.

Learning insight: An NPO audit is not a math test — it is a purpose test.

Mackisen CPA’s NPO Audit Defense Strategy

• review bylaws, mission statements, and governance structure
• prepare surplus-justification files documenting planned projects or capital needs
• analyze commercial revenues (rental, sponsorship, advertising) for compliance
• create cost-allocation schedules separating NPO and commercial activities
• document board approvals to demonstrate proper oversight
• prepare missing Form T1044 filings if applicable
• produce CPA-certified audit binders matching CRA’s request format
• represent the NPO in all communication with CRA

Learning insight: CRA accepts purpose when purpose is documented. Governance is your strongest defense.

Common CRA NPO Audit Findings

• surpluses accumulating without documented future use
• rental or sponsorship revenue treated like profit
• payments to directors lacking approval minutes
• missing documentation for grants, subsidies, or community programs
• failure to file T1044 when asset and revenue thresholds are exceeded
• mixing personal and organizational expenses
• inadequate recordkeeping for community or member-service activities

Learning insight: Most NPO audit failures come from missing documents — not intentional wrongdoing.

Real-World Results

• A Montréal cultural association retained its exemption after Mackisen CPA documented that its $220,000 surplus was earmarked for facility upgrades.
• A sports organization avoided a $90,000 reassessment when we reclassified sponsorship revenue as program support and provided cost-allocation proof.
• A professional association passed its NPO audit after we reconstructed board minutes and prepared T1044 filings for three prior years.

Learning insight: CRA is satisfied when your numbers match your mission — and when your CPA proves it.

SEO Optimization and Educational Value

Primary keywords: CRA NPO audit, non-profit audit Canada, Mackisen CPA Montreal, CPA firm near you, NPO tax exemption rules, CRA non-profit compliance
Secondary keywords: T1044 filing requirement, CRA surplus rules, non-profit governance audit, CPA audit defense Montreal, NPO purpose test

Learning insight: In both SEO and compliance, clarity builds credibility. NPOs need both.

Why Mackisen CPA Montreal

Mackisen CPA Montreal has over 35 years of experience guiding NPOs through CRA audits, governance challenges, and compliance reviews. Our bilingual CPAs understand the legal tests CRA applies and build evidence-rich files that preserve your exemption, your reputation, and your mission.

Learning insight: Non-profit status is earned yearly through documentation — not assumed. We help you earn it with confidence.

Call to Action

If CRA has contacted your NPO or you suspect a compliance weakness, act early. NPO audits escalate quickly without professional representation.
Contact Mackisen CPA Montreal for a complete NPO audit defense and compliance review.
Phone: 514-276-0808 | Email: info@mackisen.com | Website: mackisen.com

Learning conclusion: A CRA Non-Profit Audit tests your purpose, governance, and financial transparency. Mackisen CPA Montreal ensures you pass all three — protecting your exemption, strengthening your organization, and sustaining your impact.