Insights
Nov 24, 2025
Mackisen
CRA Non-Profit Organization Audit — Montreal CPA Firm Near You: NPO Tests
A CRA Non-Profit Organization (NPO) Audit determines whether an association, club, or society claiming non-profit status truly operates “for a purpose other than profit.” These audits are rising across Canada, especially in Québec, as CRA and Revenu Québec examine whether surpluses are reinvested into operations or indirectly benefit members.
Mackisen CPA Montreal represents non-profits, associations, professional orders, and community organizations under CRA and ARQ audit, ensuring their financial and operational practices meet the legal standards for non-profit status while protecting their reputation and funding eligibility.
Legal Foundation
Law: Income Tax Act s.149(1)(l) — exemption from tax for clubs, societies, or associations not operating for profit; Tax Administration Act (QC) s.34–36.
Jurisprudence: Tourism Industry Association of Canada v. Canada (1994 TCC) — established that NPOs must operate exclusively for their stated objectives, not accumulate profits or provide personal benefit.
Learning insight: A true non-profit doesn’t mean zero surplus — it means zero private gain. CRA audits distinguish stewardship from self-interest.
Why CRA Audits Non-Profit Organizations
NPOs are exempt from income tax, but the CRA ensures that exemption is justified. CRA’s Charities and NPO Compliance Division focuses on groups showing large surpluses, related-party transactions, or profit-oriented activities.
Common triggers include:
Surpluses exceeding operational needs for multiple years.
Excessive cash reserves or investment income.
Personal benefits to members, directors, or staff.
Commercial activities unrelated to the organization’s purpose.
Payments to related entities or board-controlled companies.
Failure to file Form T1044, Non-Profit Organization Information Return.
Learning insight: CRA audits don’t target community service — they target blurred boundaries between charity and commerce.
How a CRA NPO Audit Works
CRA issues an information request for financial statements, meeting minutes, and T1044 filings.
Auditors analyze the NPO’s purpose, sources of revenue, and use of funds.
Interviews are held with directors and officers to confirm activities align with the constitution.
CRA issues a preliminary finding — either compliance confirmation or loss of tax-exempt status.
Learning insight: Non-profit audits are not accounting tests — they’re motive tests. CRA asks “why” before it looks at “how much.”
What a Mackisen CPA NPO Defense Includes
Purpose and Constitution Review: Analyze by-laws, objects, and mission for compliance with s.149(1)(l).
Financial Analysis: Document that revenue and surpluses are used to achieve non-profit purposes.
Governance File: Review minutes, elections, and member-benefit policies.
Commercial Activity Assessment: Distinguish taxable activities and prepare separate filings if needed.
T1044 Filing and Correction: Prepare and submit accurate NPO information returns.
Learning insight: An NPO’s best defense is clear documentation of purpose, control, and reinvestment. Mackisen CPA builds that foundation before CRA questions it.
Common CRA Findings in NPO Audits
Retained earnings without earmarked programs.
Member-only perks such as discounted services or honorariums.
Significant investment income beyond operational needs.
Related-party contracts not tendered at arm’s length.
Failure to file T1044 or TP-997.13 (Québec equivalent).
CRA may reclassify an organization as a taxable corporation, revoke its exemption, or apply penalties retroactively for up to four years.
Learning insight: CRA doesn’t penalize growth — it penalizes private benefit disguised as community purpose.
Real-World Example
A Montréal-based professional association accumulated five years of surpluses and paid executive travel without member approval. CRA questioned its NPO status. Mackisen CPA demonstrated that the expenses advanced educational objectives and restructured financial reporting to allocate reserves transparently. The NPO maintained its exemption and credibility.
Learning insight: Good governance isn’t bureaucracy — it’s protection. Every policy you record is one less penalty you face.
SEO Optimization and Educational Value
Primary Keywords: CRA Non-Profit Organization Audit, NPO CRA Compliance Canada, Mackisen CPA Montreal, CPA Firm Near You, Tax-Exempt Audit Defense.
Secondary Keywords: CRA T1044 filing, non-profit governance review, CRA s.149(1)(l), NPO status Canada, Revenu Québec NPO compliance.
Learning insight: Non-profits thrive on trust. CRA trusts proof, not promises — Mackisen CPA provides that proof in every audit.
How Mackisen CPA Supports NPOs
Mackisen CPA Montreal provides full-service audit and compliance support for non-profits, cooperatives, unions, and associations.
Our services include:
T1044 and TP-997.13 return filing.
CRA and ARQ audit defense.
Reserve and investment policy design.
Internal control system reviews.
Training for board members on fiduciary duties and compliance governance.
Learning insight: Non-profit status is a privilege, not a right. We help you keep that privilege by showing CRA your mission matches your money.
Why Mackisen CPA Montreal
With over 35 years of combined experience in taxation, audit, and governance compliance, Mackisen CPA Montreal bridges the gap between accounting and law for Canada’s non-profit sector.
We translate complex tax legislation into simple operational safeguards — from constitution wording to audit-proof documentation. Our bilingual experts ensure your NPO remains compliant, credible, and respected by funders, regulators, and donors.
Learning insight: CRA expects transparency — Mackisen CPA turns that expectation into your advantage.
