Industry Committee on Feb. 7th, 2008

[Paule Brunelle, Bloc, Trois-Rivières, QC]

Good morning. Thank you all for being here.

Mr. Rutsey, the provincial governments do need gaming revenue to pay for a lot of...

[Bill Rutsey]

I'm sorry, the translation is not coming through.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

Mr. Chair, I am going to ask Ms. Presseault a question while we are waiting.

Good morning, Ms. Presseault. You talked about competition in the market. I would like you to explain something for me. You are a member of the organization of CGAs. In Quebec, there were chartered accountants. Are these still two separate corporations? I think they are.

Previously, CGAs could not do certain things, such as audits of non-profit organizations. Now, I think they can do that.

Is that what you were referring to when you talked about competition in the market, that each of these two associations has its own standards?

[Carole Presseault]

Thank you for your question.

The legislation does recognize three professional bodies for accountants in Canada. In Quebec in particular there are three accounting orders, one of which is CGAs. Those orders are independent of one another and have different fields of practice. In Quebec and Ontario, until very recently, public accountancy was limited to CAs. In response to complaints we filed on behalf of our members under the interprovincial trade agreement, the legislation was amended.

I mentioned in my remarks that the problem is never that there is no regulation. There is a lot of regulation and there is a lot of mobility between the accountancy professional bodies and CGAs. The problem was that in Quebec that mobility still did not exist. So CGAs from Alberta had to leave their clients at the Quebec border in order to practise.

The National Assembly passed a bill in December. When it is completely operational, it should allow CGAs in Quebec to practise the full range of their accounting expertise: public accounting. However, as long as a CGA from Ontario or New Brunswick or somewhere else is entitled to practice public accountancy in Quebec, we will still have the problem of labour force mobility. We are hoping that this will resolve itself.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

Your role is important. There are a lot of financial scandals, including very big ones in Quebec. Is it your impression that the public is adequately protected? Should the legislation be amended to protect the public? There are realtors and so on, but you have to put your signature on financial statements or balance sheets. Certainly people have to feel they are protected, as investors, and that the public is protected. Are there amendments that should be made?

[Carole Presseault]

Several initiatives have in fact been implemented since the events of 2000-2001, that is, since the Enron scandal and others in Quebec. At present, the existing processes are working well, even if they don't work entirely as might be hoped. However, one of the major standards that the profession has adopted is that it is independent, which is a national standard. The problem isn't a lack of standards. There are high standards that are recognized at the international level. Those standards come with a disciplinary process and professional oversight, which should be satisfactory.

Organizations such as the Canadian Public Accountability Board have been established to exercise oversight. The national bodies are reasonably comparable with the international bodies. What remains to be seen, in years to come, is whether those bodies are going to live up to their mandate.

We are having some problems in relation to the processes of the Canadian Public Accountability Board. We launched court challenges because we believe that the accounting profession exercises a little too much control over those processes. Time will tell whether it will work. A standard of independence has been adopted and the Canadian Public Accountability Board has been created. Investors should have assurance that the necessary mechanisms are in place.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

Thank you.

Do I still have time for Mr. Rutsey?

[The Chair, Conservative, James Rajotte]

Yes, you have three minutes.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

Mr. Rutsey, you say that gambling is gambling. But in my opinion, what gambling is, is dreaming. It seems that the dream is particularly strong when you are poor. We know that gambling has economic benefits. That's fine. But have you assessed the social costs of gambling, in terms of suicide, poverty and people receiving social assistance, that the government has to cover? The rate of suicides attributable to gambling is rising sharply. Have you assessed the social costs of gambling?

[Bill Rutsey]

The answer to that question is no. No one has, because there's no model designed to effectively measure that.

Having said that, the interprovincial lottery organization has just put out an RFP to develop a modality for that.

I would challenge your statements that there are increased numbers of people with problems. When you measure it in Canada and around the world, the numbers don't change. I think we're becoming much more aware of the issues around gaming, just as society has become much more aware of the issues around a whole host of activities. Gaming is not a problem for 98%, or more, of the population. It's that small percentage you have to focus the research on, to find out how you can help. It's a question of someone having a problem with their on/off switch. Whether it's gaming, shopping, drinking, or anything, there are a certain number of people in society who do have problems around control.

[The Chair, Conservative, James Rajotte]

Merci, madame Brunelle.

Mr. Carrie, please.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you very much, Mr. Chair. I will be sharing with my colleague from Chatham.

I did want to talk about internal trade barriers.

Madame Presseault, you mentioned these barriers and you quoted the figure of $14 billion. I was shocked to hear the cost of that. I was wondering if you could explain for the committee what you see as the obstacles for lowering these interprovincial trade barriers. And also, regarding international trade barriers, how are we doing, relatively speaking, internally versus externally?

[Carole Presseault]

On the second part of your question, I have a very simple answer. It's not an issue we've looked at in terms of barriers, but I can tell you that the capacity of the services sector to improve Canada's competitiveness internationally exists. I think the committee has heard other witnesses talk to that issue. There's an incredible untapped potential in that area.

In terms of accounting specifically, for us, we are expanding internationally, as I mentioned. We just signed an agreement with a Caribbean CGA association where, if you want, you can export CGA know-how and knowledge to help the Caribbean single market become a reality.

We've signed mutual recognition agreements to allow our members to export their services. However, there are some barriers I've talked about in terms of being blocked out of markets, because there are three accounting bodies in Canada.

In Canada the number I quoted--the $3 billion--comes from the Department of Finance, and the second number comes from the Premier of Alberta. So there is a discrepancy with this number, or there is not agreement on the number but there is agreement that barriers exist.

The barriers relate a lot to licensing. Our area has been professional services. We've looked at our specific area, and as I mentioned, still to this day, the legislation is in place but it's not fully implemented. Certified general accountants in Alberta or in Manitoba cannot practise their trade in Ontario or Quebec--as we know, two of Canada's largest capital markets. So those are barriers.

Many organizations can talk to you about their specific issues, so I don't want to talk about that. I want to talk about what's needed in terms of what happens when there are barriers, because even if we reduce all barriers, people have a tendency, perhaps, to erect new barriers. But what has failed us is really the Agreement on Internal Trade. We do not have an effective interprovincial trade agreement that allows organizations, groups, and individuals to force governments to break down their barriers.

Our case in point is this. We launched two trade challenges against two provinces in Canada. It took almost five years to resolve, millions of dollars and millions of energy, after having a positive decision in our favour. It doesn't make sense that we have an interprovincial trade agreement that is unenforceable, that's costly, that's cumbersome, bureaucratic, and I can keep going on the topic for a long, long time.

CGA Canada, with a number of other national professional organizations, have been strategizing on what it will take. We're very pleased to see in the Speech from the Throne that this government has committed to improving internal trade and has in fact indicated that it wishes to use its trade and commerce powers to do something about it.

And that something, as we have put forward, would be to legislate a set of open trade principles, where basically everything is on the table unless you take it off, and secondly, to create some kind of trade tribunal so that you have, at the end of a dispute resolution mechanism, some adjudication process that enables disputants to get a resolution to it and have some kind of monetary penalty attached to that, which we don't have currently.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you.

[The Chair, Conservative, James Rajotte]

Mr. Van Kesteren.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

May I call you Francesca? I can't make out your last name.

CMHC is the other organization that allows for mortgage insurance. I was told that a person can purchase that insurance, and then if they default, the bank can sell the home and then go after them to sue them for the amount owing. Is that correct?

[Francesca Iacurto]

I will let my colleague Winsor, who just recently arrived, answer that.

[Winsor Macdonell, Vice-President and General Counsel, Genworth Financial Canada]

I'm sorry for my lateness.

That is correct. It is default insurance, so it protects the lender against the loss.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

So what's the sense of having insurance?

[Winsor Macdonell]

The insurance is to allow borrowers to get into a home with a low down payment because the risk associated with their default is so high it transfers that risk from the lender to the mortgage insurer. And it allows the lender to give that borrower the lowest interest rate possible for that mortgage without taking in their default risk associated with it. So the borrower gets a much lower-cost mortgage. It's a very affordable way of getting somebody into a home.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

I have a question for Mr. Rutsey.

Mr. Rutsey, I'm an auto dealer. I'm listening to your statistics—and that may be true—but I have to tell you that in my riding, four dealers have lost their dealerships. One of them is dead.

The pattern we saw—this is something we've witnessed—is that they kind of get snagged into, you know, being picked up by limousines, etc. It might be an American thing, I don't know. But I'm curious about that. Of course, when you talk about 0.5% or 1.5% of the population, there were a number of people in those dealerships who obviously lost their jobs too.

I'm really concerned about that. I understand that there are people who just like to enjoy themselves and go out, but I'm really concerned about the dark element of the industry. I wonder if you would comment on that.

[Bill Rutsey]

I think everyone is concerned about that. Nobody's business plan is premised upon ruining someone else's life.

I can only speak to the numbers. Anecdotally, we all know people who have problems with a host of issues, whether it be drinking, gambling, or whatever. It isn't a problem for the overwhelming majority of people.

For the people who do have a problem, there are all kinds of programs available.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Excuse me, sir, I'm not talking about the ones.... I understand that. But are you addressing that? Do you see a pattern there?

[Bill Rutsey]

Absolutely.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

I'm not talking about the fact that there are people who have problems; I'm talking about the fact that there are people whose lives are totally wiped out--and almost targeted. I'm wondering if you're addressing that.