Industry Committee on March 31st, 2009

[The Chair, Conservative, Michael Chong]

Good afternoon everyone. Pursuant to the Order of Reference of Thursday, February 12, 2009, we are studying Bill C-4, An Act respecting not-for-profit corporations and certain other corporations.

This afternoon, we will be hearing witnesses from the Canadian Institute of Chartered Accountants—Ms. Christiane Brizard, Mr. Thomas Warner and Ms. Elly Meister—and also from the United Way of Canada—Mr. Al Hatton and Ms. Eva Kmiecic.

Welcome to all of you.

We'll begin with some opening statements, first from the Canadian Institute of Chartered Accountants.

[Elly Meister, Director, Government Relations, Communications and External Relations, Canadian Institute of Chartered Accountants]

Thank you, Mr. Chair and honourable members.

The Canadian Institute of Chartered Accountants--together with the provincial, territorial, and Bermuda institutes, and the ordre of chartered accountants--represents a membership of approximately 74,000 CAs and 10,000 students in Canada and Bermuda.

The CICA conducts research into current business issues and supports the setting of accounting, auditing, and assurance standards for business, not-for-profit organizations, and government. It issues guidance on control and governance, publishes professional literature, develops continuing education programs, and represents the CA profession nationally and internationally.

The role of the provincial and territorial institutes of chartered accountants, by contrast, is to serve as the qualifying and regulatory bodies of all those who have earned the CA designation and go on to work in positions in public practice, in corporate environments, in the not-for-profit sector, and in the academic world.

We appreciate the opportunity to present the views of Canada's chartered accountants to the committee today. Our commentary will focus on the provisions of Bill C-4 that deal with the requirements to be a public accountant of a not-for-profit corporation.

With me today is Tom Warner, of the Institute of Chartered Accountants of Ontario; and Christiane Brizard, of the Ordre des comptables agréés du Québec. They will provide you with an overview of our submission.

Thank you.

Tom.

[Thomas Warner, Vice-President and Registrar, Institute of Chartered Accountants of Ontario, Canadian Institute of Chartered Accountants]

Thank you.

As Elly has noted, our comments today focus on clause 181 of Bill C-4, which deals with the qualifications of a public accountant. By way of background, in addition to requiring that a public accountant be a member in good standing of an institute or association of accountants incorporated by or under an act of the legislature of a province, clause 181 requires that a public accountant “meet any qualifications under an enactment of a province for performing any duty that the person is required to perform under sections 189 to 192”. That is for audit or review engagements undertaken for federal not-for-profit corporations.

Paragraph 181(1)(b) ensures that the provisions of federal legislation governing not-for-profit corporations are consistent with and do not override the provisions of provincial public accounting legislation. It also ensures that the standards for providing public accounting to federal not-for-profit corporations are not lower or different from those for provincially incorporated not-for-profits.

The committee has heard the recommendations of the Certified General Accountants Association of Canada, CGA-Canada, regarding the replacement of the term “public accountant” with “auditor” in the preamble to subclause 181(1) and the removal of paragraph 181(1)(b).

We believe the proposed amendments, if adopted, would not be in the public interest. In the case of Ontario and a number of other provinces, they would create standards for audit and review engagements performed for federally incorporated not-for-profit corporations that are significantly lower than those that must be met in order to be licensed to provide public accounting services to provincially incorporated not-for-profit corporations.

Public accounting services are regulated by legislation in Canada's largest provinces, such as Ontario and Quebec, to include audit engagements, review engagements, and compilation services. In part, this is out of the recognition that these two provinces are home to the great majority of the country's capital markets and therefore require the most stringent regulation of financial services providers.

Under Ontario's Public Accounting Act, each of the three designated accounting bodies in the province may be granted authorization to license and govern their members in the practice of public accounting, provided they meet the standards of qualification and regulation adopted by the Public Accountants Council, the PAC. The PAC is an independent, government-appointed, standards-setting and oversight body for public accounting, comprised of a majority of public representatives.

The Ontario legislation requires the standards set by the PAC adopt, maintain, and increase as required standards for public accounting licensing that are internationally recognized and respected.

Let me spend a moment on the meaning of the term “internationally recognized standards” as it relates to CA qualifications. By these, we mean those standards that have been determined to be of equivalent rigour to those of the leading accounting bodies of Canada's major trading partners, for example, the CPA designation in the United States. It means we're not talking of CA standards per se, but rather a set of standards that are internationally driven, consistent with our obligations to our major trading partners.

While the PAC has granted the Institute of Chartered Accountants of Ontario authorization to license members and govern the practice of public accounting by its members, the Certified General Accountants Association of Ontario and the Society of Management Accountants of Ontario currently are not authorized to do so. Indeed the qualification requirements and regulatory programs of the Certified General Accountants Association of Ontario were recently assessed by the PAC as inadequate for this purpose.

We believe this strongly shows there is a significant public policy issue regarding the amendments that CGA-Canada has proposed to clause 181. They would allow individuals who do not possess the necessary competencies under provincial enactments to be public accountants for federally incorporated not-for-profits. It also serves to illustrate that the removal of paragraph 181(1)(b) from Bill C-4 would do nothing to establish uniform or consistent standards for qualification of public accountants between federal and provincial jurisdictions.

Legislation specifically governing licensing or certification of public accountants has been adopted in some jurisdictions but not in others. The nature of public accounting services that are regulated varies among the provinces and territories. In our written submission to the committee, we have provided an overview of the disparities in these public accounting standards.

I'll now ask my colleague, Christiane Brizard, to provide you with an overview of how public accounting services are regulated in Quebec.

[Christiane Brizard, Lawyer, Vice-President, Legal Affairs and Records, Ordre des comptables agréés du Québec, Canadian Institute of Chartered Accountants]

In Quebec, the Professional Code establishes a single framework applicable to all professional bodies. Beyond this, specific legislation has been adopted for bodies whose members enjoy an exclusive field of practice. For example, under the Professional Code and Chartered Accountants Act, chartered accountants are licenceted to practice as public accountants and to use the title “auditor”.

Recently, with the adoption of Bill 46, CGAs and CMAs were granted the right to practice public accounting under certain conditions related to the necessary standards of qualification and regulation—conditions that they have not yet met. CGA and CMA accounting bodies may grant their members a licence to practice as public accountants and to use the title “auditor” if their members have met the standards adopted by that accounting body by regulation. Only these future holders of specific licences may practice as public accountants.

Bill 46 specifically requires that the CGA and CMA accounting bodies, in making the first regulations applicable to their members regarding the practice of public accounting, use standards that are analogous to the recognized standards currently required to practice public accounting in Quebec. These recognized standards are those applied by the Ordre des comptables agrées du Québec and by the ICAO in Ontario. Deleting paragraph 181(1)(b), requiring public accountants to meet provincial requirements for performance of their duties, would have the effect of allowing CGAs or CMAs not qualified to perform public accounting to do so.

I would like to address another issue outlined in our submission. It has been argued that paragraph l8l(l)(b) could impede the mobility of accounting professionals, which is otherwise provided for under Chapter 7 of the Agreement on Internal Trade. Under Chapter 7, which takes effect on April 1, 2009, provinces and territories maintain the authority to establish the standards they deem necessary for their jurisdiction and also retain the authority to determine those professional areas that require exemptions to full mobility provisions, on the grounds of consumer protection, among other considerations.

There is a significant concern that a "public accountant" from another jurisdiction could obtain automatic certification in public accountancy in either Ontario or Quebec under the revised Chapter 7 provisions of the AIT. As such, a legitimate objective exemption for automatic certification in public accounting is being actively sought in Quebec, and by the Institute of Chartered Accountants of Ontario and the independent provincial Public Accountants Council in Ontario before the entry into force of revised Chapter 7 provisions.

As already noted, the concern for consumer protection would be further compounded should provisions regarding mandatory qualifications set out in subclause181(1) be deleted from Bill C-4.

I would also like to speak briefly about the independence provisions of Bill C-4, which are contained in clause 181. It has been suggested that they be amended to simply require that professional accountants comply with independence standards established by their regulatory bodies, that is the CA, CGA or CMA. However, we note that there are significant differences among the independence standards established by each body. For this reason, we support keeping the minimum standards that are established under Bill C-4.

This would avoid any confusion in determining the applicable independence standard and would prevent potential disputes. We note that these provisions, contained in Bill C-4, mirror those that are found under the Canada Business Corporations Act.

I will now give the floor to my colleague, Thomas Warner, who will conclude our presentation.

[Thomas Warner]

We believe that our submission clearly demonstrates the importance of retaining clause 181 as contained in Bill C-4. If paragraph 181(1)(b) were deleted, the right to perform audits or reviews of federally incorporated not-for-profit corporations would be given to some practitioners who, under the legislated public accounting regimes in Quebec and Ontario, do not possess the competencies necessary to do so. That this would occur, whether or not their accounting bodies have qualification programs that provide their members with the competencies needed to perform audits and reviews, runs counter to the public interest at a time when stringent regulation of financial services practitioners is paramount.

We submit that Bill C-4 should not be amended to create a conflict with provincial legislation. We urge the committee to ensure that the public interest is protected and that Bill C-4 is consistent with and does not override the provisions of applicable provincial legislation by retaining the current term “public accountant” in the preamble to clause 181 and by retaining paragraph 181(1)(b).

We appreciate the opportunity to address the committee and would be pleased to take any of your questions. Thank you.

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Warner

Mr. Hatton, you have the floor.

You have the floor.

[Al Hatton, President and Chief Exective Officer, United Way of Canada]

Good afternoon, bonjour, everyone.

Mr. Chair, members of the committee, and committee staff, thank you so much for inviting us to present to you this afternoon. We're pleased to discuss the bill and talk a little bit about United Way.

I'd like to begin actually by talking about United Way, and then I'll come to our position, in more detail, related to the bill. No doubt all of you know about United Way. We actually have a very special relationship with the federal government. We work with every department for several months of the year. This year we raised $36 million in partnership with the federal government right across the country and $20 million in the national capital region. We have long experience of working with government in that regard.

We are also the largest movement in the country that fundraises in the voluntary sector, supporting health and social services. Each year, we raise more than $480 million. We've raised almost as much this year as we did last year, which is pretty extraordinary because the economic turmoil hit us as it did all of society in the last quarter and the beginning this fiscal year. We know we have a challenge ahead, but at least this year we can maintain many of the commitments we had over the past year.

I also want to talk to you a bit about the transformation we're going through as an organization. Our fundamental purpose is to change living conditions and tackle the toughest issues in communities. It's ultimately about improving the life of Canadians; it's not simply about fundraising.

Our 119 local United Ways across the country have independent boards of directors. They're incorporated separately across the country. They represent diverse citizens who come from a variety of sectors. They work with us to identify community problems and address them on an ongoing and daily basis.

We have approximately 900 staff, and we engage 200,000 volunteers each year across our country, both in fundraising and in working on allocations and how you deploy those resources in the best possible way in local communities.

Our role at national—we're based here in Ottawa—is to provide directions, be strategic, think long term, and help United Ways learn and share together. That's our fundamental purpose.

In 2003, we actually worked very hard to come up with a new mission to move away from simply being an umbrella fundraising organization and really start to understand more fundamentally how you change community conditions. How do you have an impact in the community? That's far more challenging.

For us, fundraising is one of our strategies to reach the public and ignite volunteers and engage people, but the other is to create lasting change in communities. We're really about getting at root causes and thinking long term. That's a fundamental change for us. In the past, for instance, funding a food bank takes resources and is a challenge. Try alleviating and reducing poverty. It's much more challenging.

We're doing this through research, through public policy, through new partnerships and collaborations, and engaging volunteers and citizens in a far more meaningful way. This is going on with United Ways all across the country.

Now I want to come to Bill C-4. Actually, we welcome this legislative initiative and congratulate the government on this act, because we feel it's actually long overdue and will help organizations maintain the credibility and the public trust that is so important for organizations, both ours and ones we fund across the country.

We also support the principle of a new stand-alone legislative framework, which will help organizations and guide them in some areas where perhaps they haven't had the resources in the past to really pay attention. Everyone wants to be transparent and everyone wants to be accountable in our sector, because in fact that is a fundamental precept of our sector—trust. If we don't have trust with citizens, we obviously will not be able to engage them and work with them over time.

We also participated in earlier rounds of consultations in other forms of this bill, so we're happy to see it at this stage. Hopefully it will move through the House in the coming weeks.

Over the last couple of years our board of directors has actually been working in anticipation of this legislation. We took this as a guide and we began to change our policies and our procedures. Whether this actually became law or not, we know it's best practice, and for us that was an important thing, to update our guidelines and requirements to ensure we would be ready and were very credible in terms of the public.

It's true that the bill is complex, and we appreciate the government's role in trying to simplify and clarify how organizations can actually utilize this and be stronger. We do appreciate that this is long overdue and we support the fundamental principles underlying the bill. However, at the same time, we regret a bit that in this recent iteration of the bill there wasn't more extensive consultation with the sector, because some new things have been introduced, and it would have been helpful to have had the time to weigh in on that. On the other hand, we have to keep moving, and we appreciate that it's important to get some of it, or all of it, through the House so that it can start being used by organizations over time.

We do have one major concern. We believe this will have a significant impact on smaller organizations. In our case, we have a number of United Ways. We are very representative of the voluntary sector. In the city of Toronto, for instance, our United Way raises $107 million each year, including this last year, and we have small, remote United Ways that raise $200,000, so we are a very good reflection of the sector.

Our concern is with small and remote United Ways and those small organizations that we also fund. For us, some of the burden of the regulations will potentially have a negative impact on small organizations. There's a fear among some of their members about whether they can continue to attract quality volunteers, and that is a concern for us.

Volunteers get involved with our organization, and many other organizations, because they want to give back to the community. They want to care. They want to make a contribution. They're not interested in overhead and they're not interested in bureaucracy. They live through enough of that in their daily lives. Really, they come out and they want to help fellow citizens. For us, that's an important thing to keep in mind.

We would ask the committee to perhaps consider less onerous requirements in some of the regulations so as to make things simpler, especially in the areas that relate to legal guidelines. This is not about undermining transparency and accountability, but it is about making it simpler.

We also appreciate and understand that the committee, or the government, is going to be holding some workshops across the country after the implementation or the acceptance of this bill. We commend you for that. It's very important to get out and explain to organizations what's embedded in this, because from our experience, the smaller organizations just do not have the capacity to stretch and do more in terms of accountability.

We also have a concern around the rights of members. Obviously it's important to share information with members, and to use modern data management and up-to-date systems to the best of our ability in terms of sharing information, but many small United Ways and local organizations don't have that capacity, so it would be really important for this to be communicated well. Again, if there's any way the regulations around members could be simplified, it would be great.

There's also a tone in the bill that can be taken in one of two ways. From one perspective, it can simply be that you are assisting organizations to be more transparent and accountable. There's another side to that, though, that could start to cast doubt in the minds of the public about huge insufficiencies and incapability and incompetence in voluntary organizations. That has not been our experience crisscrossing this country. What people are able to do with minimal resources is incredible, so I think it is important for the committee to underline this point in casting the introduction of this measure.

With regard to the remedies section, we see remedies across a number of the categories in some of the different pieces of the legislation. We would recommend that they be perhaps centralized in one place. Then organizations could quickly go to that place and be very clear about the areas in which they are accountable. We believe that's also cast around a feeling of trust. In all the polls we do--in the private sector, in the public sector, in our sector--we see that trust levels end up being the top consideration. Yes, we can always improve, but again, we want to give a healthy impression to the community and to the public in general.

We also know that Imagine Canada recently presented before the committee. I think they made some very cogent arguments around the voting rights of members. I don't want to reiterate those. We would support that. They also talked about reducing red tape, and that's something we've been working on with Treasury Board and the current government to ensure that the organizations can be effective but not overwhelmed.

I'm going to leave it at that. We're open to a conversation and a discussion in responding to your questions.

Again, thank you so much for inviting us, and we look forward to chatting with you about this.

[The Chair, Conservative, Michael Chong]

Thank you for your testimony, Mr. Hatton.

We will have Mr. Garneau begin the question period.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Thank you.

First of all, I'd like to thank all of the witnesses for coming today to testify, and I'd also beg your indulgence. My question is to the Canadian Institute of Chartered Accountants, the Institute of Chartered Accountants of Ontario, and l'ordre des comptables agréés du Québec.

In clause 181, this bill talks about public accountants or auditors. Irrespective of whether or not paragraph 181(1)(b) is in the bill, ultimately my concern is that Bill C-4 be a good piece of legislation. There's no question that one of the two groups, either you or the Certified General Accountants' Association, is not going to be satisfied with the bill's final form.

This, of course, is a piece of legislation that deals with a matter of great importance. Forgive me thinking at one point that there may be a little bit of a turf battle going on here—at least that's my perception as a non-expert. So if you'll indulge me, I would like to quote from the other group and ask you what your opinion is of their statement. Of course, they want to remove paragraph 181(1)(b), and one of their arguments is that the provision is redundant and that:

...a professional accountant who provides public accounting services must comply with the requirements of his association or institute whether these requirements are matters of law or practice. The requisite level of oversight is appropriately captured in the first requirement.

What is your comment about that assertion?

[Thomas Warner]

I guess I'll respond to that.

Really, the issue is not about which accounting designation gets to do what services. It really is a question of standards. The legislation governing public accounting in Ontario and Quebec says that if you're a member of any of the three accounting bodies, you can be licensed and do these services if your accounting body meets the standards set by the legislation.

The Public Accountants Council for the Province of Ontario has set those standards for that province, including qualifications—that is, education, examination, and experience requirements. But they also include, on the regulatory side, rules of professional conduct, disciplinary processes, practice inspection, etc. Those are all standards, and the Public Accountants Council has said they will assess each of the three accounting bodies in terms of whether they meet those standards, and if they do, the members of those bodies will be able to provide the public with accounting services, because they will be able to be licensed.

So, really, our response is that this is about standards. The legislation provides for members of each of the three accounting bodies to provide those services, if they meet the standard set by the independent government-appointed oversight body in Ontario.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Did you wish to add something?

[Christiane Brizard]

I agree completely with what my colleague just said and I would add that, in general, in order to practice public accounting, one must hold a specific permit for public accounting in addition to being a member of the Ordre des CGA and the Ordre des CMA.

Therefore, you can be a member of an association without necessarily holding a public accounting permit. Thus, you would not have the right to perform public accounting, that is, to audit financial statements. You must hold a public accounting permit to do so.

That is what paragraph 181(1)(b) sets out. The conditions are, first, membership in an association and, second, a permit to practice public accounting.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Thank you.

I have one other argument of theirs that they bring up, and I would like to hear your opinion of it. Again, the Certified General Accountants' Association says that the provision in paragraph 181(1)(b) is inconsistent with current federal legislation, including the approach taken by the Bank Act, the Canada Elections Act, and the Canada Mortgage and Housing Corporation Act.

I guess they're basically arguing that this has not been an issue with some other very important government acts.

[Thomas Warner]

I'll respond to that as well.

Our concern is that those federal acts are inconsistent with the applicable provincial legislation, in terms of who may provide those accounting services, that is, the audit and review engagements within those sectors. Our concern is that within a province or a territory, it is not in the public interest to have an inconsistency in the standards of who is able to do audit and review engagements for federally incorporated not-for-profits, as opposed to those who would have to meet a different or higher standard to do the equivalent public accounting services for provincially established not-for-profits.

We're saying it is important that there be consistency between the federal and provincial legislation within each province for services provided to not-for-profits established or located in those jurisdictions, and that the federal legislation cited at the moment is inconsistent with provincial legislation. Our view is that Bill C-4 shouldn't continue the inconsistency, but should be consistent with provincial legislation.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

I had a feeling you were going to say that, Mr. Warner.

Madame.

[Christiane Brizard]

I believe that the CGA commented more on the use of the term “public accountant” than on the term “auditor”. From experience, I can tell you that when you do not necessarily use the same terms found in provincial legislation, it requires that you go to court to obtain an interpretation of what is meant by the term “auditor” as opposed to “professional accountant” or “ public accountant”. That has been our experience. I have personally had that experience with respect to the law and Elections Canada.

Therefore, by using terms applied by the provinces—the constitution gives jurisdiction for professional legislation to the provinces—, the risk of interpretation, or at least of litigation, is lower.

[The Chair, Conservative, Michael Chong]

Thank you, Ms. Brizard.

Mr. Bouchard.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Thank you, Chair. Thank you for being here this afternoon.

My question is for the certified accountants. The CGA recommends replacing the term “public accountant”—you just mentioned this but I would like to hear it again—with the term “auditor”.

Could you explain why you use the term “public accountant” rather than “auditor”?

[Christiane Brizard]

I am going to complicate this even more. The Quebec bill that was just adopted, Bill 46, does not use the term “vérificateur” nor the term “expert-comptable”, but just “auditeur”. If you would like to know why, I will explain it to you.

I was a member of the working groups that negotiated the tabling of Bill 46. This bill governs public accounting. That is the expression used, “public accounting”, and it refers specifically to audit and review engagements.

However, when the time came to choose the terms to identify those having the right to provide this type of service, we asked ourselves if we wished to use the term “comptable public”, for the English “public accountant”, and the three professional associations decided that this French term did not have a meaning in the French language. In general, the public does not know what a public accountant does.

However, in the other provinces, the term “public accountant” is very clear, and indicates an individual who has the right to perform public accounting, but not in Quebec. Thus, the term “expert-comptable” would be used. In the end, the reason why “expert-comptable” was not chosen was because, especially in the case of the CGA and CMA, the accountants must have a special permit to perform public accounting. This would have created two categories in their association: public accountants and accountants. They could not allow this. Therefore, we looked for another term that everyone could agree on. We settled on the term “auditeur” because we wanted to somewhat follow what is happening in France.

However—and I imagine my colleague can say this more authoritatively—, in the nine other provinces, the term “public accountant” is used. In looking at how the legislation has been translated, we note that in French, rightly or wrongly, it is rendered by the term “expert-comptable”. Thus, where the term “public accountant” is in the original version of a legislative text, we find, in the French, the term “expert-comptable”.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Therefore, in Quebec, “expert-comptable”—

[Christiane Brizard]

In Quebec, we use the term “auditeur”, but the nine other provinces use “public accountant”, therefore “expert-comptable”.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

I think you are referring to auditing of the books as opposed to accounting, which is carried out on a daily basis.

[Christiane Brizard]

No, I am referring to “vérification” or “audit”, if we again wish to use the term used in France. In fact, it is known as an audit and review engagement, as per clauses 182 and so forth of Bill C-4.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Did your two groups work together to find the appropriate term?

[Christiane Brizard]

Yes, that is what I was saying. The three associations and the Office des professions reached a consensus. In Quebec, we use the term “auditeur”.