Industry Committee on March 12th, 2009

[Carole Presseault]

As I said, the system provides lots of other measures, for instance, the Income Tax Act, money-laundering measures, monitoring of bank deposits, accounting professionals' requirement to declare money received, and so on. Everything's possible.

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

Under the Act, for amounts less than $25,000, there is no audit. No one audits the accounts. No one has to do anything.

[Carole Presseault]

The Act provides measures. I'm far from being an expert in suspicious operations, but I believe that various bank deposits or any other such operation would trigger an alarm, thus preventing corporations from acting in such a way. They might do it once, but I'm not sure it would work in the long term. I don't think it's a very good tactic.

[The Chair, Conservative, Michael Chong]

Thank you, Ms. Presseault.

I think Mr. Gray wanted to add something before we go to Mr. Wallace.

[Wayne Gray]

The threshold for audit exemption for a soliciting corporation is actually $50,000. That's the threshold for not having a public accountant or an audit. To have an audit, it is $250,000. That's just a small thing.

More fundamentally, even if an audit is done for the corporation, it doesn't mean that the money hasn't been taken out or hasn't been laundered. The auditor may pick it up sometime later, but it's not necessarily a device that.... Audits are not to prevent a fraud; they might report a fraud later on.

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Gray.

Please go ahead, Mr. Wallace. I'm sorry for overlooking you before.

[Mike Wallace, Conservative, Burlington, ON]

Your apology is accepted, Mr. Chairman.

I want to keep my eye on Mr. Vincent, because all his questions are about money laundering and not-for-share profit. I'm keeping my eye on him.

[Voices]

Oh, oh!

[Mike Wallace, Conservative, Burlington, ON]

More seriously, Carole, I'm going to be perfectly blunt: if “public accountant” stays in there, which is the way the wording is now, does it prevent your members from being defined as doing the audit aspects in this bill?

[Carole Presseault]

No, it doesn't. It really has nothing to do with our members. It has to do with simplification and consistency in federal legislation.

[Mike Wallace, Conservative, Burlington, ON]

You're saying consistency because it's listed in other acts as “auditor”, not “public accountant”. Is that correct?

[Carole Presseault]

Yes, that's correct.

[Mike Wallace, Conservative, Burlington, ON]

Are there other government acts that have “public accountant” in them?

[Carole Presseault]

“Public accountant” and “public accounting” are defined in very many ways in provincial legislation, but the terms are not generally used in federal legislation that we've looked at.

[Mike Wallace, Conservative, Burlington, ON]

You're here really with what I would call a couple of simple changes; they may not be simple to you, but they're not huge changes that you're looking for. It's wording.

Your replacement for...to comply with the independent standards of the association or institute of accountants that has jurisdiction over them. So you're saying that if you're a CGA, your own CGA association has its own standards, code of ethics, code of practices, or whatever you want to call it, and that should be good enough to cover you off.

But you could still operate under this other wording. What's the downside of the other wording?

[Carole Presseault]

It's not the role of federal legislation to set professional ethical standards. That's a role that's been assigned by provincial statute to provincial and territorial regulatory bodies and professional associations.

It's a good attempt to do it, and it's important to recognize that auditors have to be independent of the corporation, but you're putting criteria in there that are captured in a larger independence standard. The downside is that over time, those criteria may change. It will become more rigorous, and the legislation will be out of date. But if you refer it to the professional bodies, a professional body's responsibility is to ensure that it is current, and they're the people who are mandated to be doing that.

[Mike Wallace, Conservative, Burlington, ON]

That's a good argument. Thank you very much.

To our lawyer friends, did you say 37,000?

[Tamra Thomson]

Yes.

[Mike Wallace, Conservative, Burlington, ON]

Oh my; that's a big organization.

I appreciate your presentation today.

I have a couple of questions. One, I appreciate the summary of recommendations. That's part of the minutiae that you've sent to the bureaucracy to see if they're interested. Those 71 recommendations, I'm assuming, implement your broader pieces that are in the front. Is that correct?

[Wayne Gray]

Yes.

[Mike Wallace, Conservative, Burlington, ON]

I appreciate your saying that it simplifies things, but I'm assuming that I could give you any piece of legislation and the CBA could find 71 items they'd like to see change in any piece of legislation that exists.

Let's take the first section here. I don't see what the downside is of just leaving it in there. It won't really affect the vast majority of not-for-profit organizations, non-share capital groups. For the few that it does affect, why not have it in there? I don't understand.

I actually have started a charity for performing arts, for example, in the city of Burlington. It's an organization called PAB, and you can go to the website and check it out. We had a lawyer on our initial board, so he helped us out a little bit with that, but it's not like the director sat around and read the act on forming a new charity. We just did it. Isn't that really what's going to happen for the vast majority of charities in this country?

Then, (a), I don't understand why leaving some of this stuff in there for those it affects when it becomes an issue is.... I'll give you a chance to answer, and then I'm done asking questions. And (b), you showed us the act and you showed us the regulations. I'm of the view, sort of opposite to yours, that the act should maybe be simpler. Let's put things in regulations where the rubber hits the road on those things, because legislation is for the lawyers and regulations are for people who are actually operating the thing. Moving it from one piece of paper to another doesn't mean much to me. I would like to see less regulation in here, and put it out of legislation, sort of the opposite of what you proposed earlier.

I'll let you respond to both those issues.

[Wayne Gray]

On the securities transfer question—part 6—the question, if I can put it this way, is what's wrong with just leaving it there? Really, not a whole lot is wrong with just leaving it there. You could leave it there.

Functionally, it overlaps the provincial. Let me give you a couple of examples. One, functionally this is provincial terrain. I'm not saying constitutionally, but functionally, property transfers and security interests in property transfers are all dealt with at the provincial level. There is no federal personal property security act, for example. But this act, like the CBCA, provides for a mortgage or pledge of a security interest.

So it is overlapping and inconsistent. It's just not a good law to have such a system.

Will it affect a lot of non-for-profit corporations? No, it won't. It's just that, functionally, it's not the right thing to do. We're not saying you can't live without it.

On the other question, about the balance between the act and the regulations, the act for the most part has been modelled after the Canada Business Corporations Act. The Canada Business Corporations Act has a different balance. We're suggesting that the balance between the two acts be more consistent.

The things that are hard-wired into the CBCA should be hard-wired into the act for the not-for-profits. That way, when you get to amendments, the amendments can be made in the same way at the same time.

This way, there's a tendency for continental drift. There are changes made to the regulations of the not-for-profit act that won't be made to the CBCA. There will be inconsistencies between these two statutes where there shouldn't be.

So I think I could accept.... As long as both models are the same, that's fine.

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Gray.

Mr. Sweet and then Mr. Maloway.

[David Sweet, Conservative, Ancaster—Dundas—Flamborough—Westdale, ON]

Thank you very much, Mr. Chairman.

You commended the government on the drafting of this bill. I guess I should also commend you, because you obviously did a lot of very rigorous work. That large document of yours did not come about without a lot of blood, sweat, toil, and tears, I would imagine.

I want to go down the road, just briefly, of Mr. Maloway's questioning, but a little differently. I understand what it's like to be in a director's position and have liability on your shoulders. It's not comfortable, and I can understand why people may make a decision not to serve on a not-for-profit organization because of it.

However, I also know what it feels like when you're the person who has been wronged or damaged by a decision that has been made in an organization. Although there are compliance costs and liabilities in a not-for-profit organization, by virtue of its being not-for-profit—it doesn't serve its members but actually serves the public—there's also a huge public trust denoted in their actions. I have a concern about any liability for misfeasance being removed from directors.

I understand that your case is that for malfeasance it would still be there, but I think we already have in this act a due diligence framework, in proposed subsection 263(5). I'm wondering why you would want to put forward that they be held harmless, particularly because, if I were in the position of a director and there was something questionable, I would want to make sure that my defence was that it was a misfeasance and not a malfeasance.

[David Stevens]

It's a very good question. It's definitely a policy choice for a statute of this kind to make--whether the exculpation or immunity of directors should go as far as we're suggesting. Lots of people disagree on it, and there are two views.

The opposite view to this is that if you take the position of a director, then you should take on the responsibility, which means that if the outcomes aren't good, you should take on those outcomes.

The answer on the other side has to be that on balance we're dealing with a very diverse sector. We're dealing with religions organized in various different fashions, with member-oriented golf courses, with advocacy associations. If we look across the sector, there's a huge variety of purposes that are pursued under this statute. We're asking in general whether the liability regime should be immunity-oriented or simply indemnification and insurance. That's the policy question.

And that's the reality; I think your choice is between the two views.

On balance, six or seven of us who worked on this argued this question back and forth. That sentiment was expressed, and this view prevailed in the end, based on our experience with clients. In general, the client group we're dealing with wants a regime that is simpler to use, and is concerned about attracting directors to give volunteer time.