Ontario - Pro-Bono Auditing Exemption renewed to December 2008 - January 7, 2008

The Ontario Government has again extended the exemption for pro-bono assurance services in Ontario preformed by an unlicensed person to a new date, December 31, 2008.   This change was made by Regulation 572 to the 2004 Public Accounting Act (PAA) on December 31, 2007. The new regulation reads:   Limitation on public accounting services 4.  (1)  For the purposes of section 2 of the Act, the practice of public accounting does not include providing any of the services listed in that section, if they are provided without reward. O. Reg. 572/07, s. 1. (2)  This section is revoked on December 31, 2008. O. Reg. 572/07, s. 1.     This is an important matter to the vast number of not for profit organizations that have a volunteer act as an auditor and were being faced with having to retain a licensed public accountant after the original November 1, 2007 expiry date.   A permanent change in the legislation to clarify the issue is needed according to Gaelen Fisher, CMA, CGA who has followed this matter closely and lobbied for the extension. Prior legislation provided that only assurance services for a reward required a licensed person in Ontario.

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Pro-bono Audits End in Ontario on November 1, 2007

Incl. Regulation O. Reg. 526/06 – Dec 2006

By Gaelen Fisher, B.Comm., MBA, CMA, CGA

Windsor, Ontario

January 18, 2007

I went to the theatre on Saturday night with a friend. Afterwards we went to a coffee shop as is our usual practice and discussed current issues. When I told my friend how upset I was about a new regulation enacted in the last months of  2006 to the Ontario Public Accounting Act which failed to extend the exemption for pro-bono work to 2008, she baulked, “You have to stop worrying about this!” 

The next day she was at my home office asking me to provide a letter to Ontario Disability Supports Program to verify her income for the previous three months.

I said, “Remember that conversation we had last evening?” She said “Yes”.

“Well, such a document will be illegal on November 1, 2007.” To which she replied “Oh! I guess you do need to worry about this.”

So exactly - what is the problem?

In June of 2004, after 30 years of heated debate, an actual decline in the number of licensed accountants, and lobbying by two of the accounting bodies in Ontario – pro and con, the new Liberal Ontario Government passed a reform bill  - The 2004 Public Accounting Act (PAA). What the Government forgot in the legislation was the former statutory exemption for services provided by unlicensed accountants for free as a volunteer. The majority of these probono cases involve not-for-profit organizations (NPOs), clubs, charities and individuals in need of an income support program who have fallen on hard times. These are examples only.  Regulation 238/05 proclaimed on November 1^st, 2005 reconstituted the exemption for probono audit and review services until November 1, 2007. This is known as a sunset provision.

The purpose of the 2004 Public Accounting Act  was to allow reasonable access for all qualified CAs, CGAs and CMAs to the licensed field and to comply with the new Federal / Provincial internal trade agreement on the mobility of accountants within Canada. The license filed in Ontario is defined as the assurance function, audits and reviews. This objective has not be accomplished.

What has happened since 2004?

No CGA or CMA has been licensed in Ontario as the snail pace of sufficiency testing continues for the new qualifying “designated bodies”, the Society of Management Accountants of Ontario and the Association of Certified General Accountants of Ontario. The Society has not yet applied for sufficiency testing by the Public Accountants Council (PAC).

In addition, while the Statute requires that a majority of members on the new PAC be public appointees and not members of the designated bodies, i.e. not accountants, the Ontario Government has failed to replace all the former public appointees who resigned. At this date, the PAC is not properly constituted as provided by the Statute and O Reg 238/05. On November 1, 2006 the Government did replace two of the three who resigned in the spring of 2006. The Chair position is still unfilled.  There are now eight (8) designated accountants and eight (8) Government public appointees which contravenes the legislation as nine public appointees are required.

Today, only the Institute of Chartered Accountants of Ontario can issue new licenses.  Further, as of March 1, 2007 some 45 unaffiliated licensed accountants will loose their licenses if they fail to join either the CA Institute or CGA Association. As always there is a cost to this. The cost of membership is expensive. While this measure was planned at the inception of the 2004 legislation,  a licensee must be a member of one of the designated bodies also approved as a licensing body, the timing of this requirement is ill advised. Only the CA Institute has passed sufficiency testing as a licensing body. 

On the issue of auditors for NPOs,  many volunteer auditors accept their appointment in the spring of the year for a future date, i.e. a December 31, 2007 year end. For 2007 an unlicensed person will be barred from accepting an appointment as the exemption for pro-bono work expires November 1, 2007. Too bad, so sad!  One should be asking the question, who will pay for the audit now? That answer is contributors and funding agencies.

Who is the beneficiary of this? The licensed accountants in Ontario on November 2, 2007, as the same high CICA standard must be used in all probono work.

The PAA legislation needs to be amended to clarify the exempt status of pro-bono audits and reviews and this matter should not be left to the whims of the PAC and the government of the day. This exemption existed in the 1965 Public Accountancy Act and was there to recognize the public need for audits of small organizations which are required by corporate legislation in Canada.

Why is it that hair dressers have to be licensed but people that invest your life earnings / assets are unlicensed?

This matter is not even on the radar of the government(s) of the day. A significant number of financial planners in Canada providing investment advice to the public have taken only an employer’s one week course on their company’s proprietary investment products. Investment counsel is indeed unlicensed in Canada as are tax services that the public are exposed to every day. How is this in the public interest?

Commercial crime often goes unpunished.  Cashiers, bookkeepers and controllers that have defrauded banks, employers and their customers go from one employer to another and fail to have a criminal records because businesses can deduct the losses and not report the crime. Banks write up ATM losses as loans and write them off when they don’t collect.

Wish list for 2007!

To the Ontario Government: If sincere and will eventually allow reasonable access to the license for all qualified then please:

1.         appoint the chair to the Public Accountants Council of Ontario, a leader and not a lawyer, and

2.         amend the legislation appropriately for pro-bono work, and

3.         license “all” who deal with the public on tax and financial matters, and

4.         ensure that all official representatives of the designated bodies are experienced in public accounting as current public practitioners who have a vested interest in the rules of practice, not just token administrators listening to the proceedings,

these changes are needed in the public interest.

To Accountants: The conclusion must be that no unlicensed person can accept an engagement as an auditor or reviewer of financial statements in Ontario in 2007 if the report cannot be completed before October 31, 2007. The only way to get a license in Ontario is to do audits using the CICA standard. Current auditing experience is required to be licensed..

The structure of the 2004 Act is such that the licensed field will grow as exemptions expire. The regulations to the Act set out some exemptions and others are contained in the Act itself. Exemptions in the regulations will likely change and expire over time.