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Annual Report British Columbia’s Chartered Professional Accountants2016/2017

Fiscal 2016-2017

On the cover: phototechno/Thinkstock

2016/2017 CPABC Annual Report 1

Table of Contents

Message from CPABC Chair and Past President & CEO ........................................ 2

Management’s Discussion and Analysis .................................................................... 5

CPAs in British Columbia - The Membership at a Glance

Key Accomplishments in BC Public Trust and Ethics Continuing Professional Development (CPD) Regulation of Public Practice Professional Conduct Education and Qualification CPA Professional Education Program (PEP) CPA Advanced Certificate in Accounting and Finance (ACAF) Preparatory Courses (Formerly the CPA Prerequisite Education Program (CPA PREP)) Growth and Recruitment Brand and Reputation Member Engagement Professional Development Member Support and Engagement

Financial Performance

The Environment in which CPABC operates ...........................................................16

Strategic Risks and Risk Management

Financial Risks and Risk Management

Capability to Deliver Results

Key Performance Drivers

Outlook for 2017/18 .......................................................................................................21

Governance and Leadership ...................................................................................... 22

Financial Statements ...................................................................................................24

2 2016/2017 CPABC Annual Report

Message from CPABC Chair and Past President & CEOBy Dave Hallinan, FCPA, FCMA and Richard Rees, FCPA, FCA

Our organization ends this fiscal year on solid footing. Over the last few years we have been focused on managing through the various initiatives and activities associated with unification of the profession.

Through this transition we have achieved a great deal while appropriately managing resources, both human and financial, and have fulfilled our mandate for change. New processes were developed and implemented and economies of scale were realized. Looking back on our major accomplishments from last year, our four primary areas of focus were well served.

Most importantly, CPABC took a proactive approach to protecting the public interest and initiated legal proceedings for an injunction to prohibit two individuals from using the designation “Professional Business Accountant” or “PBA.” An injunction was awarded through appeal. However, an application has been made to the Supreme Court of Canada to appeal this decision. CPABC also successfully implemented different categories of public practice licenses and a common practice review process.

The profession continued to attract qualified students, and the CPA Western School of Business enjoyed another year of strong growth. Transition and implementation issues continue to be worked on by the school, the western provinces, and CPA Canada, with a focus on ensuring the programs are accessible and continue to meet the needs of employers and students. The Advanced Certificate in Accounting and Finance continues to grow and will supply employers with technically adept, mid-tier accountants.

CPABC’s branding efforts continued to have a positive impact, as unaided awareness with managers, business owners, professionals, and entrepreneurs grew. The national campaign featured a new television commercial, and provincial efforts focused on the message of CPAs ability to manage change in a turbulent world.

Lastly, the services we offered our members continued to improve and expand. In particular, we collaborated with our chapters, and member engagement through their networking and local professional development events grew last year.

Looking ahead, CPABC is now in a steady state, and ready to deliver on the mandate of the future –namely addressing the challenges and opportunities facing the accounting profession here in BC and at the national level.

Provincially, once in place, our new President & CEO will work with the government over the coming year to strengthen our legislation and CPABC’s ability to protect and regulate designation usage in the province to ensure that anyone holding themselves out as a regulated, designated accountant is effectively regulated in BC as a member of CPABC.

Given the recent election results and the fact that BC has a minority government for the first time in 60 years, we will need to monitor the situation going forward over the coming months. We are committed to working with the government and the Minister of Advanced Education, and will do our best to bring them up to speed as quickly as possible on this important issue.


Dave Hallinan, FCPA, FCMA Chair

Richard Rees, FCPA, FCA Past President and CEO

Nationally, we will be assessing and analyzing how the five major drivers of change impact our market, focusing on the effects of key trends in globalization, trust and regulation, brand and reputation, demographics, and technology.

Through all of this, our focus will still be on the public interest and you, our members. We’ve created a strong platform, and the CPA profession will be prepared to leverage our expertise to drive forward effectively. To continue providing rigorous regulatory oversight, ensuring there are enough professional accountants to meet market needs, and offering quality services that allow our members to thrive and grow as professionals.

Dated May 30, 2017


Vision

The Canadian CPA is the pre-eminent, globally

respected business and accounting designation.

Chartered Professional Accountants of BC Mission

CPABC enhances the influence, relevance, and value

of the Canadian CPA profession by:

Protecting the public interest;

Supporting its members and students; and

Contributing to economic and social development.


Management’s Discussion and Analysis

Introduction

This Management Discussion & Analysis (MD&A) will present and discuss the operations, performance, and financial condition of CPABC for the period ended March 31, 2017 and the plans and outlook of the accounting profession in BC for fiscal 2017/18. The MD&A should be read in conjunction with the audited financial statements for CPABC.

CPAs in British Columbia – The Membership at a Glance:

Where CPAs Work

2%14%

4%62%

7%

11%

By Location

Vancouver/Lower Mainland Canada Vancouver Island Okanagan Rest of province Outside Canada

58%19%

13%

10%

Industry Public Practice Retired Not Specified

By Sector

CPABC had...

1,545 new members were admitted into the profession and

684 members left the profession.

As at March 31, 2017

34,996 CPA members

4,960 students pursuing the CPA designation, including 4,296 students in the CPA Professional Education Program (PEP) and 664 students in a predecessor program

CPABC

DID YOU KNOW


The Chartered Professional Accountants of Canada

There are more than 200,000 professional accountants in Canada. The CPA profession adopted common or similar missions, values, and strategic objectives. In addition, work on national committees was extensive with British Columbia playing a leadership role. Significant progress was made on the four core areas of focus; these areas are also critical to the success of CPABC, namely:

• Public Trust and Ethics

• Education and Qualification

• Brand and Reputation

• Member Engagement

Key Accomplishments in BC

CPABC protects the public, educates students, and provides services and support to members. Aligned with the national collaboration, these accomplishments will be presented in the four core areas of focus of the profession.

Public Trust and Ethics Protection of the public interest is an ongoing priority for CPABC and is carried out through the rigorous education, examination, and regulation of our members. Individual CPAs also consider it one of the most important services CPABC provides as a governing and training body. Given the significance of this responsibility, CPABC also provides an Annual Regulatory Report to the Public which provides more details about regulatory activities during the current fiscal year.

Quick Facts about the Profession and CPABC

The experience verification pathway training route will be a critical component of the profession meeting current and future market needs. This training option is flexible and allows CPA candidates to choose their employer when meeting their practical experience requirements.

The majority of CPAs work in industry and are often the only designated accountant on staff. Most positions are clustered in leadership and include executive, CFO, or controller roles.

Public practice represents less than 20% of the profession, as many who train in public practice leave for industry within five years of receiving their designation.

There are almost 35,000 CPABC members.

1

2

3

4

https://www.bccpa.ca/cpabc/media/CPABC/News_Events_Publications/Publications/Report%20to%20the%20Public/CPABC_Report-to-the-Public_Final_2017.pdf

https://www.bccpa.ca/cpabc/media/CPABC/News_Events_Publications/Publications/Report%20to%20the%20Public/CPABC_Report-to-the-Public_Final_2017.pdf


In addition to the activities outlined in the following sections, there are three provisions of the CPA Act that specifically enhance protection of the public interest.

1. Only authorized CPA members can provide the public with regulated assurance services under the CPA Canada Handbook Standards.

2. Only members of CPABC may call themselves “professional accountants.”

3. When a member (or former member) is unable to continue managing their practice, if needed CPABC can:

• Apply to the court for an order appointing a custodian to take possession of, or control over all, or part of the property; and

• Determine the status of, manage, arrange for the conduct of, and, if applicable, wind up or sell the practice.

Continuing Professional Development (CPD) CPD helps CPAs to develop and maintain professional competence that is relevant to their roles.

Our CPD requirements are consistent with the International Federation of Accountants (IFAC) input based CPD standard of 120 hours every three years, with an annual minimum of 20 hours. In addition, over the course of each three-year rolling reporting cycle, our members are required to ensure at least four of their reported verifiable hours relate to business ethics.

Active members must report compliance with CPD on a calendar year basis and virtually all members comply. Action is taken against members who do not comply with the requirements or the audit process. This action can result in suspension or cancellation of membership within the same calendar year as the reporting deadline.

Regulation of Public Practice There are 3,664 practitioners and partners operating in 2,311 public practice offices in BC. The majority are small businesses, and over 98% of the firms are owned by fewer than five professional accountants.

In addition, public practice offices include 15 CPA firms with ten or more partners and 25 CPA firms with five to nine partners. Those practicing public accounting must be registered or licensed with, and overseen by CPABC.

As part of CPABC’s regulatory responsibilities, a program of practice reviews is carried out over a three-year cycle to ensure compliance with professional standards and to provide practitioners with guidance and education based on the results of the review.

This resulted in 917 practice reviews being conducted this past year. CPABC also communicated information on key practice areas through Public Practice News & Views in the monthly CPABC eNews, and provided support in the form of tools and resources.

Professional Conduct As a profession built upon integrity and public trust, CPABC investigates complaints about members and students. With close to 35,000 members and approximately 5,000 students, it is a reflection of the integrity of the membership that there were only 107 complaints received in the year ended March 31, 2017.

Many complaints are dealt with through education and course work, and sometimes involve a fine. As prevention is the best course of action, guidance is provided to members in the magazine CPABC in Focus, and through ethics PD courses for students and members.

In rare instances, a discipline matter is serious enough to warrant a suspension, or cancellation of membership. No members had their membership cancelled as a result of disciplinary action, and in the face of disciplinary action one member was suspended and four resigned.

Nationally, the profession continues to refine a common regulatory framework reflecting compliance with international standards and best practices, including codes of conduct and practice inspection, disciplinary processes, and an effective, nationally consistent public accounting regime.


Education and Qualification BC continued working with its national and provincial partners to evolve the CPA programs: The CPA Professional Education Program (PEP); CPA Canada’s Advanced Certificate in Accounting and Finance (ACAF); and the CPA preparatory courses (formerly the CPA Prerequisite Education Program (CPA PREP)). All of these programs were heavily promoted on post-secondary campuses and through work force information sessions.

The CPA Western School of Business (CPAWSB) continued to serve all current and new CPA students and candidates enrolled in both the PEP and preparatory courses for British Columbia, Alberta, Saskatchewan, and Manitoba. Program delivery, funding models, and processes continue to be fine-tuned.

CPA Professional Education Program (PEP) The two year part-time CPA Professional Education Program (PEP) consists of six modules, which use a blended learning model combining online learning, self-study, classroom learning, and teamwork to develop the competencies expected of Canada’s preeminent professional accountant. There is an evaluation after each module, which candidates must pass before proceeding to the next module. The educational program culminates in a national, multi-day final evaluation, the Common Final Exam (CFE).

The CPA certification program includes two training routes—the pre-approved program route and the experience verification route—for gaining practical experience that meets the requirements and standards of the profession. Pre-approved program positions are offered by offices/organizations that have progressive career paths established to meet the experience requirements of the CPA program and are approved by the profession. The experience verification route is student driven, with the student ensuring they are getting the needed progressive experience, working with a CPA mentor approved by the profession.

CPABC had almost 4,300 students registered with CPAWSB in the PEP program, and the student experience and success rates are good. Prior to March 31, 2016, any legacy students who had not completed their education requirements were transferred into the PEP program at CPAWSB, and there are another 664 students still finishing their legacy pre-certification requirements as at March 31, 2017.

The future growth of the profession is through having successful students, and in 2016/17, 376 members were admitted to membership by way of the CPA Common Final Examination (CFE).

1 CGA PACE level candidates transitioned to CPAWSB in Q4 2015/16; 635 CGA legacy students have not transitioned to the school and are completing outstanding practical experience and/or degree requirements.

Professional Program Candidates1

ICABC – CASB CGA PACE CMABC – ECMA CMABC – SLP Students completing legacy requirements only PEP

0

1000

2000

3000

4000

5000

6000

2014/15 2015/16 2016/17


CPA Advanced Certificate in Accounting and Finance (ACAF) The Advanced Certificate in Accounting and Finance (ACAF) program is a nationally recognized certificate issued by CPA Canada for those seeking a career in accounting and finance. It is designed for college diploma holders, individuals currently employed in an accounting function without a recognized credential, internationally trained accountants wanting to work in Canada, and international students enrolled at a Canadian post-secondary institution who are seeking an additional Canadian credential that can be completed online.

The certificate program enables students to upgrade their finance skills in order to enhance employment prospects, and the full program takes one year, full-time, to complete. The schedule can be flexible and is based on the student’s needs, and the certification is comprised of 11 online courses. Awareness and interest in the program is expected to continue to build throughout 2017/18. At the end of this fiscal year it was decided to move development and delivery of the ACAF program from the CPA profession to the post-secondary market, which is well positioned to deliver and recruit into the program.

Preparatory Courses (Formerly the CPA Prerequisite Education Program (CPA PREP)) The CPA preparatory courses are designed for those who have an undergraduate degree in a discipline other than accounting and lack some or all of the prerequisite courses required for admission to CPA PEP.

Delivered on a part-time basis to offer students maximum flexibility and accessibility, the modules are offered through distance or classroom learning, and students complete only those modules they require.

Preparatory course students

CGA Level 1–4 Preparatory courses

0

200

400

600

800

1000

1200

1400

1600

2014/15 2015/16 2016/17


Growth and Recruitment Interest in the CPA profession continues to be strong. The Public Practice Fall Recruit events attracted almost 2,000 students. Outreach to potential candidates and preparatory students takes place in social media on Facebook, Twitter, and the recruitment blog; employer and member profiles were regularly posted online to promote careers in accounting, opportunities within the profession, and the benefits of training CPAs. The number of social media followers continues to grow at a steady rate.

Events with workforce recruits also increased, with a focus on career changers and new Canadians. Employer events figured prominently in recruitment efforts, as educational sessions were held with Career Connect Employers and firms providing information regarding the certification programs and training pathways.

Brand and Reputation National accomplishmentsAn extensive national branding campaign ran in fall and winter 2016/2017, with a new television ad, digital and social media advertising, and select print publications.

Provincial accomplishmentsNational efforts were supported by provincial CPA branding for workforce and post-secondary recruitment and included out-of-home advertising (bus and transit shelters) and digital and social media advertising in addition to the above campaign. Online coverage showcased CPA testimonials that focused on the attributes of the designation. These extra efforts paid off, as the most recent CPA Canada National Awareness Research found BC achieved a 47% unaided awareness result for the CPA brand, and CPA Canada and the other provinces achieved 42%

High profile sponsorships were maintained throughout the year, which positioned CPABC as a business leader and raised awareness of the designation among those who would hire or train CPAs.

CPABC’s earned media strategy continued to successfully position members as business experts. Overall, the number of articles, ad value, and circulation numbers increased from the previous year’s results. On average there were 3 articles about BC members every week, with the majority of articles centering on economic and professional commentary.

Government and stakeholder relations efforts focused on economic and provincial budget commentary through the BC Check-Up, the Regional Check-Up and Budget recommendations, and partnering with the Greater Vancouver Board of Trade, Business Council of BC, and Business in Vancouver on several high profile events. For many of these events CPABC received advertising benefits, editorial, and event input.

Recruitment

Information session attendance Information kits downloaded/requested

0

500

1000

1500

2000

2500

3000

3500

4000

2014/15 2015/16 2016/17

Change doesn’t always go your way.

Nope, it’s a disruptive force. But it does send millions of tiny messages

before its arrival: Data. CPAs analyze the data and identify patterns

to make informed, insightful decisions that can change the fortunes

of your business.

Change

Hey Ben, I’m about to send the market into a nosedive.

M O N DAY

9:00

SLIDE TO READ

1 min ago

1

CPAsNavigatingChange.ca


Member Engagement CPABC supports members by providing education, services and resources, and networking opportunities.

Professional Development The PD program provides professional development opportunities and products to meet the constantly evolving PD needs of our membership. In 2016/17, PD held 1,000 face-to-face courses. Comparative analysis of pricing with other provincial accounting bodies and education providers found CPABC prices were competitive, allowing the PD program to deliver excellent value for members.

PD titles relevant to members in industry were expanded, and in addition to the executive leadership courses, included titles in financial reporting, management, and tax. In total, over 31,000 participants attended PD courses. There were 19 free PD sessions held, with 3,396 member registrations; these sessions focused on educating members on the new CPABC regulatory regime and included topics on managing operational risks, taxation, the economy, and governance guidance for Not For Profit Directors.

36%

26%

17%

16%5%

Distribution of 1,000

PD Courses held in 2016/17

Management Accounting & Auditing Taxation Ethics Student courses

Management Accounting & Auditing Taxation Ethics Student courses

Distribution of 782


40%

28%

19%

10% 3%

Distribution of 825


Professional DevelopmentDive Deeper and Explore

2017

SPRING I SUMMER


Member Support and Engagement A diverse membership requires a wide-range of tools and services to provide support and connect members to the profession. A sampling of the member support tools includes:

• All 16 CPABC chapters held at least 3 events each, many as part of the Member Engagement Tour. Overall, these chapters held 102 social networking events with over 4,300 registrations and 116 local PD courses attracting over 8,000 registrations, and kept their members informed through blogs and social media.

• The Member Engagement Tour held 23 sessions and provided an opportunity for over 1,400 members to meet with the leadership and discuss what’s happening in the profession, particularly with respect to the regulatory transition.

• Over 2,800 telephone enquiries were handled by Professional Advisors, covering topics ranging from public enquiries about the merits of hiring a professional accountant to member enquiries about technical and ethical issues related to the Code. In addition, a host of online resources are available including a new searchable Public Practice Knowledge Base with relevant articles to support practitioners.

• Member forums and networking events bring together groups of members with similar backgrounds and/or areas of interest, providing opportunities to network, discuss common issues, and brainstorm solutions to common concerns in a collaborative environment. One new member forum was launched in Vancouver for members in the construction sector, and three were added to serve practitioners outside Vancouver.

• All members can access benefit and savings programs, such as an Employee and Family Assistance Program and numerous national and provincial benefits.

• The CPABC Careers site is an online career search tool for CPAs that matches the staffing needs of employers to the talents and experience of CPABC’s designated members, students, and candidates. Last year, 51,848 unique visitors came to the site and there were 14,391 average monthly logins by CPA members, students, and candidates.

This is just a sampling of some of the member services and tools available — the CPABC website is the hub for member engagement and services, and CPABC is working to inform members of the breadth of services now available.

Our goal is to reach as many members as possible, and we continually evaluate our tools for effectiveness and reach and include:

• CPABC in Focus, which is produced six times annually, and delivered either electronically or in hard copy; 77% of members indicated they had read the magazine within the last six months.2

• CPABC eNews, the monthly e-newsletter providing information on breaking news, events, PD, and standards changes; 70% of members read eNews within the last six months.3

• Industry Update and the corporate blog were revamped and launched as a news portal, which will curate both CPABC and third party content as a resource for members in industry and external stakeholders.

• CPABC social media sites (Facebook, Twitter, YouTube, Flickr, and LinkedIn) saw continued growth and reached a milestone this year, with over 15,000 people now following CPABC’s social channels.

• The CPABC website averaged almost 34,000 unique visitors and over 245,000 page views each month.

• Overall, 76% of members4 who responded to the members’ survey rated the communications from CPABC positively, and CPABC will continue to use member feedback to make improvements.

2 Results are based on the 2016-17 CPABC Members’ Survey.3 Ibid.4 Ibid.


Financial Performance CPABC Operations for the year ended March 31, 2017 CPABC Operations for the year ended March 31, 2017, with comparatives for the prior year can be found in the Financial Statements package.

Revenues Total revenue in 2016/17 for the CPABC profession was $33,004,000, vs $34,863,000.

The most significant variance results from the wind up of the legacy education programs, which offset the increase in professional development revenue and membership dues.

The primary sources of funding for the profession’s programs and services are membership dues, professional development revenue and public practice firm fees.

Revenues

FY 2016/17 Actuals FY 2015/16 Actuals

MembershipFees

Professional Development

Student Education Program

Public Practice & Regulatory

Recoveries

All OtherRevenue

CPAWSBCost recovery

Investmentincome

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000


Membership fees revenue was the most significant activity, and accounted for 44% of the profession’s revenues in 2016/17 and 41% in 2015/16.

Professional development was the second largest source of revenue with 28% of the profession’s revenues in 2016/17 and 22% the previous year.

Public Practice & Regulatory revenues were the third largest source of revenue with 13% of the profession revenues in 2016/17 and 11% the previous year.

Historically the largest source of funding, the student education program revenue accounted for 2% of the profession’s total revenues in 2016/17 and 19% in 2015/16. These net revenues have been impacted as education delivery shifted from the legacy bodies to CPAWSB.

In 2016/17, CPABC received cost recoveries from CPAWSB of $1,018,000 and $306,000 for the practical experience and occupancy costs, respectively.

Investment income benefited from favorable market conditions as well as from the impact of consolidating CPABC’s investment portfolio to one investment manager, Leith Wheeler.

44%

28%

2%

13%

6% 4% 3%

2016/17Revenue

Membership fees Professional Development Student Education Program Public Practice & Regulatory recoveries All other revenue CPAWSB Cost recovery Investment income

41%

22%

19%

11%5%1% 1%

2015/16Revenue

Membership fees Professional Development Student Education Program Public Practice & Regulatory recoveries All other revenue CPAWSB Cost recovery Investment income


Expenditures The total expenditures in 2016/17 for CPABC were $29,412,000, significantly down from previous year ($36,358,000).

Expenditures in 2016/17 have decreased in comparison to the 2015/16 amounts for most areas, showing the trend for increasing operational efficiencies and the run out of the student education programs, with some increases in PD and Public Practice due to higher volume of activity.

CPABC’s financial resources were invested in the following programs and services: student education programs; governance; member services and engagement; communications, business development, recruiting, and external affairs; regulatory affairs, professional development; and administration support and IT.

17%

7%

16%5%

18%

14%

23%

2015/16Expenditures

Governance & Executive Office Regulatory Affairs Student Education Program Communications, Business Development

& Recruiting, External Affairs Professional Development Member Services & Engagement Administrative Support & IT

25%

9%

19%3%

21%

5%

18%

2016/17Expenditures

Governance & Executive Office Regulatory Affairs Student Education Program Communications, Business Development

& Recruiting, External Affairs Professional Development Member Services & Engagement Administrative Support & IT


Expenditures

FY 2016/17 Actuals FY 2015/16 Actuals

Governance &Executive O�ce

RegulatoryA�airs

Student Education Program

CommunicationsBusiness

Development &Recruiting,

External A�airs

Professional Development

Member Services& Engagement

AdministrationSupport & IT

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

The Environment in which CPABC operates

Strategic Risks and Risk Management CPABC regularly identifies and assesses risks to ensure they are effectively managed. The rapidly changing environment in which it operates creates several risks and uncertainties that could affect the successful implementation of the operational and strategic plans outlined above.

Regulatory Under the Chartered Professional Accountants Act and Bylaws, CPABC’s regulatory responsibilities include: maintaining admission, licensing, and mandatory continuing education requirements; conducting reviews of public practice firms; investigating complaints; and disciplining members, firms, and students.

Our vigilance with regard to these regulatory responsibilities, combined with the involvement of volunteers (members and public representatives), ensures that our members and students meet standards as expected by the public.

CPABC strives to harmonize its regulations to the extent possible with those of other provincial CPA bodies. This harmonization enhances our profession’s ability to meet the requirements of the Agreement on Internal Trade, a Canadian intergovernmental trade agreement designed to ensure labour mobility (among other things).


Provincially, self-regulating professions often need to be more accountable and transparent with regard to their regulatory processes, while also balancing the potential consequences for a member/firm’s reputation, business, or professional status. Therefore, when establishing policies, considering procedural changes, or responding to requests for information, CPABC carefully balances the public’s interest in transparent regulation and disclosure with members’ rights to privacy. As part of this commitment, CPABC publishes an annual Regulatory Report to the Public providing details of our approach to protecting the public interest.

The Canadian Public Accountability Board (CPAB) is a regulatory regime with significant influence on public company auditors. CPABC continues to work with CPAB to minimize the potential for expensive, inconvenient, and confusing duplication and inconsistency in the oversight of public company auditors who are regulated by both CPAB and CPABC.

Funding Integration is now complete, and economies of scale have been realized across the organization in the delivery of services and programs. The Strategic Opportunity Fund generated by the sale of the Broadway building will provide a unique opportunity for CPABC to benefit the profession and the public interest in the coming years. No decisions have been made on its first use.

Currently revenues are derived primarily from three sources:

• Member dues, which account for 44% of CPABC’s total revenue, fund many critical programs. With many members close to retirement, increasing both membership numbers and member satisfaction will ensure a robust membership body; thus both are key initiatives in the national strategy.

• The professional development program which offers courses to members and the public, currently accounts for 28% of the total revenue of CPABC. CPABC ensures a sustainable PD program by continuing to provide competitive and relevant learning opportunities to both members and the public.

• Public practice fees represents 13% of the total revenue of CPABC in 2016/17. Those fees fund the public practice review program and are key to ensuring that CPABC fulfill its regulatory mandate of protecting the public.

The introduction of new continuing education and member services programs comes with inherent financial risks. In terms of PD, for example, uncertain participation rates and the potential for competition from other providers present financial risks when new courses are introduced.

CPABC manages these risks by collaborating with other CPA or unifying bodies, conducting advanced market research and pilot offerings, and targeting its marketing. These strategies will continue as the profession invests in future courses and products.

As part of its role in a self-regulating profession, CPABC is responsible for disciplining members. Dealing with the complexities of each individual case—as well as the unpredictable cost of legal and investigative fees—presents uncertainties in terms of time, effort, and resources.

As CPABC has no control over these variables, it monitors discipline costs and maintains sufficient unrestricted net assets to ensure that adequate resources are available to manage this variability.


Human Resources CPABC relies on the services of volunteers to complete many of its planned projects and regulatory responsibilities. The talent and expertise of volunteers are among its most valuable resources.

Many national working groups that are shaping the new CPA profession, setting its strategic direction, and finalizing the details of the new CPA certification programs have benefited from this expertise and commitment.

There is always some risk that volunteers may not be as willing or able to donate their time or talents in the future, due to ever-increasing competition for their attention. This means that CPABC could eventually incur a significant cost in trying to replace lost expertise. To mitigate this risk, CPABC continues to nurture ongoing volunteerism by ensuring positive and rewarding experiences for volunteers, and by structuring volunteer opportunities in a flexible manner.

Given the uncertainty inherent in establishing a new organization, and the stresses that come with it, staff retention could be challenging. To manage the risk of employee turnover, CPABC implemented a number of change management strategies. In addition, CPABC offers a high-quality work environment with a total compensation package that is competitive with the professional, not-for-profit market for the skills employed. These efforts paid off, with the organization being recognized by Human Synergistics Canada with a Corporate Award of Merit for organizational culture.

Education Changes made to the education and qualification system, such as the evolution to the CPA certification program, are made with the intention of increasing the profession’s growth while maintaining its excellent reputation.

There is a risk that the CPA Certification Program will not be well accepted in the marketplace and attractive to potential students. The profession’s leadership is closely monitoring the development and implementation of the program, and is ensuring it evolves to meet or exceed the standards for legacy program admission and delivery policies, and that it is accepted in the marketplace by both business and candidates/students.

There is also a risk that certain legacy mutual recognition agreements may not be renewed with existing provisions due to the newness of the CPA program.

Standards While it is vital to the CPA brand that designated accountants stay abreast of emerging accounting and assurance standards, the profession’s leadership across Canada recognizes that the increasing complexity and volume of these standards requires members to put in a significant effort in terms of change management.

Therefore, in partnership with CPA Canada and the other provincial CPA or unifying bodies, CPABC continues to provide tools and support to help members working in industry, public practice, and other sectors, as well as those serving on boards and audit committees to maintain the quality of their work.

CPABC continues to monitor the quality of the work performed by public practitioners through practice review—in part to help members in public practice deal with the increased complexity of the standards.

Financial Risks and Risk Management As part of its strategic planning process and through the execution of its strategic initiatives, CPABC regularly identifies and assesses risks to ensure they are effectively managed. Since the organization operates in an extremely complex and rapidly changing global environment, it must pursue opportunities, provide services, and conduct activities, which may carry with them a certain degree of risk, in order to accomplish its mission.

CPABC assesses its willingness to accept risk and determine its overall risk tolerance profile by evaluating risks for their potential severity of impact and the likelihood of their occurrence, before any mitigation strategies are introduced.

In the normal course of business, CPABC is exposed to financial risks, such as those related to credit, liquidity, and market, that have the potential to adversely affect operating and financial performance. For an explanation of CPABC’s exposure to the risks associated with its financial instruments, refer to the notes to the audited financial statements for the year ended March 31, 2017.


Capability to Deliver Results During 2016/17, CPABC received cash flows from operating activities of $1,079,000, while cash flows of $2,740,000 were used in investing and financing activities.

At March 31, 2017, cash and investments available to the organization total $34,749,000 (2016 - $33,524,000).

The primary objective of the overall investments is preservation of capital, with secondary objectives of maximizing return on investments, providing sufficient liquidity to allow the organization to meet its changing cash requirements, and cash flow generation.

The goal is to achieve an annual return which exceeds a benchmark based on the asset allocation weighting.

CPABC believes its current cash and short-term investments, combined with the anticipated cash flow from operations, are sufficient to meet the working capital and capital expenditure requirements for the foreseeable future.

In 2016/17, the total capital expenditures was $430,000, of which $334,000 related to computer hardware and software.

Cash and Investments

March 31, 2017 March 31, 2016

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

Cash and Investments

Net Assets The net assets available are as follows:

March 31, 2017 March 31, 2016

Total unrestricted net assets $ 11,485,000 $ 7,554,000Invested in tangible and intangible assets 2,929,000 3,119,000Capital development fund 67,000 67,000Unification stabilization fund 521,000 670,000Strategic opportunity fund 6,500,000 6,500,000Total Net Assets $ 21,502,000 $ 17,910,000

The increase in the total Net Assets reflects the positive net contribution generated by the organization in 2016/17. In fiscal 2014/15, the respective Boards and Council of the legacy bodies internally restricted funds amounting to $12,812,000 for the Capital Development Fund ($2,312,000) for the development of new IT platform for CPABC and build out and furnishing of the new leased premises, Unification Stabilization Fund ($4,000,000) for non-recurring costs of unification, and Strategic Opportunity Fund ($6,500,000) for projects benefiting the profession and its members and students.


Total Net Assets

March 31, 2017 March 31, 2016

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

TotalNet Assets

CPABC incurred the tail end of the non-recurring unification costs ($149,000) in 2016/17, continuing to draw down on the Unification Stabilization fund, which has been substantially utilized.

The Board and management believe the net assets of the profession are sufficient to:

a) Provide the financial capital needed to meet any unexpected financial risks CPABC may encounter in the near future, and

b) Maintain reasonable stability in the annual membership dues payable by members.

Systems and Processes CPABC maintains robust and consistent internal accounting and administrative control systems at a reasonable cost, and meet the requirements of regulation such as the Freedom of Information and Privacy legislation.

Such systems are designed to provide reasonable assurance that the financial information is relevant, reliable, and accurate, and that CPABC’s assets are appropriately accounted for and adequately safeguarded.

CPABC believes there are no mission-critical systems, controls, procedures, or deficiencies that will impair its ability to provide reliable and timely disclosure, or affect its ability to execute the strategic and operational plans. CPABC continues to improve and enhance the functionalities of newly integrated systems.

Key Performance Drivers As CPABC operates in the not-for-profit sector, several non-financial indicators are used to measure performance, and these play a significant role in what drives the organization.

At the same time, CPABC also has a stewardship responsibility to its members, and rely on financial indicators to ensure that the resources entrusted to us are used efficiently and appropriately.

The primary indicators of success in achieving the mission, strategy, and priority commitments are deliverables, stakeholder satisfaction, and financial performance.

Deliverables CPABC regularly reviewed deliverables through various reporting processes to the board to ensure ongoing alignment with:

a) The organization’s regulatory mandate;

b) The needs of BC members; and

c) The goal of attracting and educating exceptional people for the accounting profession.

Deliverables were identified and are expected to be completed on time, within budget, and at the highest level of quality possible.

The extent to which CPABC achieves these goals is one of its most important measures of success.


Stakeholder Satisfaction CPABC’s external stakeholders include the government, the securities industry, other regulators, and the users of our members’ services.

Nationally, the profession conducts periodic surveys of its external stakeholders to gain insight into how designated accountants are perceived. BC also monitors public satisfaction through periodic meetings with regulators and government officials, and by monitoring the coverage of designated accountants in the provincial news media.

CPABC’s members are its internal stakeholders. Member satisfaction with the services provided is a critical performance indicator.

Accordingly, programs and services are evaluated, modified, and developed based on members’ feedback regarding their needs and satisfaction with existing services. Members provide feedback through member consultations and surveys.

Another performance indicator is the number of repeat professional development (PD) registrations, as the CPABC PD program competes in the marketplace with other education service providers. Feedback is sought after each PD course to ensure quality education and to garner ideas for new courses.

Member Satisfaction Understanding the needs of members, and providing the products and services to fill these needs, is the fundamental purpose of CPABC’s programs. A crucial way to evaluate the success of our various programs is by listening to what members have to say. Feedback is sought by engaging with members directly, conducting independent membership surveys, holding focus groups, soliciting feedback, and monitoring usage. The results from these various communication channels help us to enhance programs and services. In the 2016-2017 Member Satisfaction Survey, 68% of members who responded were satisfied with their overall experience with CPABC.

Outlook for 2017/18 Looking forward, the coming year will bring some significant changes to the organization, with the appointment of a new President and CEO, and the first board elections being held on June 28, 2017 at the Annual General Meeting.

Nationally, BC will continue to actively participate on committees that will deliver on the strategy for the profession in Canada, which has identified five major drivers of change: globalization, trust and regulation, brand and reputation, demographics, and technology.

Globalization significantly impacts how accounting organizations operate, with many large, global bodies expanding their influence and vying for entry into the Canadian market. These foreign accounting bodies are not authorized to regulate through provincial legislation and are not subject to local oversight, and as such, may not provide regulatory oversight that is consistent with government and industry standards. We will also be mitigating this risk with strategic partnerships with global bodies, such as AICPA.

Ultimately, provincial governments will need to determine the level of regulation that is appropriate for the market, but we feel very strongly that the public interest is better protected by the current legislative environment and that those holding themselves out as designated accountants should be held accountable to local regulators. Here in BC, we will be working to clarify our role and work with government to further strengthen our regulatory environment.

Ensuring we have a system that works within the global and national regulatory environment is critical for maintaining trust in the accounting profession. This is why trust and regulation are always a major trend, and are essential to the health and stability of the profession and the economy. CPABC will continue working with its partners across the country to rationalize the Code of Professional Conduct to one that is principles based and will meet the future needs of the profession. In addition, significant work will be undertaken to develop a CPA professional liability insurance regime that will move all CPAs in public practice to the same standard. Once implemented, this will better protect both the public and our members and ensure sufficient coverage for a range of regulated services.


Building the CPA brand and reputation will continue to be a significant area of focus as we establish the value of the CPA brand among the business community, the public, and other important stakeholders, such as post-secondary institutions.

CPABC continually positions our organization and members as business and thought leaders. National and provincial campaigns, earned media, and government and stakeholder relations all helped raise our unaided brand awareness, and we will continue to build on this success over the coming year, in particular, with a new national campaign this fall.

This awareness is critical for attracting people to the profession. In BC it’s been forecasted we’ll need over 1,000 new CPAs per year to fill demand from retirements and economic growth. At the same time, immigrants will account for a larger proportion of the country’s labour market growth.

Assessing the impact of demographics on the workforce will be a significant trend for the foreseeable future and working with our post-secondary partners is critical. One significant change in the next year will be the transition of the development and delivery of the Advanced Certificate in Accounting and Finance from the CPA profession to the post-secondary market.

Lastly, an important part of our mandate is ensuring members are up to speed and prepared for new trends, such as advancements in technological platforms. The new norm for business is constant change, and business looks to our profession to help navigate through the unknown from a place of integrity and knowledge.

CPABC is well positioned for the future. With the unification of the profession behind us, we are completely focused on refining our processes, programs, and regulatory regime to ensure we better deliver services to our membership, and constantly improve what we’re doing and how we’re doing it to better protect the public interest.

Governance and Leadership CPABC is governed by a board comprised of three non-accounting profession public representatives appointed by the provincial government, and 15 CPAs. The inaugural board is comprised of individuals who previously served on the boards of the Institute of Chartered Accountants of BC, the Certified Management Accountants Society of BC, and the Certified General Accountants Association of BC. Board elections will commence at the 2017 Annual General Meeting.

At the governance level, the national CPA Collaboration Accord governs how the independent national body, CPA Canada, and independent CPA provincial bodies work together. It details the ways in which these parties will collaborate, cooperate, and partner in order to further the CPA profession and harmonize approaches (where appropriate) to common core elements and key functions. Given this level of collaboration, CPABC staff and volunteers have taken on key roles to ensure that BC is influencing the national direction.

Financial Statements Financial Reporting Framework CPABC previously adopted the Accounting Standards for Not-for-Profit Organizations contained in Part III of the CPA Canada Handbook — Accounting.

Financial Statement Package

Olin Anton, FCPA, FCAVancouver

Brian Friedrich, FCPA, FCGAfriedrich & friedrich corp., D’Arcy

Roland KruegerPublic RepresentativeChristina Lake

Stanley Chang, CPA, CGAFinancial Institutions Commission, Vancouver

C. Douglas Lang, CPA, CGA Consultant Campbell River

Geoffrey Dodds, CPA, CABuckley Dodds Parker LLP Vancouver

Sheila Nelson, CPA, CARetired from Public PracticePrince George

Ben Sander, FCPA, FCASander Rose Bone Grindle LLP Dawson Creek

David Hallinan, FCPA, FCMAChairCity of Kamloops

2016-2017 Board of Directors

Heather Banham, FCPA, FCGAFirst Vice-ChairOkanagan College, Kelowna

Barry Macdonald, FCPA, FCASecond Vice-ChairVancouver

Linda Lee Brougham, FCPA, FCA, CGAGrant Thornton LLP, Victoria

Barbara Brink, CPA (Hon.)Public RepresentativeWest Vancouver

Doris Good, CPA, CMAMinistry of Finance, Consumer Taxation Audit Branch, Vancouver

Elizabeth JacksonPublic RepresentativeVancouver

Diane Kerley, FCPA, FCMAMason Group, Vancouver

Tom Senft, CPA, CGAJD Sweid FoodsLangley

Gavin Still, CPA, CGAMNP LLPFort St. John

CPABC’s

24 2016/17 CPABC Financial Statements

Financial Statements

Management responsibility for financial reporting The accompanying financial statements and all other information contained in this annual report are the responsibility of the management of the Chartered Professional Accountants of British Columbia (CPABC). The financial statements have been prepared by management in accordance with Canadian accounting standards for not-for-profit organizations and have been approved by the Board of Directors.

Preparation of financial information is an integral part of management’s broader responsibilities for the ongoing operations of CPABC. Management maintains a system of internal accounting controls to provide reasonable assurance that transactions are accurately recorded on a timely basis, are properly approved and result in reliable financial information. Such information also includes data based on management’s best estimates and judgments.

The Audit Committee reviews the annual financial statements and recommends them to the Board of Directors for its approval. In addition, the Audit Committee meets periodically with management and the external auditors, and reports to the Board of Directors thereon. The Audit Committee also reviews the annual report in its entirety.

The accompanying financial statements have been audited by the external auditors who are engaged by the Board of Directors on the recommendation of the Audit Committee, and whose appointment was ratified at the annual meeting of members. The external auditors have access to the Audit Committee, without management present to discuss the results of their work.

Dated May 30, 2017

Olin Anton, FCPA, FCA Interim President and Chief Executive Officer

Amy Y. Lam, FCPA, FCA Executive Vice President, Operations and Chief Financial Officer

BDO Canada LLP, a Canadian limited liability partnership, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms.

Tel: 604 688 5421Fax: 604 688 5132 [email protected]

BDO Canada LLP600 Cathedral Place 925 West Georgia Street Vancouver BC V6C 3L2 Canada

Independent Auditor’s Report

To the Members of The Chartered Professional Accountants of British Columbia

We have audited the accompanying financial statements of the Chartered Professional Accountants of British Columbia, which comprise the Statement of Financial Position as at March 31, 2017, and the Statements of Operations, Changes in Net Assets and Cash Flow for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with Canadian accounting standards for not-for-profit organizations, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements present fairly in all material respects, the financial position of the Chartered Professional Accountants of British Columbia as at March 31, 2017 and the results of its operations, changes in net assets, and cash flows for the year then ended, in accordance with the Canadian accounting standards for not-for-profit organizations.

Chartered Professional Accountants

Vancouver, British Columbia May 30, 2017


Statement of Financial PositionAs at March 31, 2017

All in $000’s

2017 2016

ASSETSCurrent AssetsCash $ 6,886 $ 8,547Accounts receivable 2,247 470Short term investments (Note 2) 13,087 12,158Prepaid and other assets 654 679 22,874 21,854

Investments (Note 2) 14,776 12,819Equipment and leaseholds (Note 3) 3,041 3,291Intangible assets (Note 4) 1,722 1,800 $ 42,413 $ 39,764

LIABILITIESCurrent LiabilitiesAccounts payable and accrued liabilities (Note 5) $ 5,807 $ 7,087Deferred revenue 13,271 12,796 19,078 19,883

Deferred Lease Inducements (Note 6) 1,833 1,971

NET ASSETS (Note 8)Invested in capital and intangible assets 2,929 3,119Internally restricted 7,088 7,237Unrestricted 11,485 7,554 21,502 17,910 $ 42,413 $ 39,764

The accompanying notes are an integral part of these financial statements.

On behalf of the Board.

Dave Hallinan, FCPA, FCMA Chair of the Board

C. Douglas Lang, CPA, CGA Treasurer

2016/17 CPABC Financial Statements 27

Statement of OperationsFor the year ended March 31, 2017

All in $000’s

2017 2016

REVENUESMembership dues $ 14,479 $ 14,108Professional development 9,148 7,686Regulatory affairs: Public practice fees 3,480 2,866 Discipline fines and cost recoveries 167 216 Admission fees 710 885Student education program: Legacy student dues and program run-out 613 5,733 CPA prerequisite program 24 1,017CPA Western School of Business cost recoveries (Note 9) 1,324 273Investment income (Note 2) 1,100 391Member services and event 929 891Employment referral services 296 315Other revenue 734 482 $ 33,004 $ 34,863

EXPENSES (Note 12)Professional development $ 7,364 $ 6,321Regulatory affairs Public practice registration and review 2,413 2,194 All other regulatory affairs 3,054 3,581Student education program 1,547 5,157Member services and engagement 2,599 2,574Communications, business development and recruiting, and external affairs 6,181 6,430Governance and executive office 1,015 1,907Administration support 3,769 6,559Information technology 1,470 1,635 $ 29,412 $ 36,358

Excess (Deficiency) of Revenues over Expenses $ 3,592 $ (1,495 )



Statement of Changes in Net AssetsFor the year ended March 31, 2017

All in $000’s

Invested in Capital & Intangible Internally Total Net Assets Restricted Unrestricted Assets

Opening Net Assets, April 1, 2015 $ 1,539 $ 12,812 $ 5,054 $ 19,405Deficiency of revenue over expenses – – (1,495 ) (1,495 )Investment in equipment and leaseholds, net of deferred lease inducement 1,252 (1,252 ) – –Investment in intangible assets 993 (993 ) – –Amortization of deferred lease inducements 103 – (103 ) –Amortization of intangible assets (337 ) – 337 –Amortization of equipment and leaseholds (431 ) – 431 –Interfund transfer (Note 8) – (3,330 ) 3,330 –Net Assets, March 31, 2016 $ 3,119 $ 7,237 $ 7,554 $ 17,910 Opening Net Assets, April 1, 2016 $ 3,119 $ 7,237 $ 7,554 $ 17,910 Excess of revenue over expenses – – 3,592 3,592Disposition of equipment and leaseholds (7 ) – 7 –Investment in equipment and leaseholds 214 – (214 ) –Investment in intangible assets 169 – (169 ) –Amortization of deferred lease inducements 138 – (138 ) –Amortization of intangible assets (266 ) – 266 –Amortization of equipment and leaseholds (438 ) – 438 –Interfund transfer (Note 8) – (149 ) 149 –Net Assets, March 31, 2017 $ 2,929 $ 7,088 $ 11,485 $ 21,502



Statement of Cash FlowsFor the year ended March 31, 2017

All in $000’s

2017 2016

OPERATING ACTIVITIESExcess (Deficiency) of revenues over expenses $ 3,592 $ (1,495 )Adjustments to determine net cash provided by (used in) operating activities Amortization of equipment and leaseholds 438 431 Amortization of intangible assets 266 337 Loss on disposal of equipment and leaseholds 7 - Unrealized (gain) loss on investments (529 ) 52 Amortization of deferred lease inducements (138 ) (103 ) $ 3,636 $ (778 )Change in non-cash working capital items Accounts receivable (1,777 ) 1,246 Prepaid and other assets 25 265 Accounts payable and accrued liabilities (1,280 ) (1,544 ) Deferred lease Inducements - 1,935 Deferred revenue 475 1,864 $ 1,079 $ 2,988

INVESTING ACTIVITIES Purchase of investments $ (55,754 ) $ (16,294 ) Proceeds on sale of investments 53,397 18,168 Purchase of equipment and leaseholds (214 ) (3,187 ) Purchase of intangible assets (169 ) (993 ) $ (2,740 ) $ (2,306 ) Net change in cash $ (1,661) $ 682Cash, beginning of year $ 8,547 $ 7,865Cash, end of year $ 6,886 $ 8,547


Notes to Financial Statements March 31, 2017


All in $000’s

Purpose and and Nature of Organization On June 24, 2015, the Chartered Professional Accountants of British Columbia (CPABC) was legally established under the Chartered Professional Accountants Act. The CPABC is a member organization of the Chartered Professional Accountants of Canada (CPA Canada). The CPABC is a tax-exempt body under Section 149 of the Income Tax Act.

CPABC has the following objectives as outlined in the Chartered Professional Accountants Act:

1. to promote and maintain the knowledge, skill and proficiency of members and students in the practice of accounting;

2. to establish qualifications and requirements for admission as a member and continuation of membership, and for enrollment and continuation of enrollment of students;

3. to regulate all matters, including competency, fitness and professional conduct, relating to the practice of accounting by members, students, professional accounting corporations and registered firms;

4. to establish and enforce professional standards; and,

5. to represent the interests of members and students.

1. SIGNIFICANT ACCOUNTING POLICIES

a) Basis of Accounting

These financial statements have been prepared in accordance with Canadian accounting standards for not-for-profit organizations applied within the framework of the accounting policies summarized below.

b) Revenue Recognition

Membership dues, student dues, and membership admission fees, are recognized as revenue in the year in which they apply.

Public practice fees is recognized as revenue in the year in which they apply and the amount collected are allocated proportionately over 12 months commencing September 1, the billing date, and the portion not yet taken into income is recorded as deferred revenue.

Professional development revenue is recognized when the course is presented. The liability for the portion of course revenues invoiced but not yet presented is recorded as deferred revenue.

Legacy education program revenue is recognized as revenue in the academic year in which they applied.

Discipline fines and cost recoveries are recognized when their collection is assured and all of the CPABC’s internal processes and any known external appeals are complete.

Investment income includes interest income and realized and unrealized gains and losses.

Other revenue is recognized on an accrual basis as earned.



All in $000’s c) Use of Estimates

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingencies at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The most significant areas requiring management estimates and assumptions include the useful lives of equipment and leaseholds and intangible assets for calculating amortization, the determination of the deferred portion of Professional Development (PD) fees, and the allocation of expenses to the appropriate functional category and contingencies.

d) Investments

Investments are initially recognized and subsequently measured at fair value plus accrued interest, determined using market information. Transaction costs and net gains and losses arising from changes in fair value are immediately recognized.

e) Equipment, Leaseholds and Intangible Assets

Equipment and leaseholds are recorded at cost. Amortization is calculated on a straight-line basis over the expected useful lives of the assets as follows:

Leasehold improvements remaining term of lease Office furnishings ten years CPABC member database ten years Computer equipment and software three years Printing equipment six years

Equipment, leaseholds and intangible assets are tested for impairment whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. If any potential impairment is identified, then the amount of the impairment is quantified by comparing the carrying value of the equipment, leaseholds, or intangible asset to its fair value. Any impairment of these assets is charged to income in the period in which the impairment is determined.

An impairment loss is not reversed if the fair value of the equipment, leaseholds or intangible asset subsequently increases.

f) Lease Inducements

CPABC accounts for lease inducements received by deferring such amounts and amortizing them to expenses on a straight-line basis over the term of the lease.

g) Controlled Entities

Controlled entities are not-for-profit entities and are not consolidated in CPABC’s financial statements as the bylaws and trust agreements of the entities specify that entities’ assets are to be used for specific purposes only, and are not available to the CPABC even in the event of the entity’s dissolution. The CPABC believes separate note disclosure of controlled entities provides a more meaningful presentation of the CPABC’s activities.



All in $000’s

h) Allowance for Doubtful Accounts

Accounts receivable are reviewed on a monthly basis and are written off when it is determined that the likelihood of collection is low.

i) Donated Services

CPABC and its members benefit greatly from donated services in the form of volunteer time for various activities. The value of donated services is not recognized in these financial statements.

2. INVESTMENTS

March 31, 2017 March 31, 2016

Guaranteed investment certificates (GICs) $ 4,520 $ 14,036Fixed income bonds 12,532 1,946Pooled funds and Equities 10,811 8,995Total investments $ 27,863 $ 24,977

Categorized as:Short-term investments $ 13,087 $ 12,158Long-term investments 14,776 12,819Total investments $ 27,863 $ 24,977

GICs have interest rates ranging from 0.9% to 1.71% (2016 – 1.5% to 2.75%). Fixed income bonds include Canadian corporate and government exchange traded funds and US investment grade exchange traded funds. Equities are invested in Canadian and international securities.

Investment income is comprised of the following:

March 31, 2017 March 31, 2016

Interest and dividend income $ 401 $ 431Unrealized gains (losses) 529 (52 )Realized gains 170 12Total investment income $ 1,100 $ 391



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3. EQUIPMENT AND LEASEHOLDS

Net Book Net Book Value Value Accumulated March 31, March 31, Cost Ammortization 2017 2016

Harbour Centre leasehold improvements $ 2,504 $ 271 $ 2,233 $ 2,414Office furnishings 559 122 437 443Computer equipment 989 783 206 261Printing equipment 217 52 165 173Total equipment and leasehold $ 4,269 $ 1,228 $ 3,041 $ 3,291

4. INTANGIBLE ASSETS

Net Book Net Book Value Value Accumulated March 31, March 31, Cost Ammortization 2017 2016

Computer software $ 471 $ 238 $ 233 $ 146CPABC membership database 1,779 290 1,489 1,654Total intangible assets $ 2,250 $ 528 $ 1,722 $ 1,800

5. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

March 31, 2017 March 31, 2016

Trade payables $ 3,077 $ 3,008Government remittances – 482Accrued liabilities and other 2,730 3,597Total accounts payable and accrued liabilities $ 5,807 $ 7,087

6. DEFERRED LEASE INDUCEMENTS

The CPABC received leasehold inducements of $2,063 to fund leasehold improvements for the Harbour Centre premises in 2015 and 2016. These inducements have been deferred and are being amortized to expenses on a straight-line basis over the term of the lease.

March 31, 2017 March 31, 2016

Opening balance $ 1,971 $ 139Leasehold inducement received for Harbour Centre – 1,935Current year amortization (138 ) (103 )Closing balance $ 1,833 $ 1,971



All in $000’s

7. COMMITMENTS AND CONTINGENCIES

a) Commitments include the Harbour Centre lease. The lease term for Harbour Centre commenced August 1, 2015 and extends through to July 31, 2030 with two options to renew for two further 5 year terms. In addition to the minimum lease payments, CPABC is required to pay a portion of operating costs and property taxes.

CPABC is committed to the Hastings Lease for a 10-year term which ends in July 2021. A provision of $331 (2016 - $406) has been provided for the estimated loss to be realized where the lease rate of the sublease agreement is below CPABC’s contracted lease rate.

Minimum lease payments required under the terms of the Harbour Center and Hastings leases are as follows:

2018 $ 810 2019 815 2020 817 2021 817 2022 715 2023 and thereafter 6,119 Total $ 10,093

b) CPABC has received statements of claim and is involved with certain legal actions related to various matters arising in the ordinary course of its business. These matters are at various stages and to the extent that the outcome is likely and an amount of costs can be reasonably estimated, an accrual based on the best estimate has been made. Any adjustments to the estimates or differences to the actual costs will be recorded in the period in which additional information becomes available. CPABC has no reason to expect that the ultimate disposition of any of these matters will have a material adverse impact on its financial position, results of operations or its ability to carry on any of its business activities.



All in $000’s

8. INTERNALLY RESTRICTED NET ASSETS

CPABC maintains a policy to internally restrict an amount equal to the net assets invested in equipment, leaseholds and intangible assets.

In addition, on March 31, 2015, the Board approved the following categories of internally restricted net assets:

• Capital Development Fund of $2,312, which is comprised of the planned resources to develop a new IT platform for CPABC and build out and furnish the new leased premises for CPABC.

• Unification Stabilization Fund of $4,000, which is comprised of the anticipated non-recurring costs of unification.

• Strategic Opportunity Fund of $6,500, which is comprised of those resources the Board is restricting for projects that will benefit the profession and its members and students.

These internally restricted amounts are not available for any other purpose without prior approval of the Board. As at March 31, 2017, the following amounts remain internally restricted:

March 31, 2017 March 31, 2016

Invested in tangible & intangible assets $ 2,929 $ 3,119Capital development fund 67 67Unification stabilization fund 521 670Strategic opportunity fund 6,500 6,500 $ 10,017 $ 10,356

Invested in Capital and Capital Unification Strategic TOTAL Intangible Development Stabilization Opportunity Internally Assets Fund Fund Fund Restricted

Net Assets, April 1, 2016 $ 3,119 $ 67 $ 670 $ 6,500 $ 7,237 $ 7,554 $ 17,910Less:Excess of revenue over expense before non–recurring costs – – – – – 3,741 3,741Investment in capital and intangible assets 383 – – – – (383 ) –Ammortization (566 ) – – – – 566 –Disposition of assets (7 ) – – – – 7 –Interfund transfer – – (149 ) – (149 ) – (149 )Net Assets, March 31, 2017 $ 2,929 $ 67 $ 521 $ 6,500 $ 7,088 $ 11,485 $ 21,502

Total Net Internally Restricted Unrestricted Assets



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9. RELATIONSHIPS WITH OTHER ORGANIZATIONS

The transactions described below are measured at the exchange amount – the amount of consideration established and agreed to by the other parties.

a) Chartered Professional Accountants of Canada (CPA Canada) is the national body which supports the provincial accounting bodies that have unified under the Chartered Professional Accountant (CPA) banner in Canada.

During 2013, CPA Canada established a Collaboration Accord that defines roles and governance processes for the unified profession going forward. Under these mechanisms, CPA Canada and the participating unifying provincial bodies undertook a series of projects to implement the CPA profession’s strategic initiatives and to collaborate nationally. CPA Canada accumulates the related costs and invoices the participating provincial bodies their proportionate share totaling $4,533 (2016 - $5,077). CPABC’s contribution to funding these projects amounted to $706 (2016 - $699). These transactions are reflected in the appropriate cost function on the statement of operations.

During 2017, CPABC collected member dues on behalf of CPA Canada totalling $10,400 (2016 - $14,271). At March 31, 2017 a net amount of $2,968 (2016 – $3,021) was owed to CPA Canada.

b) The Institute of Chartered Accountants of the Yukon, the Society of Management Accountants of Yukon and the Certified General Accountants’ Association of Yukon are administered by CPABC. On July 17, 2016, the Institute of Chartered Accountants of the Yukon, the Society of Management Accountants of Yukon and the Certified General Accountants’ Association of Yukon unified and became the Chartered Professional Accountants of Yukon (CPA Yukon). CPA Yukon continues to be administered by CPABC and administrative fees of $31 (2016 - $14) were charged to CPA Yukon for the services rendered.

CPABC also runs practice review and licensing on behalf of CPA Yukon. Fees of $15 (2016 - $11) were charged by CPABC for services rendered in relation to practice review and licensing.

c) CPA Insurance Plans West (CPAIPW) administers benefits plans for members of the CPA bodies in Alberta, British Columbia, Manitoba, Saskatchewan, the Northwest Territories, and the Yukon. CPAIPW is a not-for-profit organization under the Income Tax Act. Each of the four western provinces, including CPABC, nominates two persons to serve on CAIPW’s eight-member board.

d) CPA Western School of Business (CPAWSB) is responsible for delivering pre-certification education for students in the four western provinces and the territories, in accordance with an agreement reached in 2000 by the Institutes of Chartered Accountants of Alberta, British Columbia, Saskatchewan, and Manitoba (member body). This agreement was replaced and superceded with a revised agreement signed by the CPA bodies in Alberta, British Columbia, Saskatchewan, and Manitoba and CPAWSB effective September 29, 2015. CPAWSB is governed by a twelve member board, with one member elected by each participating province and the balance elected by a nominating committee comprised of the board chairs of these provinces.



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CPAWSB is a registered charity incorporated under the Canada Not for Profit Corporations Act, and is not subject to income taxes. In the event of dissolution or winding up of the corporation, all of its remaining assets after payment of liabilities shall be distributed to qualified donees as defined in Section 149.1(1) as amended, of the Income Tax Act (Canada). If a member body withdraws from the agreement prior to operations ceasing, that body would have no right to any of the assets or other property of CPAWSB.

Cost recoveries in the amount of $1,324 (2016 - $273) were charged to CPAWSB during the year.

10. CONTROLLED ENTITIES

All of the entities noted below are controlled by CPABC as it appoints the members, directors or trustees, as applicable, which govern each entity. The accounts of the controlled entities noted below have not been consolidated in CPABC’s financial statements as the bylaws and trust agreements of these entities specify that the entities’ assets are to be used for specific purposes only, and are not available to CPABC even in the event of the entity’s dissolution. It is believed that separate note disclosure provides a more meaningful presentation of activities.

The transactions described below are measured at the exchange amount being the amount of consideration established and agreed to by the related parties. The summary financial statements of each entity have been provided.

a) The Chartered Professional Accountants’ Education Foundation of British Columbia (CPAEF), formerly the Chartered Accountants Education Foundation (CAEF), is a registered charity under the Income Tax Act. In November 2015, the CAEF held an extraordinary general meeting to approve an amended constitution and bylaws and a name change to become the CPAEF. The CPAEF’s mandate is to enhance the quality and quantity of students entering the CPA profession, sponsor relevant and practical research, and stimulate the ongoing educational experience of CPABC’s members. The CPAEF elects its board members from candidates recommended by CPABC.

On March 16, 2016, the CPAEF signed an Assignment and Assumption Agreement with the CMA Scholarship Fund (CMASF) and the CGA Education Foundation (CGAEF) in order for the CPAEF to carry on the activities of all three charitable educational entities. The three legacy foundations have amalgamated effective April 1, 2016.

At March 31, 2017, a net amount of $16 was owing to CPAEF (2016 – CPAEF owed $146 to CPABC).

b) The Benevolent Fund is a registered charity under the Income Tax Act. It was established to provide financial assistance to CPABC’s members who are experiencing unusual financial hardships. CPABC appoints the trustees of the Benevolent Fund.

c) The Association of Accounting Technologists of British Columbia (AAT) was a registered society under the Society Act. The AAT Association of Accounting Technologists of British Columbia was formed to protect the usage of the AAT designation awarded to Technologist members of the British Columbia Society. The directors of the Society are the Executive Committee of the Certified Management Accountants Society of British Columbia. There have been no transactions with this entity in 2016 or 2017, and there were no assets or liabilities at end of 2016 or 2017. On April 25, 2016, the Board made the decision to dissolve the Association as protection of the AAT designation is now contained within the CPABC legislation.

CPABC provides administrative and support services for the above entities without charge.



All in $000’s

Summarized Financial Information

CPAEF Benevolent Fund 2017 2016 2017 2016

Financial positionTotal assets $ 3,583 $ 3,429 $ 491 $ 520Total liabilities 44 248 3 11Net assets $ 3,539 $ 3,181 $ 488 $ 509

Results of operationsInvestment income earned during the year $ 242 $ 245 $ 9 $ 10Unrealized gain (loss) 103 (274 ) – –Donations 177 169 14 15Total revenue $ 522 $ 140 $ 23 $ 25

Education funding, benevolence and expenses $ 164 $ 249 $ 3 $ 32 Excess (deficiency) of revenues over expenses $ 358 $ (109 ) $ 20 $ (7 )

Cash FlowsOperating $ 29 $ 323 $ (26 ) $ (12 )Investments (acquired) sold (236 ) (149 ) 24 9Net (decrease) increase in cash $ (207 ) $ 174 $ (2 ) $ (3 )

The amalgamation of CPAEF (formerly CAEF), CGAEF and CMASF occurred on April 1, 2016 and was accounted for using the pooling of interest method. Under this method, the financial statements of CPAEF, CGAEF and CMASF were combined to form the current year figures and comparative figures as if the three entities had been combined since inception.

11. FINANCIAL INSTRUMENTS

CPABC’s financial instruments consist of cash, short-term investments, accounts receivable, long-term investments, and accounts payable and accrued liabilities.

Interest Rate Risk CPABC manages the interest rate risk exposure of its fixed income investments by investing in bonds and guaranteed investment certificates with varying terms and maturity dates. Investments in equity securities are not exposed to significant interest rate risk.

Currency Risk CPABC mitigates the currency risk exposure of its foreign bonds and equities through diversification. The Canadian portion of the portfolio was 89% at March 31, 2017 (2016 – 97%).

Credit and Market Risk CPABC has an investment policy that restricts the types and amounts of its eligible investments, and requires dealing with highly rated counterparties. Risk and volatility of investment returns are mitigated through the diversification of investments in different geographic regions and different investment vehicles.



All in $000’s

12. ALLOCATION OF OVERHEAD COSTS

Expenses directly related to a functional area are charged to that area, including salaries and benefits, contractor costs and all other expenses directly related to the activities of that area. Overheads have been allocated to the various functional areas on the basis of estimated usage as follows:

• Expenses related to premises, including rent, maintenance and amortization – proportionately based on office space used;

• Expenses related to general administration, including insurance, telephone and supplies – proportionately based on number of staff; and

• Expenses related to information technology, including computer equipment and connectivity – proportionately based on number of staff.

The overhead costs allocated per functional areas are as follows:

March 31, 2017 March 31, 2016

Professional development $ 343 $ 303 Regulatory affairs: Public practice registration and review 188 180 All other regulatory affairs 361 302 Student education program 201 284 Member services and engagement 139 130 Communications, business development and recruiting, and external affairs 495 552 Governance and executive office 70 94 Administration support 700 766 Information technology 266 299 $ 2,763 $ 2,910

Chartered Professional Accountants of British Columbia 800-555 West Hastings Street Vancouver BC CANADA V6B 4N6T. 604 872.7222 F. 604 681.1523 TF. 1 800 663.2677 www.bccpa.ca

annual report - bccpa.ca us/annual... · 2017-11-23 · 2016/2017 cpabc annual report 3 dave...

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