FINDING THE RIGHT ANSWER STARTS HERE

Spring 2008 |

Goodbyebaby boomers,

hello baby bustTop seven tips for a tight labour market

Fraud ERDo you have a plan for

corporate fraud?

Daryl Ritchie, FCACEO, Meyers Norris Penny

A fresh look atyour businessWith spring just around the corner, now isthe perfect time to look at new ways tofine-tune your business. This issue ofMPACT offers all the tools you need. Fromtips on dealing with Canada’s labourshortage to insights on federal tax credits,we have something for everyone.

Here’s a sneak peek at just a few storiesaimed at giving you the inspirationyou’ve been seeking:

> Goodbye baby boomers, hello babybust. With baby boomersapproaching retirement age andbirth rates hitting all-time lows,Canada’s labour shortage is affectingvirtually every organization.

Discover seven key tips to help yourbusiness succeed in today’s tightlabour market.

> Fraud ER. According to a recent survey,more than half of Canadian businesseshave suffered from economic crime.Learn how a fraud response plan canhelp reduce your risks.

> Innovation motivation. Is your businessinvolved in research and development?If it is, you may be eligible for significanttax-savings through a federalgovernment program.

MPACT is about sharing ideas andinformation to help you find the rightanswers for your business. If you havesuggestions for our next issue, e-mail usat mpact@mnp.ca.

In this issueFEATURESGoodbye baby boomers, hello baby bust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Innovation motivation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Rubicon readies for the Golden Age of Pharmacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Fraud ER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Making the grade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

One size does not fit all . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

REGULARSA word from our CEO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Western Perspectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Published by:

Meyers Norris Penny LLP

300, 622 5th Avenue SW

Calgary, AB T2P 0M6

P: 1.877.500.0792

Managing Editor

Karin Holmgrenkarin.holmgren@mnp.ca403.536.5552

Articles in this publication are

neither official statements of

position, nor should they be

considered technical advice for

individuals or organizations without

consulting an advisor.

mnp.ca

A W O R D F R O M O U R C E O

MPACT > Fall 20072

WW orldwide pressure to reducegreenhouse gas emissions isleading to more than an

environmentally conscious public; it’s alsocontributing to a plethora of new industries.One of the fastest growing is the globaltrade in carbon credits. According to theWorld Bank, international carbon salesquadrupled in 2006 to more thanUS$25 billion. In Canada, Alberta isleading that charge: The province was thefirst in the country to introduce greenhousegas legislation on July 1, 2007.

Based on the new rules, utilities and otherregulated companies have three options formeeting new greenhouse gas emissiontargets: (1) implement new technology thatreduces carbon emissions; (2) purchasecarbon credits from a third party; or (3) pay$15 per tonne into a provinciallyadministered technology and research fund.

While many companies have already beenexploring new technologies for reducingtheir emissions, the development process iscomplex and time-consuming —especially for oil and gas-related

industries. As a result, a number ofcompanies are looking to purchase carboncredits from another source.

HOW IT WORKS

According to Alberta regulations, carboncredits can be generated through variousmethods. One attracting the most attentionis through “no-till” practices in theagriculture industry.

“Basically, no-till means that instead oftilling their land, farmers would do directseeding. This process removes carbon fromthe air and stores it in the soil,” explainsLarry Ruud, Meyers Norris Penny’sdirector of intensive livestock.

Larry adds that most businessesgenerating carbon credits will want to usean aggregator or carbon credit trader tohelp market the credits. Aggregators poolthe carbon credits from farmers and othersources, then market them to utilities andother major companies to offset theirown emissions. MNP held informationseminars on the new industry inFebruary 2008.

“Carbon credit trading is an emergingmarket. It rewards farmers and othersfor pursuing more carbon-neutral waysof doing business.”

While opponents to carbon credittrading may fear it becomes a quick-fixsolution for major emitters, Larry pointsout concerns over global warming areso widespread, everyone is under themicroscope to demonstrate theircommitment to the environment. Thecarbon credits market provides afinancial incentive for both buyers andsellers to continue to find ways toreduce overall emissions.

“In Canada and around the world, more andmore companies are recognizing thatpracticing sound corporate socialresponsibility isn’t just good for ourcommunity, it’s good for business,” says Larry.

To find out more about the carboncredits market, contact Larry Ruud,Director of Intensive Livestock at780.842.4815.

Environmental legislation leads to a unique new industry

WesternPerspectives

3

Real estate in the West: When should you invest?Are you a developer looking to embark on a new project? An investor wondering where — and when — to invest?Get the latest trends on real estate investment in Western Canada. Visit www.mnp.ca and click on ourspecial Western Perspectives article, “Sold on opportunity,” located under the MNP Library.

MPACT > Spring 20084

CChronic labour shortages havebecome the norm acrossCanada, with little relief in sight.

The two biggest culprits? Aging babyboomers — and a birth rate too low tomaintain our current population. Theresult is a workplace vacuum with suctionat both ends. While the problem has noquick-fix solution, you can make repairs tohelp stem the flow.

“You really need to look at a variety ofoptions and develop a strategy that makessense for your organization,” advises MNPhuman resource practice leader MerrillBrinton. Merrill offers practicalsuggestions to help you get started.

TOP SEVEN TIPS FOR ATIGHT LABOUR MARKET

1. Keep baby boomers involved.According to Statistics Canada, 2006 sawa record number of 60 to 64 year-olds (45per cent) in the labour force. The increasereflects a wide range of factors, fromCanadians seeking extra income to adesire to stay active.

“By amending or eliminating ourmandatory retirement age, organizationscan tap into baby boomers who’ve beenwith the company a long time and havean in-depth knowledge of thatorganization,” explains Merrill.

Keeping older workers on a part-timebasis, giving them less physical and/orless demanding roles, offering them

contract work, or hiring them asconsultants are all potential ways tohelp alleviate the shortage of workers.

2. Remember to ask “why?” Anotherkey strategy is to take a close look atwhat your company is good at — andwhat makes you profitable.

“In asking why something is done, youmay discover there’s no sound reasonfor it and the process has becomeredundant or outdated,” says Merrill.Hiring an objective third party toassess your existing processes canmake it easier to determine whichchanges should be made.

Merrill says you may also discovercertain tasks can be completed fasterwith the right technology. Do youhave a time-consuming, manualprocess that could be automated? Arethere more efficient ways of doingsomething? Would updating yourhardware, software or machineryallow streamlining or eliminateunnecessary positions?

“It isn’t good enough anymore to say,‘that’s our policy’ or ‘we’ve alwaysdone it this way,’” asserts Merrill.Customers no longer accept thisanswer, and neither shouldemployees. Getting rid of redundantprocesses can eliminate unnecessarypositions or free up time foremployees to pursue moreprofitable initiatives.

3. Explore outsourcing and partnershipopportunities. If your organization isn’tlarge enough to support humanresources, marketing, IT, and other non-core departments, consider outsourcingthose tasks. If you don’t need aspecialist 24/7, you may be better offhiring contractors as needed. Anotherbenefit is that because of theirexpertise, specialists are usually awareof best practices.

Partnering with other companies toshare specialists is another alternative.For example, four or five smallcompanies may pool their resources toshare an IT expert.

4. Consider cross-training. According toHuman Resources and SocialDevelopment Canada, approximatelytwo-thirds of job openings over the nextten years will be in occupationsrequiring post-secondary education.Given the current shortage, there maynot be enough labour to fill demand.

Merrill offers this advice to address thechallenge: “If you can’t fill positions bysearching outside the company, youmay want to recruit and traininternally.” Rotating high-potentialemployees in a variety of roles andtraining them in the skills you need canmake them more valuable workers —and strengthen your retention efforts.

Employees with multiple specialities canfill in when other workers are

unavailable. Training can also helpemployees feel more valued.

“Assets and equipment for runningbusinesses are put through regularmaintenance. Why not our people?They’re really our most valuable assets,”asserts Merrill.

He adds that cross-trained employeesusually stay with their companies longerand can be strong candidates forleadership positions.

5. Identify benefits that can set youapart. In today’s labour market,offering a competitive salary is critical.Yet to really stand out, you need tolook at benefits you’re already offering— and find creative ways todistinguish yourself. For example,given the growing number of peoplecaring for aging parents, you maywant to offer an option like eldercare.

Personal days and flexible work hoursare also important. “If someone asks foran extra day off, I say give it to them.Would you rather lose a good employeefor a day or forever?” says Merrill.

Offering flexible work schedules may beimportant to parents with children;parents may need to start later to droptheir kids off at school.

Creative bonus structures based onperformance and accountability can helpimprove retention and productivity.Bonuses may be based on individual,

team and/or the organization’s effort,with results weighted to account for thelevel of the employee and ability toinfluence outcomes.

6. Promote a creative workenvironment. Technology has openedup many new options when it comesto transforming the traditional workenvironment.

Instead of requiring all your staff to bephysically in the office, you may givethem the option to telecommute oneor more days a week. This can beparticularly attractive to teammembers who live in large urban areas,reside a considerable distance from theoffice, or want to work from home forfamily reasons.

Another option is to hire students orinterns for the summer and allow themto continue working part-time whenthey return to school. This can be aneffective recruitment tool, as you cantest someone’s skills before deciding tohire them full-time. They, in turn, havean opportunity to experience yourmanagement style and culture.

7. Brand yourself. Branding isn’t just forproducts; it’s important to the entireorganization. “People want to contributemeaningful work and believe in thecompany they work for,” explains Merrill,adding, “Your brand, culture and vision areinterrelated and can impact your ability tohire quality candidates.”

To define your organization’s brand, startby asking yourself key questions, such as:Why would someone want to work forus? Do we have a reputation for being thebest in our field? Does our company havean attractive culture?

If you don’t know what’s important in abrand or what your employees value,Merrill suggests having team memberscomplete an employee satisfaction survey(this should be done by an externalresource to ensure confidentiality).

Branding is particularly important whenhiring young people because of theirprolific use of communication tools.Social networking sites such asFaceBook and MySpace allow youngergenerations to communicate quickly.“You can’t afford to have a badreputation among young workers; they’lltell everyone,” warns Merrill.

THE ROAD AHEAD

Looking forward, Merrill admits that whilethere’s no easy solution to the labourshortage, the smartest thing you can do is tostart preparing now. “It’s like saving for yourretirement; start early and save often.”

For more information on overcominglabour shortages, contact MerrillBrinton, Human Resource PracticeLeader and President of the CanadianCouncil of Human ResourcesAssociations at 1.877.500.0780 oryour local MNP office.

5

GOODBYE BABY BOOMERS, HELLO BABY BUSTTop seven tips for a tight labour market

IIs your business one of the manythat contributed to $13.2 billion inresearch and development funding

in Canada in 2006? If it is, how much ofyour R&D investment did you recover?

Across Canada, R&D is clearly on therise: 2006 recorded an estimated $28.4 billion in planned spending from universities, businesses,government laboratories and hospitals.In the past decade, R&D funding hasmore than doubled.

From improved systems, processes andproducts to increased competitivenessin the marketplace, R&D is an economicinvigorator. But innovation doesn’tcome without a price, both in time andresources. The federal government’sScientific Research & ExperimentalDevelopment (SR&ED) Investment TaxCredit Program is helping businessesreduce that cost.

REAL SAVINGS

The savings available to businessesengaging in R&D can have a measurableimpact on your business’ bottom line.While tax credit rates differ based onyour business’ size and the province youoperate in, the potential savings can be

significant. This is evident in theexample below, which comparespotential after-tax savings forcompanies in Western Canada.

According to MNP tax specialist RyanMackiewich, the overall benefits tobusinesses can be impressive: “Fundingissues don’t necessarily have to hold anorganization back from valuableresearch anymore. The after-tax savingscan really open up R&D opportunitiesfor businesses today.”

Ryan adds the tax credits can put realcash in a company’s coffers to helpthem through the early stages ofdevelopment.

DETERMINING ELIGIBILITY

Eligibility doesn’t have to becomplicated. If your organization isinnovative with its systems, processesor products, you may be eligible for the credit.

Detailed eligibility criteria can be foundon websites for the Canada RevenueAgency (www.cra-arc.gc.ca) and theDepartment of Finance Canada(www.fin.gc.ca).

INNOVATION MOTIVATIONCashing in on Canada’s $3 billion in R&D tax incentives

7MPACT > Spring 20086

AB BC MB SASK

Tax savings forsmall privatecompanies*

$38,900 $45,300 $52,400 $48,600

Tax savings forlarge publiccompanies*

$18,070 $24,400 $30,200 $27,300

SR&ED TAX SAVINGS BASED ON A $100,000 INVESTMENT

*Based on 2006 tax rates.

The program is open to Canadiantaxpayers carrying on a business in anyindustry sector, with SR&ED separated intothree categories: basic research, appliedresearch and experimental development.Within these areas, only certain activitiesthat support the research are eligible.

INNOVATIVE RESULTS

Keep in mind that R&D isn’t limited toone industry; it’s produced manyremarkable results from a range ofindustries — and works to improveCanada’s competitiveness in the globalR&D arena.

Investment credits have resulted insome unique innovations. These include:

> A manufacturer who developed anew method of cleaning industrialbulk containers.

> A farmer who designed a newprocess for planting and growingvines to increase root competition.

> A software developer who created a product enabling existingsoftware systems to communicatewith new systems.

> An oil and gas services companythat investigated new ways ofremoving contaminants fromdrilling fluids.

A WORK IN PROGRESS

While the SR&ED program has beenaround since 1985, Ryan points out thatimprovements are needed.

“Historically, there were some toughyears for companies that made claimsand were finding it challenging workingwith the CRA. Companies had to do a

cost-benefit analysis weighing the costof making the claim against the overallbenefit,” explains Ryan.

As the program is designed to stimulateR&D, not inhibit it, the federalgovernment announced a jointconsultation by the CRA andDepartment of Finance in fall 2007.

The consultation welcomed feedbackfrom stakeholders. Its goal: To identifyareas where tax incentives can beimproved and the programadministration can be made moreefficient. Results from the consultations will be unveiled in the2008 budget announcement.

GUIDING YOU THROUGH THEPROCESS

As with other tax incentives,approaching the claim process earlierrather than later can have the bestresults. If your business is embarking ona new initiative, an advisor can assistwith defining, tracking and thenclaiming R&D expenses.

With the SR&ED program, taking theinitiative can make all the difference.Ryan advises looking into the programearly and then making a decision.

“Often, we find claims are anafterthought for businesses, as they’reunaware of the money available throughthis program. If you start early, you canhelp ensure you don’t miss out.”

For more information on the SR&EDprogram, contact Ryan Mackiewich,Tax Specialist at 1.877.766.9735 oryour local MNP office.

9MPACT > Spring 20088

TROUBLING TIMES

During his tenure on the boards, Allan noticeda disturbing trend: Major consolidators suchas Rexall and Shoppers Drugmart werebuying independent Pharmasave stores andbranding them under their own name. Whilethe Pharmasave board wanted to grow thebrand, and had the right to match any bidwithin 45 days, raising the capital theyneeded was becoming a challenge.

When a Pharmasave store in Saskatchewancame up for sale in 2004, Allan and asmall team that included a handful ofPharmasave owners considered buying iton their own. They ultimately had todecline the opportunity — a majorturning point for the group.

“We knew if we couldn’t purchase a store aspromising as this one, something wasfundamentally wrong,” confides Allan.

Gerald Braaten, a partner with MNP’s SwiftCurrent office, was advising Allan on hisPharmasave store at the time. When Allanmentioned his franchise frustration, Geraldoffered to help by introducing Allan and hisboard to Tamarack Capital Advisors, MNP’scorporate finance subsidiary. Gerald’sforesight helped change the course ofPharmasave’s future.

Tamarack was invited to develop a businessplan aimed at growing the Pharmasave brandstrategically. The plan recommended a modelof shared ownership in Pharmasave stores.

Rubicon Pharmacies, a new acquisition entity,would purchase stores coming up for sale,while the vendors would leave money behindas an investment in Rubicon. Through thisarrangement, Rubicon could use the equityto acquire more stores in the future.

“Pharmasave wanted to create a culture thatwould be attractive to young pharmacistswanting to buy into the program. They alsowanted to offer an exit strategy that wouldbuild on an established brand, whilemaintaining a great investment with above-average returns,” explains Gerald.

The Pharmasave board endorsed the planwholeheartedly, and the limitedpartnership of Rubicon Pharmacies wasformed. The Rubicon team included Allanas CEO, chief integration officer BlairPateman, chief operating officer RobertGare, along with a number ofSaskatchewan-based drugstore owners.

The plan proved a success, enabling Rubiconto purchase 13 stores within a couple ofyears. The pace of Rubicon’s growth was sogreat that the group soon had more offersthan they had the capital to match.

Recognizing Rubicon’s need to grow morequickly, the Tamarack team revisited thebusiness plan and developed a forecastingmodel aimed at establishing an effectiveapproach for Rubicon’s financing plan.

“Preparing the forecast analysis helped usgain a clear picture of the costs Rubiconwould incur to reach its goals, and it gavepotential investors and lenders a betterunderstanding why it made sense to getinvolved with Rubicon,” explains CharlesAddison, a senior vice president and directorwith Tamarack Capital Advisors.

Based on the model, Tamarack advisedRubicon to pursue a combination of equityand debt financing. The team connectedRubicon with all the right groups, from banksto private equity entities to Tamarack’s ownPrivate Investor Network.

“Tamarack got us into doors we never wouldhave thought of, and we’re a much moreastute organization because of it,” says Allan.

Tamarack also advised Allan’s team on a critical skill in the world of corporatefinance: How to win over an investoraudience. While Allan jokes he’s becomeRubicon’s “chief talking officer,” he’s clearlytaken to the role. Rubicon has raised morethan $27 million in equity and debt financingunder Tamarack’s guidance.

The financing has given Rubicon the capitalthey need to keep stores under thePharmasave brand — and promote a smoothtransition from one owner to the next.

Recently Rubicon expanded its board ofdirectors from four to seven, reflectingits growing operations.

As all of the directors are investors in thecompany, and many are pharmaciststhemselves, they have a direct interest ineach store’s success.

Allan says Rubicon has already had threeyounger owners join the program.

“They really appreciate having the supportof a team and being able to share some ofthe risks involved. Outgoing owners arealso happy because the store stays underthe Pharmasave name.”

Charles praises Rubicon’s seniormanagement team for their contributionto the overall strategy. “They have awealth of knowledge about their business,which has made our job a lot easier.”

THE ROAD AHEAD

As of January 2008, Rubicon was operating23 stores, and plans to purchase more.Allan says the experience has beentremendously rewarding.

“We’ve achieved exactly what we wanted,and we’re aiming to have 60 stores withinthe next couple of years.”

While Rubicon has come a long way in ashort time, Allan hasn’t lost sight of whatmatters most in business and in life:Relationships. Whether it’s a potentialinvestor or a patient looking to fill aprescription, Allan says it’s all about taking the time to get to knowsomeone personally.

The philosophy is one Allan still practicestoday. When he’s not busy with Rubiconbusiness, Allan can still be found behindthe pharmacy counter of the Pharmasavestore in Swift Current.

“In the end, it’s all about buildingrelationships. A pharmacist needs to knowwhat’s on his patient’s mind, just like abusiness advisor.”

WW e can do everything we’re supposed to — exercise,eat healthy, stay active. But unless we discoverthe fountain of youth, the truth remains: The older

we get, the more we start wearing out.

Baby boomers are beginning to feel that first-hand. In 2005,Canadians in the 40-59 age bracket were averaging 15prescriptions per capita a year. That number is expected tomore than double as boomers approach their retirement years.Allan Chilton calls it the “Golden Age of Pharmacy” — and he’salready getting drugstores prepared.

Offering more value-added services and building strongerrelationships between pharmacists and their patients will bethe keys to success. “Consumers are looking for answers, andwe need to be a source for those answers,” he asserts.

As the CEO of Rubicon Pharmacies, a group of Pharmasaveowners who purchase and franchise drugstores operatingunder the Pharmasave banner, Allan oversees a majorconglomeration. His qualifications are exemplary. Allan hasbeen a pharmacist for more than 37 years, and has co-owneda Pharmasave store in Swift Current, Saskatchewan since 1972.He also served on Pharmasave’s regional and national boards.

HOME VISIT.MNP advisor Gerald Braaten (right ) catches up with Rubicon CEO Allan Chilton in his Swift Current Pharmasave store.

Rubicon readies for theGOLDEN AGE OF PHARMACY

BUILDING YOUR TEAM

Ensuring you have the right people onyour team can have a major impact onyour plan’s effectiveness. “If you’replanning a fire drill, you want a reliablefire warden on every floor to keepeverything on track. The same is truewhen it comes to developing a fraudresponse plan,” explains Greg.

Your team should be made up of subjectmatter experts from all key areas ofyour organization. Each will play acritical role in executing your plan.

Key Team Players

Project Leader > Manages the response plan and

coordinates the internal team.> Reports to the audit committee and

your board of directors. > Usually a representative from your

internal audit department.

HHaving disaster insurance and an evacuation plan in case of fire isstandard in today’s workplace. But how many of us have a plan fordealing with a threat that can be just as devastating — corporate fraud?

According to a recent survey, 55 per cent of Canadian businesses haveexperienced economic crime. Corporate losses due to fraud are estimated to besix per cent of a company’s total revenues.

MNP forensic services leader Greg Draper says fraud is more prevalent than wethink — and when it does strike, its impact is felt on every level. “Fraud canobviously be a major blow to an organization financially, but the effects on otherareas, like reputation and staff morale, can be just as devastating.”

Developing a fraud response plan is an ideal way to help reduce that risk. A planis particularly valuable to organizations that could suffer extensive damage dueto fraud or ethical violations. These organizations can range from publiccompanies that need to report to shareholders to health districts that receivegovernment funding and must account for their spending.

Greg advises that having a fraud response plan in place early can help reduce therisk of fraud, minimize losses if it does occur, and reduce your organization’sliability insurance.

“It’s really a win-win for everyone involved, plus it’s a great cost-savings for your business.”

Human Resources > Provides information on union

agreements andemployment contracts.

> Manages risk related to suspendingand terminating employees.

> Liaises with labour lawyersand unions.

Finance > Provides financial information to

investigate potential fraud cases. > Helps explain the flow of information

and shares information oninternal controls.

IT> Provides details on IT controls

and access.> Facilitates access to computers for

forensic analysis.> Compiles data from the server.

Legal (internal)> Advises management on key issues

such as privacy, corporategovernance, and director andofficer liability.

> Coordinates disclosure related toinvestors, regulators and media.

Legal (external) > Assists with litigation. > Ensures solicitor-client privilege.

Forensic Accountants> Provide specialized expertise on

suspected/confirmed fraud cases.> Ensure independence.

FOUR STEPS TOCOMBATING FRAUD

Once your fraud response team is in place,you can start implementing your planbased on these four steps:

1. Prevention. Most fraud responseplans focus on investigating asuspected wrongdoing. Yet takingaction to help prevent fraud is just asimportant. That’s because preventivemeasures send a strong message to

both your staff and externalstakeholders that your businessrecognizes fraud is a potential risk andis prepared to address it.

“A great way to help reduce your riskof fraud is to ensure you’ve writtenyour fraud response plan into yourorganization’s policies, or at leastreferenced it,” asserts Greg.

He urges organizations to informemployees and other keystakeholders they have a plan in place— and will use it whenever fraud orsome other ethical violation issuspected or verified. Review yourplan annually to help keep it current.

2. Detection. While preventive actioncan help reduce your risk, it can’teliminate it. Implementing anongoing fraud detection program iscrucial to identifying issues earlyand minimizing losses. Given that17 per cent of fraud is uncovered byaccident, conducting targeted audittesting is crucial.

Establishing a whistleblower hotlineis another strategy to help reducethe risk of fraud or detect apotential problem as early aspossible. Tips are by far the mostcommon detection method. Ideally,your hotline should be active 24hours a day, 365 days a year, and beoperated by a third party to ensureobjectivity. Hotlines have beenproven to reduce fraud losses by50 per cent.

3. Investigation. If your organizationsuspects fraud has occurred, assessthe information you have as quicklyas possible.

“Start by identifying whichmembers of your response teamneed to be involved, and have eachone collect whatever relevantinformation they can find,” advises

Greg. If the evidence points towardfraud, you’ll need to investigate further.

Given the seriousness of fraud,any investigation you do must beprofessional — and be viewed assuch by your staff, shareholders,and other key stakeholders.

Ensuring you have externallawyers, forensic accountants andother objective third partiesinvolved is critical. Theinvestigation should also beconducted as promptly as possibleto reduce the risk of informationbecoming lost or hidden.

4.Remediation. If yourinvestigation has confirmed acase of fraud, you may be able torecover some of your losses aswell as costs to your organization.

“It’s important to remember there aresteps you can take to recover at leastsome of the damages,” says Greg.

These options include litigation,asset tracing and insuranceclaims. Greg urges organizationsto ensure they have sound legaladvice to determine which optionis best for them.

Remediation should also involveaddressing the circumstances,such as gaps in your internalcontrols, which contributed to thefraud. This helps strengthen yourpreventive steps for the future.

While fraud is an ongoing threatto every organization, developingan effective response plan is oneof the best ways you can helpreduce that risk — and minimizethe damages if it does strike.

For more information on developing a

fraud response plan, contact Greg

Draper, Forensic Services Leader at

1.877.500.0792 or your local MNP office.

11MPACT > Spring 200810

Do you have a plan for corporate fraud?

point. “If knowledge is power, then theoutput of program evaluation cancertainly place our clients in a positionof power with their current andpotential funders.”

By having timely, relevant, credible, andobjective findings and conclusions onprogram performance, clients are in theenviable position of being theauthorities on their programs. They willhave the information they need to makefuture decisions about their programsthat can improve performance, impactsand efficiencies.

CASE STUDY: CHANGE WORTHMEASURING

The value of measuring bottom-line resultsis particularly evident in Greg’s evaluationof a critical health care program.

A region in northwestern Ontario(NWO) was found to be morevulnerable to children born with FetalAlcohol Spectrum Disorder (FASD) thanthe rest of the province.

A group of partner agencies in NWOacquired funding to establish a regionalFASD clinic. The clinic would providediagnostic and case management services

to children in the region. Previously,obtaining a diagnosis was a challengingprocess as no clinics existed in the area.

As part of the funding agreement, athird party was required to evaluate theclinic’s success in reaching its goals.MNP was chosen to conduct theprogram evaluation, and gatheredinformation from various sources,including personal interviews, focusgroups, and clinic site visits.

MNP’s work resulted in key findings thatillustrated the clinic’s success inreaching its objectives. The clinic wasfound to be having a positive effect onproviding increased FASD diagnoses andcase management services for morethan 60 children. It also eliminated theneed for travel in 26 cases.

“While evaluation is often viewed as areport card, it’s really more like aprogress report, providing the clientwith practical information that can beused to make improvements. Thoseimprovements can have real benefits foreveryone involved, like it did with thisclient,” says Greg.

IMPROVING FORTOMORROW

The need to evaluate — and create aprocess that supports improvement — iscritical to any publicly funded initiative,regardless of size. Greg asserts it’s alsoabout helping organizations succeed.

“Our goal is to be objective and to giveour clients suggestions on how toimprove both their organizations andtheir management practices today andfor the long haul.”

FFrom health care initiatives to our national defences,publicly funded programs have a huge impact on ourcommunities — and can account for millions of tax

dollars in funding.

Greg Lamothe, a management consultant with MNP’s AdvisoryServices team, says evaluating these projects is crucial giventhe integral role they can play in helping to improve access tohealth and social services, reinvigorate economies, boost localemployment, and create regional economic balance.

“When you think about the lasting social effects publicly fundedprograms can have, it’s critical to ensure those funds are beingspent as efficiently and effectively as possible,” says Greg.

WHAT EVALUATIONS REVEAL

Evaluations are important whether a program is receiving $10,000in funding or $1 million. Ultimately, the funding body and thepublic want a bottom-line measure of a program’s success.

“The term ‘value for money’ audit is often used,” remarks Greg. “Inessence, that means providing an indication of how much bang thegovernment got for its buck.”

Greg adds a broader goal is to understand how a program hasimpacted participants, partner agencies and the community.

These benefits can be used to empower those accountable for theprogram. Greg employs a well-known metaphor to make this

1. Enhanced accountability. Provides

stakeholders with valuable information about

program performance and spending.

2. More informed decision making. Helps

directors, policy makers, managers and funders

make better decisions about program direction.

3. Increased knowledge and skills. Provides a clearer,

more objective understanding of the program

being evaluated.

4. Social change. Helps promote, defend, or oppose

specific methods, approaches or programs and

shape public opinion.

5. Increased cohesion and collaboration. Enhances

consistency and communication between

departments or organizations and builds energy and

enthusiasm within the program team.

TOP FIVE BENEFITS OF EVALUATING

For more information on how toevaluate programs effectively,contact Greg Lamothe,Management Consultantat 1.877.500.0795 or yourlocal MNP office.

13MPACT > Spring 200812

the public, with an invitation forcomment submissions to the CICA byJan. 31, 2008.

“The current GAAP principles are toocomplex for many of Canada’s 1.7 millionowner-managed businesses,” explainsLayne. “The new proposed frameworkwill be based on the existing CICAHandbook, but will cater specifically tothe unique needs of these enterprises.”

WHO WOULD BE ELIGIBLEUNDER FOME?

To be eligible to adopt the Framework forOwner-Managed Enterprises (FOME), theenterprise must meet two primaryconditions: (1) it must not be publiclyaccountable; and (2) it must not havesignificant external users.

It’s important to differentiate betweenprivate enterprises with significantexternal users (which the AcSB is currentlyreviewing standards for) and owner-managed businesses without significantexternal users. The CICA’s draft frameworkis being proposed for the latter group.

Significant external users are generallydefined as parties such as investors orlarge creditors who do not haveindependent access to a company’sfinancial information. Layne cautions ablack-and-white differentiation betweenthe two doesn’t always exist. As aresult, the marketplace would likelydetermine who qualifies under theproposed framework.

“There are so many case-by-casescenarios that the reporting procedureswould likely be based on whether the useror creditor requires GAAP or will acceptother than GAAP financial statements, inwhich case the framework may providean alternative.”

Currently, the CICA has identified thatprivate enterprises can borrow up toapproximately $250,000 on the basis ofcredit scores and personal guarantees,indicating they generally do not rely onfinancial statements for capitalallocation decisions. One financialinstitution even indicated it’sconsidering increasing its threshold forrequiring GAAP statements to loans ofmore than $2 million.

Of Canada’s 2.2 million privateenterprises, approximately 1.7 million(86 per cent of SMEs) borrow less than$250,000.* This means they essentiallyhave no significant external users, andtherefore would qualify under theproposed FOME.

Other identifying characteristics ofowner-managed enterprises for whichFOME is being proposed include:

> Usually no qualified accountant on staff.

> Company records kept by anowner-manager or bookkeeper.

> Reliance on financial statements toconfirm assessments ofperformance, assets and debt.

> Financial statements support

applications for banking, financingor income tax filing.

WHAT DOES THIS MEAN FORYOUR OWNER-MANAGEDENTERPRISE?

The proposed accounting framework isintended to be a more simplified,straightforward set of standards thatdeals with transactions and eventscommon to owner-managed businesses.If the standards become “generallyaccepted,” it is hoped this wouldprovide a basis for public accountantsto provide assurance on those financialstatements prepared under theproposed FOME.

“We’re hoping to get to the point wherepublic accountants may proceed withan audit or review engagement forenterprises using this accountingframework, even though the FOMEdoesn’t comprise standards approved bythe Accounting Standards Board rightnow,” explains Layne.

It is hoped the new framework will beissued in spring 2008. Details about thecurrent draft framework can be obtainedfrom your MNP business advisor.

For more information on the proposedaccounting framework for owner-managed businesses, contact LayneMcFarlane, FCA at 1.877.500.0784 oryour nearest MNP office.

OOne size, or set of reporting standards, used to beappropriate for all business entities. This requirement ischanging in Canada, the United States and internationally.

Following Canada’s announcement to adopt InternationalFinancial Reporting Standards (IFRS) for public companies by2011, the Accounting Standards Board (AcSB) issued a discussionpaper and invitation to comment regarding a proposed course ofaction for developing Generally Accepted Accounting Principles(GAAP) for private enterprises with significant external users.

Issued in May 2007, the AcSB discussion paper identified thatmany enterprises do not have any external users of GAAP financialstatements. One potential solution may be to develop a simplifiedset of non-GAAP standards for these enterprises.

The Canadian Institute of Chartered Accountants (CICA) followedup by initiating a project to develop an accounting framework forthe owner-managed enterprises. CICA established a review group toprovide comments in developing the framework. Layne McFarlane,FCA, an assurance partner with Meyers Norris Penny LLP, wasappointed to the group. The proposed framework was released to

MPACT > Spring 200814 15

* CICA, Framework for Owner-Managed Enterprises, November 2007.

MPACT is published two times a year by Meyers Norris Penny. It provides information that is necessarily general in nature. For guidance on your individual situation, we recommend you consult your MNP professional.

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MNP is the only Top 10 national chartered accountancy andadvisory firm based in Western Canada. Like you, we live in

the West and believe in its potential. MNP provides clear,straightforward business advice with a local perspective. It’s knowing Western Canada, your business, and you.

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