Hopes of national unification of the Canadian accounting profession have taken a serious — perhaps fatal — blow following a decision by two key players from Ontario to terminate merger discussions.
The Certified Management Accountants of Ontario and the Certified General Accountants of Ontario have walked away from talks, and the latter’s departure has had a domino effect across the organization as several jurisdictions, along with the national body, have followed suit.
The discord appears deeply rooted, with CGA Ontario alleging lack of member protection for all legacy bodies, and lack of fair and equal treatment in provincial discussions about the proposed unified body under the Chartered Professional Accountant (CPA) banner.
Moreover, it accuses the Canadian Institute of Chartered Accountants (CICA) and Certified Management Accountants of Canada (CMA Canada) of trying to plow ahead with a national merger before the provinces were ready — something those bodies vehemently deny.
"CGA Ontario entered the merger discussions with the belief that unification of the profession, under the right circumstances, was an opportunity worth pursuing," chief executive officer Doug Brooks told The Bottom Line.
"The right circumstances are defined as ‘satisfying the public interest and members’ best interests.’ This implies that all the members of the legacy bodies can rightfully expect the protection of their rights, and to receive fair and equal treatment in the new body. In our view, these circumstances were not present at this time."
Brooks also charged that "there were no enforceable commitments to members of legacy bodies. A good example of this is mutual recognition agreements. There was no agreement to ensure that all members of the new body would benefit from new or renewing agreements. We were unable to get a commitment on this."
Rod Barr, president and CEO of the Institute of Chartered Accountants of Ontario (ICAO) had a much different take. "There is an equal place for every accountant within the proposed new CPA framework and we believe that, had the parties continued discussions, the remaining few minority rights issues would have been resolved."
As for concerns about recognition agreements, he countered: "A new [CPA] body would have to negotiate with the various international accounting bodies regarding any new or existing agreements. It is impossible to know in advance precisely what another accounting body in a different country would require to achieve mutual recognition."
Brooks also accused the CICA and CMA Canada leadership of wanting "to push ahead with voting at provincial bodies and merge national bodies before appropriate due diligence was completed, and before provinces had decided their future." Issues such as national governance, roles and responsibilities and member protection measures had not been agreed to, he said.
"I don’t see the merit in those allegations at all," said Kevin Dancey, CICA’s president and CEO. "We had the unification framework out in January. The whole concept of that framework is that the three bodies agreed on it at the national and provincial level. Then that became the framework for unification to happen within each province. We were very respectful of the provincial processes that went after.
"In terms of working through a lot of the national governance issues, and the roles and responsibilities — we did a lot of that over the course of last summer [and] into the fall in terms of how the provinces and national bodies would work together."
CMA Canada president and CEO Joy Thomas went further, saying Brooks’ accusations are "absolutely not the case. The provinces are ahead of the national body in terms of merger activity." She added that the national bodies have a responsibility to prepare for CPA Canada to support provinces such as Quebec, whose accounting bodies have unified under CPA.
"The steps we’ve taken in terms of due diligence are the appropriate steps at the appropriate time," Thomas said. "We just continue to try to move forward."
A CMA Ontario official was not available for comment, but the organization released a statement upon withdrawing from talks that read, in part: "Despite the best efforts of the three organizations, agreement on key issues associated with the proposed unification, including protection of minority rights and the appropriate legal structure, could not be resolved to the satisfaction of all parties."
Barr said that, in spite of the long list of issues CGA Ontario and CMA Ontario cited, he didn’t perceive there was a major breakdown in negotiations.
"From our perspective, the three parties had made significant progress and there were no real insurmountable barriers to making unification a reality," he said. "We are disappointed that after months of discussions and what we believed to be significant progress, the other parties left the table.
"The ICAO continues to be an active participant in working with the other parties across the country to ensure Ontario’s voice is heard in the ongoing unification discussions and to protect our members’ interests," Barr added.
The Certified General Accountants Association of Canada, along with CGA bodies in British Columbia, New Brunswick, Nova Scotia, Saskatchewan, P.E.I. and Newfoundland and Labrador followed Ontario’s lead and withdrew from talks in their respective jurisdictions — representing more than half of CGA membership.
"Clearly, we could not remain in discussions when most of our affiliates were no longer involved," said CGA Canada president and CEO Anthony Ariganello. "While there was progress made over the course of the discussions at the national level, it was not sufficient to address issues that were critical to CGAs both at a provincial and national level."
But Dancey at CICA disagrees, saying the discussions had been "very positive," and the issues were "all resolvable."
The decision by CMA Ontario to terminate discussions has not led to an exodus of other CMA bodies from talks. Nevertheless, Thomas conceded, Ontario’s withdrawal will exclude 42 per cent of the CMA membership from unification.
"CMA Canada is definitely disheartened by CMA Ontario’s decision," she said. "I’m disappointed that Ontario dropped out because I do believe the issues are resolvable, because they have been resolved in other provinces."
Despite the latest developments, an outside observer predicts that a full-on national unification will still eventually happen.
"It’s not going to just come to a halt," said Umashanker Trivedi, an associate professor of accounting at York University’s Schulich School of Business in Toronto. "It’s just that it will be a longer, messier ride, and will create a [temporary] patchwork across Canada. Different institutions will get into this merger process at different points in time, depending on when it suits them.
"The underlying economic pressure is still there for some kind of a consolidation to happen," said Trivedi, who earned his CA designation in India but is not a member of any of the three major Canadian accounting bodies.
Dancey was asked about a possible patchwork quilt of CPAs across Canada — excepting the unification success already achieved in Quebec (Editor’s Note: in a late development, P.E.I.’s CMAs and CAs are the latest to release a provincial merger proposal) — with most CGA associations missing; along with CMA Ontario, and a key CA jurisdiction in Alberta.
"We may not be able to have all 40 bodies join in on unification at the same time, but I do still believe that is a very powerful value proposition for the members out there. We have bodies engaged in discussions in every jurisdiction. If this proceeds [CPA] would be the only body with a designation in every province.
"And I’m quite comfortable that as this proceeds people will see the benefits of success," Dancey added.
For now, however, the position of various bodies across Canada remains mixed.
"Certainly a key point in terminating discussions was the recognition that without CGA Ontario — as well as CMA Ontario — as part of the merger process, this was not truly a national initiative, the whole premise of the unification framework," said Gordon Ruth, CEO of CGA-BC in Vancouver. "Many of our members also told us directly during our town halls that this had to occur nationally."
Richard Rees, CEO of the Institute of Chartered Accountants of British Columbia (ICA-BC), expressed disappointment that several CGA bodies have withdrawn but added that "we have confirmed our commitment to continue discussions with CMA BC as part of a national initiative." ICA-BC recently completed a member vote in which 52 per cent of respondents supported unification, 39 per cent were opposed and nine per cent said the group’s council should decide.
Trudy Dryden, executive director of CGA New Brunswick in Moncton, noted that developments across Canada, but particularly the withdrawal of CGA Ontario and CGA-BC, prompted her group to act in a similar fashion, even though "we still believe in national unification."
This is not an irrevocable decision, Dryden said. "We had a conference call with our CMA and CA counterparts to let them know our decision, and also to keep the doors open. We’ve always had a very good working relationship with [them], and did not want to lose that. So if the landscape changes across Canada, we will certainly be back in discussions."
The Institute of Chartered Accountants of Saskatchewan (ICAS) indicated in a press release that as a result of developments across the country, "we believe that deferring a member vote on unification until a later date remains the appropriate course of action."
The ICAS’ provincial colleagues in Alberta withdrew from unification discussions in February, citing lack of member support. However, the boards of CGA Alberta and CMA Alberta continue to support unification, and have presented a provincial proposal to their respective members, who have until June 30 to vote.
Despite the withdrawal of most CGA bodies, CGA Alberta CEO John Carpenter remains bullish on unification. "We’ve had a good dialogue here in Alberta, laterally with the CMAs, but initially [too in] those conversations including CAs," said Carpenter. "We’re now confident we can put the question to our members [who are] pretty positive about how we might go forward with our unification process here."
Quebec unification bucks trend
Having legislation in force to create a merged accounting body in Quebec "is a dream come true," says the head of the organization representing the province’s newly-unified accountants.
Chartered accountants, certified general accountants and certified management accountants are now under a single banner, with its members all chartered professional accountants (CPAs) in addition to retaining their legacy designations.
"We are really pleased by the fact our government has passed the bill and [it] has been assented to. It was the only way to ensure protection of the public through a single gateway — to have sets of regulations based on the highest professional and ethical standards of the three organizations," said Daniel McMahon, first chief executive officer of the newly official Ordre des comptables professionnels agréés du Québec, or CPA Quebec.
"We have been involved in unification discussions for 40 years. It’s the fifth attempt in Quebec, so this is the good one."
Asked why Quebec’s CAs, CGAs, and CMAs appear to have gone through the logistics of unification relatively easily compared with other jurisdictions in Canada, McMahon attributed much of that to provincial government support.
He noted that in 2009, when all professional accountants in Quebec were provided public accounting rights, "the government was pushing us to unify the profession, because for them, there was no justification having three bodies supposed to do exactly the same thing."
The latest initiative began in November, 2010, and by last September the three professional organizations in Quebec had successfully negotiated and notified the government of their support for a merger.
"The status quo isn’t possible anymore," stressed McMahon, who added that "20 per cent of the accountants in the country are now CPAs, so we need to find a way to align ourselves in the very near future."
He is concerned about problems with the unification process in several Canadian provinces, pointing out that there are now four designations across Canada instead of three; this will impact CPAs from Quebec who go to work in other provinces or territories where CPA doesn’t exist.
"For our members, there will be no difference in the short term, because we have an agreement with CGA Canada, CMA Canada and the CICA in terms of mobility. For at least a year, we are continuing with the ability to have three links. [But] in the long run there’s no way for us to be linked with three national organizations. We’ll have to decide which national organization we belong to. We will choose one," he said.
Survey supports merger
A merged national accounting profession has received strong support from many of Canada’s prominent business and thought leaders. They were participants in a recent survey commissioned by the three major accounting bodies, when CGA Canada was still involved in negotiations.
A total of 27 Canadians, plus the leader of the American Institute of Certified Public Accountants, participated in the survey. They read through the proposal A Framework for Uniting the Canadian Accounting Profession — the same report provided Canadian professional accountants last January — and then provided individual interviews with independent consultants, who reported their observations to the accounting bodies.
A major theme was the need for a united voice on the international stage.
Sheila Fraser, former auditor general of Canada, and currently a director with the Manulife Financial board of directors, said that "globalization is inevitable and there’s a lot of learning ahead; [a unified profession] helps us do that together and all at once."
David Mitchell, president and chief executive officer of the Public Policy Forum in Ottawa said that "this is a good opportunity to brand [the Canadian accounting profession] as a pre-eminent global accounting designation."
Catherine Swift, president and chief executive officer of the Canadian Federation of Independent Business in Toronto, emphasized the importance of having the profession unite, rather than fight each other. "There’s a trust issue at stake here; this has to be done but done well or the accounting profession’s reputation will be questioned. The three bodies can’t be seen to squabble when their professional image is at stake."
"CPA is a global brand and a good solution to the requirement for a fresh start," says David Brown, a partner with Davies Ward Phillips & Vineberg LLP in Toronto, and a former chairman and chief executive officer of the Ontario Securities Commission.
Bitterness in wake of break-up
The simmering discord over unification discussions in the accounting profession has started to boil. The Institute of Chartered Accountants of Ontario has hit back at CGA-Canada and CMA Ontario over what ICAO says are comments that suggest it has been "acting illegally" and deceiving its membership.
"Their statements against moving forward have undermined our integrity, disparaged the ICAO and its members, and created the illusion that unification faces insurmountable barriers. We have put these organizations on notice that their comments are incorrect, and in direct violation of agreements signed by all parties at the outset," ICAO warned in a recent notice to members.
In CMA Ontario’s monthly e-newsletter, president and CEO Merv Hillier had written: "It became clear that the required support of the CA membership was not going to be achieved any time soon. We believe that the majority of CA members in Ontario were not and are not interested in merging with the CGAs and CMAs."
Hillier was not available for follow-up comment.
CGA-Canada had indicated in a member announcement that, according to its legal review and that of CGA Ontario, each of the three Ontario accounting bodies would require a two-thirds majority binding vote before amalgamation could take place. They questioned whether there could be enough ICAO member support to achieve such a threshold, saying it was "very low."
The ICAO countered that, as corporations without share capital, neither it nor the other bodies in Ontario are subject to the Ontario Business Corporations Act. It insists unification can only be effected through legislative amendments.
"CGA Ontario maintains that, based on a legal opinion, each accounting body must have a vote with two-thirds approval of members voting. Moving forward with unification in Ontario under any other circumstance was not legally possible in our view," said CEO Doug Brooks. "Of course, the final decision regarding unification would be with the Government of Ontario through legislation after all three bodies respected the laws of Ontario to arrive at their decision."
CGA-Canada’s president and CEO Anthony Ariganello reiterated that "our position is simple: We respect the legislative requirements and that CGA would comply with the provisions of the current Act, the way it stands today."
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