Public proceedings of the Board
Meeting of the Board of Directors on May 28, 2014
Board members present
John McCamus (Chair); Aly Alibhai; Nancy Cooper; Michelle Haigh; John Liston; James McNee; Derry Millar; James Yakimovich; Robert W. Ward (CEO/Ex Officio)
Bonnie Lysyk, Auditor General for Ontario; John McDowell, Director, Office of the Auditor General; and Karen Kinnaird and Eleonora Reznik from Ernst and Young
Sue McCaffrey, Stephanie Mealing, Michelle Séguin, Vince Correia, Glenor Shiu
1. Meeting agenda
The meeting agenda was adopted.
2. Disclosure of conflict of interest
No conflicts of interest were identified.
3. Board reports
3.1 LAO’s unaudited financial statements for the year ended March 31, 2014
The Vice-President and CAO introduced these statements and explained that they require Board approval before the Auditor General can release the Auditor’s Opinion Report.
The Vice-President and CAO then introduced Bonnie Lysyk, the Auditor General of Ontario, John McDowell, Director, Office of the Auditor General, and Karen Kinnaird and Eleonora Reznik from Ernst and Young.
The Vice-President and CAO noted that:
- any minor adjustments to the financial statements will be highlighted for the Board for its next meeting, which will receive the audited financial statements.
- its appendices set out LAO’s and MAG’s respective views on the treatment of LAO’s operating surplus
- the $14 million excess of revenues over expenditures for 2013/14 will flow through as an operating surplus on the statement of operations, and will be included in the net assets of the corporation as an accumulated surplus
- the statements show the previous year’s revenue increases from the Law Foundation of Ontario (LFO) and the Government of Ontario, and show decreased expenditures, primarily in the certificate program.
The Auditor General said that her office is responsible for LAO’s audit and that it had retained Ernst and Young to act as its agent. She extended her congratulations to LAO on a very successful year. She also noted that some minor issues were outstanding, but that in future, communication would be better during the planning process between the Auditor General’s Office, the auditing agent and LAO’s Board. The following issues were outstanding:
- transition to not-for-profit accounting standards
- the operating surplus and how to treat it
- extra funding from the Government of Ontario for the next three years and disclosure requirements of deferral of the unspent funds
Karen Kinnaird presented the Ernst and Young audit results to March 31, 2014, and reported that the financial review of LAO’s unaudited financial statements is underway. She advised that:
- the auditors are satisfied with LAO’s internal control procedures, how the new family funding is being recognized as revenue in the financial statements and the payroll conversion
- outstanding matters include a legal letter as well as a management letter; more information about the new funding and the information to support the deferral; various areas of required communication
- Ernst and Young were pleased with the cooperation they obtained from staff, and will recommend an unqualified Auditor’s Report to the Office of the Auditor General of Ontario.
The Board met with the Auditor General and the audit team in the absence of staff
The Board approved LAO’s unaudited financial statements for the fiscal year ended March 31, 2014.
3.3 LAO’s unaudited pension plan financial statements for the year ended December 31, 2013
The Vice-President and CAO introduced Doug Holt of Hilborn LLP and presented the unaudited fund financial statements for the trust fund of the LAO employees’ pension plan.
She noted that this audit is on the assets within the plan, not any pension plan liabilities. Its assets have increased by $10 million—$5 million contributed by LAO and employees, the balance through improved market conditions.
Doug Holt reported that the Financial Services Commission of Ontario (FSCO) and Canada Revenue Agency (CRA) require an actuarial valuation this year on the status of the liabilities and risks within the defined benefit component. He also reviewed the notes to the fund financial statements and highlighted changes from prior years.
The Vice-President and CAO reported that LAO’s defined benefit plan is underfunded by about $50,000, based on a draft actuarial valuation. She will present the actuarial valuation to the Audit and Finance Committee in September, with a recommendation on how to address the unfunded component.
The Board approved the LAO employees’ pension plan unaudited financial statements for the year ended December 31, 2013.
3.5 Clinic Information Management System (CIMS) project funding report—amendment to budget
The Vice-President and CAO presented this report and noted that staff have identified a project budget shortfall of approximately $611,000. Staff recommend reviewing the system requirements to offset about $200,000 of this shortfall, and funding the balance of the CIMS project shortfall (approximately $400,000) from clinic surpluses.
The Board approved the CIMS Project budget of $2.991 million and the funding as described in the report; and authorized the President and CEO to sign the contract between LAO and Net Dexterity for the implementation of a Microsoft CRM system for clinics.
3.7 Defined contribution pension plan—revised pension plan text
The Vice-President and CAO reported that the pension plan text needs to be amended to reflect recent legislative changes to the Ontario Pension Benefits Act and Regulations as well as Board-approved pension enhancements that were part of the new Employee Compensation Framework.
The Financial Services Commission of Ontario (FSCO) required this new text by June 16, 2014, and LAO has changed the text with the assistance of Standard Life.
The Board approved the Legal Aid Ontario Employees’ Pension Plan, as amended; and authorized the President and CEO to sign the appropriate documents to be filed with the Financial Services Commission of Ontario.
The Chair commented that:
- the Auditor General was very complimentary about LAO
- the Auditor General had raised the possibility of adding additional elements to the audit in the future
- the audit team had suggested giving further thought to the timing of presenting the Board with the unaudited and audited financial statements.
With respect to looking beyond the substantive audit and adding an expanded audit that includes an external review of LAO’s internal controls, the Vice-President and CAO responded as follows:
- Deloitte’s last internal control review, prepared about four years ago, focused mainly on the risk of fraud through the lawyers’ portal, and LAO has implemented most of its recommendations.
- With the support of LAO’s internal audit unit, LAO will review each component of LAO’s internal controls within the next three to four years, using the Certificate of Assurance as a guide.
- She will present a detailed plan reviewing LAO’s internal controls to the next meeting of the Audit and Finance Committee.
The Chair suggested that the Board would adjust its timing to accommodate the needs of the auditors.
The Board congratulated the Acting Director, Finance.