[1988] OLRB Rep. December 1281

0721-88-M John Kozak, Complainant v. Local 27, United Brotherhood of Carpen­ters and Joiners of America, Respondent

BEFORE: K. G. O'Neil, Vice-Chair, and Board Members R. W. Pirrie and P. V. Grasso.

APPEARANCES: John Kozak for the complainant; David McKee and Frank Rimes for the respon­dent.

DECISION OF THE BOARD; November 25, 1988

1. This is a complaint under section 85(2) that an audited financial statement furnished by the respondent union (Local 27) is inadequate. Specifically, the complaint states that the audited financial statements for the fiscal year ending 1987 is inadequate because they were not complete for the fiscal year ending 1987 and were not audited by a Chartered Accountant. The union main­tains that the audit which was done of the statements prepared by a C.G.A. (Certified General Accountant) are adequate within the meaning of the section, there being no requirement that a Chartered Accountant perform these functions.

2. The Board heard evidence from Mr. John Edmunds, C.G.A., who prepared the state­ments, complained of, and from Mr. Frank Rimes, Business Manager and Treasurer of Local 27. Mr. Kozak was given full opportunity to present evidence but did not call witnesses. He cross-ex­amined the respondent's witnesses and presented the documents he had received from Local 27 as well as the constitution of the United Brotherhood of Carpenters and Joiners of America, dated January 1, 1987. Both parties made submissions. The Board recessed to consider the evidence and submissions and then dismissed the complaint orally giving the following reasons:

The Board has considered the evidence of the particular inadequacies com­plained of by the complainant at the hearing which we will deal with in turn:

a) The complainant complains that the financial statements only cov­ered six months of 1987. The Board is convinced that the statements cover a full fiscal year which commences on July 1, 1986 and ends on June 30, 1987. The statements at the front of the financial statements say that the statements cover the year ended on June 30, 1987.

b) The complainant says that the statements were not properly audited. This had three aspects as presented at the hearing, as follows. Mr. Kozak asserts that:

i) The union's constitution requires a Chartered Accountant to audit the financial statements.

ii) The individual who performed the audit and prepared the statements is not qualified to do so as he is not a Chartered Accountant and he has been charged under the Public Accountancy Act.

iii) The functions of inquiry, comparison and discussion mentioned in the financial statements do not constitute an audit.

Although we do not, under section 85 have the authority to enforce the union's constitution, we would note that on its face the section of the Constitution to which we were referred, section 40(c), does not state explicitly that the books have to be audited by a Chartered Accountant but calls for local unions having annual receipts amount­ing to $ 25,000 or more to engage a "Certified or Registered Public Accountant for periodic audits, but not less than once a year." Fur­thermore, the Labour Relations Act, section 85 does not provide that an audit has to be done by a Chartered Accountant. The charges which have been laid against Mr. Edmunds are in reference to the matter of licensing under the Public Accountancy Act and refer to an allegation that he was practicing as a Public Accountant. The charges do not appear to challenge Mr. Edmunds' qualifications as a Certified General Accountant or the accuracy of either the financial statements prepared or the audit performed. We do not find that the use of a C.G.A. instead of a Chartered Accountant is evidence of inadequacy of the financial statements. Furthermore, the uncontradicted evidence of Mr. Edmunds is that he performed an audit of the statements, comparing original documents with the control records. The complainant makes no specific allegation of any impropriety in the audit other than his statement that he did not think what Mr. Edmunds had done, as summarized in the statement at the front of the financial statements, constituted an audit. We have no evidence on which we could base a finding that the audit was inadequate or that no audit was done.

c) The complainant further alleges that the financial statements did not provide enough detail. The uncontradicted evidence is that the finan­cial statements were prepared in accordance with generally accepted accounting principles and we have no evidence on which to base a contrary finding.

Furthermore, the items of detail enumerated by the complainant as things that he thought were missing from the financial statements were explained in evidence to the Board's satisfaction and in fact are part of the financial statements. Specifically, Mr. Edmunds explained that petty cash is included in the item "Cash" in the finan­cial statements which is made up of cash in the bank and petty cash in the custody of the bookkeeper. The union operates no welfare fund, another detail that the complainant argued was missing from the statements. Since it maintains no welfare fund, there is no need for it to be in the financial statements. Furthermore, the complain­ant wanted to know whether there were other financial statements that have been prepared that he had not received. The evidence established that there were no other statements.

d) Mr. Kozak has asked us to order the union to have a Chartered Accountant audit the financial statements. Although we have the authority to do so under section 85(2) we would need some evidence of inadequacy of the financial statements provided on which to base the exercise of our discretion to order such a further audit. Since the evidence did not disclose any inadequacy in the financial statements provided, we are unwilling to order the union to have the statements audited by a Chartered Accountant. We understand that the com­plainant's goal is to have the union annually engage a Chartered Accountant to audit the financial statements. In order to achieve that, the complainant would appear to need a legislative amendment or an amendment to the union constitution. We therefore dismiss the complaint.

3. We would also note that the question of whether or not section 85(1) imposes an obliga­tion on the union to have its financial statements audited by a Chartered Accountant was dealt with in the Reginald Robert case, [1984] OLRB Rep. August 1125. Although the actual issue before us in this case was the question of adequacy under section 85(2), the discussion in para­graphs 27 of the Reginald Robert case of the meaning of the word audit in section 85 and the absence of an obligation in section 85(1) to engage a Chartered Accountant is highly relevant to this case. At paragraph 29, in particular, the Board held that the essential component of an audit is some "distance" between the person or group which conducts the examination and the person or group which recorded the accounts initially. A second essential component was said to be the com­petence of the person or group conducting the examination. We are satisfied, in the absence of evi­dence to the contrary, that these two components exist in this case. Mr. Edmunds' qualification as a Certified General Accountant and the fact that he conducted a review of the books and prepared the financial statements according to generally accepted accounting principles, is sufficient basis to find that there was no inadequacy in the audit.

4. We were also referred to a number of other decisions of the Board including the Tony Hossain case, unreported decision dated December 14, 1987, Board File numbers 1169-87-M and 1170-87-M, which dealt with a complaint on similar grounds about the same set of financial state­ments, which was settled. The matter then before the Board was whether or not the complainant could reopen the matter on the basis of a letter received from the Public Accountants' Council. Although the basis for the decision was that the matter had been settled, the Board observed at paragraph 11:

A comparison of the language used in sections 85(1), 85(2) and 86(2) of the Act indicates that the "audited financial statements" contemplated by section 85(1) need not be prepared or certi­fied by a person licensed under the Public Accountancy Act unless the Board so directs. In the absence of such direction, the financial statements which a trade union prepares for its own use (and must be provided to its members upon request pursuant to section 85(1)) may, therefore, be prepared by a C.G.A...

We agree with that observation.