CPA Ontario strengthened its net asset position in fiscal 2017, which at March 31, 2017 stands at $59.9 million (2016: $44.7 million). The change in net assets is due to the excess of revenues over expenses for fiscal 2017, $15.5 million, slightly offset by remeasurement gains and losses from pension and employee future benefits. Higher revenue from almost all revenue streams and a focus on managing costs effectively contributed to the $15.5 million excess of revenues over expenses.

CPA Ontario’s capital comprises net assets invested in land, building and equipment, and other capital assets, internally restricted net assets and unrestricted net assets. In fiscal 2017, CPA Ontario established an operating reserve of $21.5 million as internally restricted net assets intended to support the organization’s day-to-day operations in the event of unforeseen shortfalls or special projects. The reserve may also be used with approval from Council for one-time, non-recurring expenses that will build long-term capacity, such as research and development, or investment in technology or other infrastructure. CPA Ontario remains in a strong financial position to meet unforeseen contingencies and to invest in the advancement of the profession.

CPA Ontario generated cash flow from operating activities of $13.2 million in fiscal 2017 (2016: $0.3 million) while its investing activities used $16.7 million (2016: $8.2 million).

The working capital position, defined as current assets minus current liabilities, is healthy at $31.3 million (2016: $14.3 million). The increase in working capital over the prior year is due mainly to the fiscal 2017 operating surplus. Any working capital in excess of CPA Ontario’s normal operating needs is invested in accordance with CPA Ontario’s investment policy approved by Council. With the exception of real estate, the majority of the organization’s assets are in liquid or near-liquid investments.

CPA Ontario believes that the current cash and investment position, combined with anticipated cash flow from operations is sufficient to meet working capital and capital expenditure requirements.

CPA Ontario operations in fiscal 2017 resulted in a surplus of $15.5 million compared to a deficit of $4.4 million in fiscal 2016. The significant improvement in financial results is due to membership growth, robust growth of enrolments in CPA programs, student fees from new students, a focus on managing costs, and the absence of integration costs. These factors helped CPA Ontario absorb the loss of $7.6 million in contribution margin from legacy education programs in fiscal 2017, as the phase-out of these legacy programs was completed in fiscal 2016.

Total revenues of $97.1 million in fiscal 2017 (2016: $91.8 million) was derived from three main sources: member dues and fees, education, and professional development. These three revenue sources represent 96% of total revenues in fiscal 2017 (2016: 96%).

Member dues and fees. CPA Ontario collected $46.3 million in dues and fees from members in fiscal 2017 (2016: $40.8 million), representing 48% of CPA Ontario’s revenues (2016: 44%). Member dues and fees provide funding for CPA Ontario’s regulatory functions related to protecting the public trust, such as practice inspections; investigations and responses to complaints; and activities related to the Public Accountants Council for the Province of Ontario. In addition to our regulatory role, CPA Ontario delivers a wide range of member services, including ethics counseling, career services, networking opportunities, and affinity programs. Member dues and fees also help enable CPA Ontario to invest in technology and process improvements to enhance the member and student experience, and to deliver economies of scale in the years ahead.

Education programs. Education program revenue and student fees totalled $35.8 million (2016: $37.2 million), of which $22.3 million (2016: $12.9 million) was revenue from the CPA preparatory course and the professional education program; nil (2016: $17.1 million) was from legacy education programs, and $13.5 million (2016: $7.2 million) was from student fees. Revenue from legacy education programs ceased in the prior year as the phase-out of legacy programs was completed.

This year our education team focused on ramping up new CPA program registrations and on helping legacy students complete their transition into the CPA preparatory course and the professional education program. Overall, students enrolled in 8,949 preparatory courses (2016: 6,328) and 15,543 professional education program modules (2016: 9,550). The contribution margin from CPA programs in fiscal 2017 is $7.6 million, or 34.2% (2016: $4.3 million, or 33.6%). The significant increase in contribution margin dollars is due to higher enrolment in both CPA preparatory courses and the professional education program.

The increase of $6.3 million in student fees this year is due to two main factors. First, in fiscal 2017 all CPA Ontario students had to pay a full student fee, whereas in the prior year some students benefited from a fee holiday during the unification period. Second, the harmonization of the student fee rate resulted in a significant increase in student fee revenues from a segment of the student population.

Professional Development (PD) programs. PD revenue increased by $0.8 million, from $10.1 million in fiscal 2016 to $10.9 million in fiscal 2017. The increase in revenue was driven by new emerging channels of delivery, including webinars and seminar broadcasts, and higher affinity program sponsorship revenue from a new affinity partner contract.

Expenses. Total expenses for fiscal 2017 were $81.6 million compared to $96.3 million in fiscal 2016. The prior year included $14.4 million in one-time integration-related expenses. Therefore, expenses related to ongoing operations were slightly lower in fiscal 2017 compared to the prior year ($81.6 million vs. $81.9 million). These expenses include spending on regulatory work, the delivery of education and professional development programs, member counseling and support services, and the promotion of the CPA brand to students, employers, government and the public. Expenses in fiscal 2017 also included new spending in strategic areas, member research, risk management, and technology investments. Economies of scale were achieved in fiscal 2017 as lower expenses from operations supported higher revenues.

Risk management framework: CPA Ontario is committed to maintaining an Enterprise Risk Management (ERM) framework that ensures risk management is an integral part of the organization’s activities. The CPA Ontario ERM framework is guided by the following key principles:

• Governance and Oversight. Ensuring that we have the proper oversight on risk and that risk decisions are made within the framework of the organization’s risk appetite.
• Infrastructure. Confirming that we have the skills, tools and templates to enable risk identification, assessment and management.
• Practices. Applying the ERM process for identifying, assessing, managing, monitoring, reporting, and escalating key risks.

The ERM framework is supported by a policy that establishes key risk management roles and responsibilities for the organization.

Risk governance. Risk oversight of CPA Ontario activities resides with Council and the Executive Team.

• Council oversees and reviews the effectiveness of the organization’s risk management program, reviews key risks and mitigation strategies, approves the ERM policy and, together with the Executive Team, determines the organization’s risk appetite. Council also assesses the strategic plan and objectives to ensure the organization’s plans are aligned with its articulated risk appetite.
• The CPA Ontario Executive Team actively participates in the ERM process by reviewing key risks and ensuring effective management of such risks. The Team supports the integration of ERM with strategic management and decision-making processes.

Risks to CPA Ontario. CPA Ontario is exposed to a variety of enterprise risks in the course of normal operations that can impact the organization and execution of strategic initiatives. These risks stem from the complex and rapidly changing environment in which the organization operates. CPA Ontario regularly identifies and assesses its key risks to ensure they are effectively managed. Key risk areas include infrastructure, member and student experience, geopolitical and economic shifts, and changes in regulations. Overall risk categories for CPA Ontario include brand and reputation, strategic, operational, technology, financial and human capital.

We are managing these risks through rigorous project management, enhanced customer service, and prudence in fiscal management, including building a strong balance sheet to mitigate against economic contingencies. The new 2017 Chartered Professional Accountants of Ontario Act will also strengthen our organization and the profession to benefit members, students and the public interest.

Financial risks. In the normal course of business, CPA Ontario is exposed to financial risks that have the potential to adversely affect its operating and financial performance. The risks associated with CPA Ontario’s financial instruments are: credit, liquidity and market (i.e., currency, interest rate, and other price risk). Please refer to the audited financial statements for the year ended March 31, 2017, for a description of CPA Ontario’s exposure to these financial risks.

CPA Ontario manages these risks in accordance with its investment policy. The objective of the policy is to reduce volatility in cash flow and earnings and to safeguard assets by setting the parameters for the asset quality and proportion of fixed income and equity securities in which the organization invests. Based on the nature of the investments and the constraints imposed by the organization’s investment policy, it is management’s opinion that CPA Ontario is not exposed to significant risk in respect of financial instruments.