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CGA_Ontario_pre-budget_submission_2011 by nuhman10


									                            Ontario Ministry of Finance

                                Pre-Budget Submission

                                        Presented to

                 The Honourable Dwight Duncan,
    Minister of Finance, Chair Treasury Board and Chair of the
                  Management Board of Cabinet


                 Certified General Accountants of Ontario

                                     January 31, 2011

(sent via email to
                                  List of Key Recommendations

First Priority: Managing the Deficit

    -   Accelerate deficit reductions over the next three years.
    -   Return to balanced budgets prior to 2017-18.
    -   Reduce accumulated debt by minimum of $2 billion annually.

Specific Measures to Manage the Deficit:

    -   Conduct cost/benefit analysis of future initiatives funded through the stimulus funding
    -   Maintain Program Expenditure Review Working Group as a permanent part of government
    -   Ensure all ministries are included in the program expenditure review.
    -   Ensure Working Group operates collectively on an inter-ministerial basis, and not having
        representatives from each ministry operating independently.
    -   Tie expenditure growth in healthcare to a recognizable benchmark, e.g. consumer price index,
        growth in gross domestic product.
    -   Create an expert panel comprised of economists, actuaries and accountants, who have an
        expertise in the financial management of health care services, to report in a timely manner on
        how to achieve this above mentioned goal.

Long-Term Economic Development Strategy:

    -   Foster a culture of entrepreneurship and innovation.
    -   Assist in expanding export markets, particularly for small and medium-size enterprises.
    -   Leverage the strength found in existing economic clusters.
The Hon. Dwight Duncan
Minister of Finance and Chair of Treasury Board/Management Board of Cabinet
c/o Budget Secretariat
Frost Building North, 3rd Floor
95 Grosvenor Street
Toronto, Ontario M7A 1Z1

Dear Minister Duncan:

The Certified General Accountants of Ontario (“CGA Ontario”) welcomes the opportunity to participate
in the government’s public consultation in advance of the 2011 provincial budget. It is our pleasure to
present a document which outlines our shared knowledge, ideas and aspirations as a partner of
government and business for the coming fiscal year.

The mission of CGA Ontario is to ensure its members merit the confidence and trust of those who rely
upon their professional knowledge, skills, judgment and integrity, while advocating the use of their
professional expertise in the public interest.

CGAs have a 100+year history of delivering accounting and finance expertise to all sectors of the
Ontario economy and we remain committed to making the province an even better place in which to
do business and to live.

The CGA designation is recognized throughout Canada and around the world as a standard of
excellence and professionalism in all aspects of finance and business management. In addition, CGAs
belong to an elite group of professionals capable of applying current technologies to make sound
business decisions, manage complex information, and provide effective organizational leadership.

CGA Ontario represents 28,000 CGAs and students in the CGA program of professional studies in
Ontario. We are the self-governing provincial professional authority responsible for the accreditation,
regulation and continuing professional development of CGAs in the province of Ontario. We operate
under the provisions of the Certified General Accountants Act, 2010, the CGA Ontario By-Law, and the
Code of Ethical Principles and Rules of Conduct. Since its inception, CGA Ontario has maintained
rigorous standards of accreditation and professionalism in accounting to protect the public interest.

CGAs are committed to continuing professional development. In fact, we were the first accountancy
body in Ontario to mandate professional development as a means of maintaining currency of

As well, we are very proud that we are an authorized designated body under the Public Accounting Act,
2004, i.e. we have the authority to grant licenses to CGAs to practise public accounting.

The Certified General Accountants of Canada (CGA Canada) was incorporated by the House of
Commons in 1913. Along with Canada’s provincial and territorial affiliates, CGA Canada represents over
75,000 CGAs and students in the CGA program in Canada and around the world. It is an internationally-
recognized full partner of the world’s leading accounting standards organizations and conforms to the
international guidelines of the International Federation of Accountants (IFAC), delivering its program of
professional studies to accounting students around the world.

Moreover, we have mutual recognition agreements with four international accountancy bodies
including the Association of Chartered Certified Accountants, the largest organization of professional
accountants in the world with 83 offices globally serving over 500,000 members and students, and the
Certified Practising Accountants of Australia, serving over 129,000 finance, business and accounting

Current Economic Environment

The last few years have been challenging for the Ontario economy. The profound economic downturn
affected all sectors, from our traditional manufacturing base to our small and medium-sized
enterprises. Jobs were lost, families affected and government resources strained.

In 2010, however, Ontario’s economy showed signs of growth. As the 2010 Economic Outlook and
Fiscal Review noted, Ontario recovered 75 per cent of the jobs lost during the recession – compared to
the United States which recovered just 10 per cent. Ontario is emerging from the recession in better
shape than many other jurisdictions around the world.

The implementation of the harmonized sales tax this past summer, coupled with personal and
corporate income tax reductions, will provide both short-term and long-term benefits to the Ontario

Yet, we are not out of the woods. Despite improved employment levels and growth in GDP, Ontario’s
long-term economic recovery remains what some economists call, “uncertain”. Private and public
sector economic growth predictions for the coming years are very modest – between two and three
per cent. Because our economy is strongly integrated with that of the US, the pace of economic
growth in 2011 will be affected in large part by how the US economy performs. However, there are
several initiatives that the Ontario government can do in the 2011 Budget to improve its short and
long-term economic prospects.

Minister Duncan, we respectfully submit to you the following document that highlights these
recommended initiatives to help secure the economic recovery and Ontario’s long-term economic
growth. We are honoured to once again participate in this important consultation process and
welcome the opportunity to discuss these recommendations with you and your officials in greater

        1. Managing the Deficit: Returning to Balanced Budgets

We believe it is crucial for the Ontario government to accelerate the timeframe to return to a balanced
budget. In the 2010 Budget, the government forecasted a deficit for 2010-11 of $19.7 billion, which
was recently reduced to $18.7 billion in the 2010 Economic Outlook and Fiscal Review. Diminishing
annual deficits of $17.3 billion (2011–12) and $15.9 billion (2012–13) were predicted along with a
balanced budget by 2017–18. Including 2010-11, the government will add $51.9 billion to the
provincial debt by March 2013.

Given the progress that has been made within the 2010 fiscal year alone, achieved primarily through
economic growth and some cost savings, revising the deficit elimination timeframe would send an
important message to analysts and the markets. The government must set a goal of returning to
balanced budgets before 2017-18.

We strongly believe that the government’s priorities in this budget should be to:

        Significantly reduce the anticipated three-year $51.9B deficit.
        Achieve a balanced budget as quickly as possible and keep this as a high priority item until the
         budget is balanced.
        Provide a detailed plan to reach a balanced budget.
       Commit to reducing the accumulated debt once the annual budget is balanced.

Without a quick return to balanced budgets, we are most concerned that the added debt will be a very
large burden on Ontarians for decades to come, and will limit the government’s ability to invest in
priority areas as the need for public infrastructure investment heightens and the looming labour
shortages become more acute, thereby potentially hampering Ontario’s economic competitiveness.

Within this context, we provide the following suggestions to manage the deficit over the next few

a) Stimulus Funding

In our previous pre-budget submissions, we supported the provincial government’s stimulus spending
program, in collaboration with the federal government, as a means of getting and keeping Ontario’s
economy growing. However, we are concerned by findings in the 2010 Ontario Auditor General’s
report that “due to the tight deadlines, often only one or two days were allotted for the provincial
review of a large number of one program’s applications, making it unlikely that appropriate due
diligence could be carried out”.

While we support the federal government’s extension of the stimulus funding program, we reiterate
the following recommendations from our submission last year:

       That the government undertake a cost/benefit analysis of the projects that will be funded
        through any future stimulus spending to ensure that the government maximizes the value of
        these large investments and allows the government to prioritize its spending.
       That the government undertake to measure and report back to Ontarians on the economic
        benefits attributable to each project that was funded through the stimulus spending program.

These two measures are critical to ensure that there is a strong level of accountability to Ontarians with
respect to the major investments that were made through this program.

b) Size of Ontario Public Service

Last year we recommended a reduction in size of the Ontario Public Service (OPS). As such, we
welcome the government’s stated objective to reduce the size of the OPS by five per cent over three
years. In the same vein, we support your recent announcement to reduce the number of classified
agencies of the provincial government by five per cent.

While welcoming a reduction in the OPS, we do not suggest a blanket hiring freeze and elimination of
all positions as individuals retire since some positions are fundamental to the government’s operations,
and other new positions may be required as government priorities shift. Moreover, as we have
recommended in the past, the government should not reduce its investment in tax compliance
measures since these expenses generate a positive return on investment.

c) Debt repayment

While the short and mid-term objective should be to return to balanced budgets, it is imperative that
the government look beyond that target, and continue on this path to reduce the accumulated debt.
As mentioned above, the three-year anticipated cumulative deficit is $51.9 billion (not including the
record deficit in 2009-10). Therefore, once the annual budget is balanced we encourage the
government to:
        Earmark at least $2 billion surplus annually for debt repayment.
        Earmark at least 50 per cent of additional surplus for debt repayment.

To summarize, we strongly encourage the government to focus its efforts on eliminating the budget
deficit as quickly as possible as these debt levels are not sustainable and will have a detrimental impact
on the government’s ability to support future priority programs.

        2. Program Expenditure Review

a) Administrative Savings

In last year’s pre-budget submission, we commended the government for establishing a working group
to review program expenditures and service delivery to find savings within each ministry. We believed
then, as we do today, that all ministries must be subjected to this review including the Ministry of
Health and Long-Term Care even though we know that, politically, this is an area that can pose
challenges. However, we strongly believe that the government can realize its objective, sizable
administrative savings, if all ministries are included in this expenditure review process.

b) Value for Money Review of Health Care Services

Ontarians, like all Canadians, highly value their health care system and expect publicly-insured services
to be delivered close to home, when and where they need them. At the same time, there is a
continuous need to ensure that the services being provided are meeting patient needs in a cost-
effective manner.

In the late 1980s, approximately 32 cents of every dollar spent by the Ontario government on programs
was spent in health care. It now accounts for 46 cents of every program dollar. Your government
predicts if left unchecked in 12 years it could be 70 cents of every program dollar. Given the significant
policy priorities and funding commitments in other areas, such as education, transportation,
infrastructure and training, colleges and universities, it is widely accepted that this trajectory is clearly
not sustainable.

The following question was raised in the 2010 Throne Speech:

          "How do we fund the best health care without crowding out all the other priorities we share --
         like investing in our schools, helping our vulnerable, protecting our environment, and investing
         in infrastructure and economic development?"

Keeping drugs affordable, e.g. through centralized purchasing, and ensuring that funding “follows the
patient” for more and more services, are good first steps. However, we believe that the government
should, to the greatest extent possible, tie spending increases in health care to the consumer price
index or growth in gross domestic product. This will help ensure that the government is focused on
paying for what it can afford.

We appreciate that keeping health care expenditure growth at such a level poses a complex challenge
for the government, particularly as demand for more expensive technologies, drugs and procedures
grows. Therefore, we recommend that:

         the government create an expert panel comprised of economists, actuaries and accountants,
         who have an expertise in the financial management of health care services, to report in a
         timely manner on how to achieve this goal.
Furthermore, we support the accountability initiatives embodied in the recently-enacted Excellent Care
for All Act, 2010 that tie hospital executive compensation to quality and results-driven performance.
We believe that expanding this approach to more aspects of the health care sector can deliver better
bottom-line results in the health care arena.

c) Holding the Line on Expenditure Growth

Regarding the above mentioned working group tasked with reviewing program expenditures and
service delivery, we encourage the government to keep this working group on a permanent basis, with
inter-ministerial collaboration to ensure that programs are analyzed from the perspective of the
government as a whole, rather than just from within that ministry. This structure and process will help:

         Identify and reduce duplications of activities across ministries.
         Reform programs that do not deliver intended results on an impartial basis.
         Identify programs that no longer fit within a ministry’s business plans.

Through this analysis, the government will be better able to keep expenditure growth at a low rate
across the government, thereby strengthening its financial position.

Furthermore, we recommend that the government publish an annual scorecard on the effectiveness of
its program expenditures, e.g. whether the program delivered the intended results, the cost
effectiveness of the program, etc. This scorecard can serve as a useful tool for ongoing expenditure
reviews and help guide future allocation of financial resources.

        3. Long-Term Economic Development Strategy

Looking back on the economic downturn of the past couple of years, we have learned two very
important lessons:

        Our long-term economic prospects cannot rely on one specific export market.
        Ontario’s long-term economic growth should not be overly dependent on one sector.

Overreliance on one export market results in our dependence on that one market for Ontario’s
economic growth. Similarly, an economic strategy that focuses on one sector results in severe
fluctuations and job loss if that sector falters.

In short, we must develop a strategy of diversification. We need to diversify our export markets as well
as our economic sectors - fostering emerging sectors and leveraging existing strengths and clusters.

Along with broadening our export markets, we must broaden the private sector base that leverages
exports for economic growth. Currently, the small and medium-sized enterprise (SME) sector employs
50 per cent of Ontario’s workforce but only represents 35 percent of Ontario’s exports. More
significant is that these exports are derived from only eight per cent of SMEs.

We believe that there is significant opportunity to grow our economy by developing an economic
strategy and regulatory framework that fosters a strong entrepreneurial spirit for the private sector,
with particular emphasis on the SME sector. Much of this can be accomplished through education and
the dissemination of information that illustrates the benefits of thinking internationally, and that a
corporate export strategy need not be equated with any one particular market.
Along with helping businesses grow in foreign markets, this economic strategy should also leverage
Ontario’s existing strengths, e.g. financial services, high-technology and healthcare research.

With the recent turmoil in the international financial sector, Canada has been highlighted globally as a
leader in financial services for its safety and stability. Moreover, the Toronto region is the hub of the
financial services sector in Canada and is one of the largest financial services centres in North America.
Approximately 15 per cent of the region’s workforce is employed in financial services, which represents
highly-skilled jobs that generate wealth.

With the success of Research in Motion and OpenText, Kitchener-Waterloo has become a hub of
investment in high-tech research, attracting new business ventures to locate in that region thereby
stimulating employment growth and related spin-off effects.

Healthcare research is another industry that generates highly-skilled jobs that could be a boon to the
economy. Many healthcare companies are based, or have offices, in Ontario. A strategy that fosters
innovation and research could be a catalyst for those companies to expand their research capabilities in
Ontario or for other companies to locate in Ontario, similar to the Kitchener-Waterloo experience.

As well, much healthcare research is conducted in Ontario-based hospital facilities, e.g. Hospital for Sick
Children, which is recognized internationally for its research, thereby attracting some of the best and
brightest researchers from around the world. An economic strategy focusing on healthcare research
can capitalize on our strength in this sector.

Such a strategy will require stronger investment and linkages with other stakeholders including
academia, business (large and small), federal and municipal governments, and could take time to
formulate, but this investment will help Ontario effectively position itself for growth in new and
emerging sectors.

To summarize, we believe that Ontario needs an economic development strategy that encourages the
diversification of our export markets and our economic base since our economy will need to transform
in order to remain economically competitive. Moreover, a strategy that leverages existing strengths
and clusters will create synergies that can be the catalyst for this diversification strategy.


Minister, as you are no doubt aware, this upcoming provincial budget provides an ideal opportunity to
demonstrate to Ontario residents and businesses, as well as to economic analysts how the government
will manage the current economic challenges, and lay the foundation to embrace the new economy
over the longer term.

As you manage competing demands and pressures in the short term, we believe it is critical that the
government keep an eye on the longer term as well. This is why we have prepared recommendations
to deal with both the short and long-term economic challenges. To reiterate, we encourage you to
focus your efforts on cost containment with an eye toward reducing the deficit as much as possible in
the next couple of years and balancing the provincial budget prior to 2017-18.

Simultaneously, to reduce the impact of future economic recessions, we encourage the government to
promote a more entrepreneurial mindset within the private sector that highlights export opportunities
and leverages our competitive advantages.
On behalf of the 28,000 CGAs and students in the CGA program in Ontario, I encourage you to consider
the recommendations set out in this submission and find a way to include them in your plans for the
upcoming fiscal year. CGAs possess a great deal of depth in each of the topics raised and our members
would be pleased to participate in any forum that allows us to contribute to the design of solutions for
your government.

It has been an honour to once again participate in this important consultation process and I look
forward to discussing these ideas in greater depth with you and your officials soon. Thank you for the


Doug Brooks, FCGA
Chief Executive Officer

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