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Annual Report 2013 – Demonstrating the Value of Collaboration

Contents

Message from the 2012/13 Chair

The Honourable Mike De Jong
Minister of Finance
Province of British Columbia
Parliament Buildings
PO Box 9048 Stn Prov Govt.
Victoria BC V8W 9E2

Dear Minister De Jong:

On behalf of the members of the Real Estate Council of British Columbia (the Council), congratulations again on being reappointed Minister of Finance this past June. I am pleased to provide you with the Council’s Annual Report for the year ended June 30, 2013.

The Council is honoured to be the delegated provincial authority responsible for protecting the public interest through administration and enforcement of the Real Estate Services Act. The number of real estate licensees in BC remains close to last year’s record of just under 21,000. The number of complaints received this year increased slightly while the number of sanctions imposed decreased by three. Each complaint is assessed very carefully and the information collected is considered as part of the Council’s ongoing commitment to not only monitor and enforce but foster an environment of continuous improvement amongst licensees.

My term as Chair of the Council ended on June 30th, which marked my tenth year of service as a Council member. It has been a privilege to represent the best interests of the public in an industry whose members, I expect, should always represent professional best practices. I am looking forward to collaborating with fellow Council members as I serve my final two-year term on the Council, the first year of which will be under the Chairmanship of Marshall Cowe.

Yours truly,

Byron Brandle signature

Michael Ziegler
CHAIR

Michael Ziegler

About Michael Ziegler

Michael Ziegler began his career in real estate in 1976 and is currently a co-managing broker of Newport Realty Ltd in Victoria, British Columbia.

Michael has been involved in organized real estate for most of his career and has been a director of the Victoria Real Estate Board, the Canadian Real Estate Association (CREA) and the Real Estate Compensation Fund Corporation. In addition, he has served 10 years with the Real Estate Council of British Columbia. Michael was the youngest president of CREA – the largest trade association in Canada with over 100,000 members and is an honourary life member.

Michael has always been interested in promoting a high standard of business practice in the real estate profession and has been a Continuing Professional Education (cpe) course instructor since its inception. He is also the author/instructor of the highly regarded cpe course entitled: Disclosure: Issues and Risks offered by the British Columbia Real Estate Association.

Michael has always been community minded and an arts supporter. He has been a director of the Belfry Theatre in Victoria for 28 years and currently sits as a director emeritus.

 

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Message from the Executive Officer

Robert FawcettSelf-regulation is a privilege and the Real Estate Council of British Columbia (the Council) takes its responsibility very seriously in order to protect the public through enforcement of the Real Estate Services Act (RESA) and delivery of programs and initiatives that set a standard in order to protect the public interest. An aligned and collaborative effort to enforce RESA and steward best practices is shared by Council members, staff and other stakeholders – all of whom are united in their commitment to enforce the regulatory framework and contribute to the ongoing development of a robust profession.

The value of a shared, collaborative approach, exemplified by licensee practice and expertise, has been realized in several ways over the past year and as recently as September 20, 2013, when the Council was awarded the Association of Real Estate License Law Officials (ARELLO) Pre-licensing Education Program Award for the Broker’s Business Planning & Financial Management Licensing Course, the result of our partnership with the UBC Sauder School of Business with input from licensee focus groups. We also collaborate with a number of other organizations to ensure the delivery of quality education programs – this includes the British Columbia Real Estate Association (BCREA) for the Applied Practice Course for licensees, and BCREA and the Professional Association of Management Agents for continuing education programs which satisfy the Council’s relicensing education requirements.

We know that by working together in partnership with our advisory groups and committees, real estate boards and professional organizations, as well as home owners associations, we are strengthening the profession and putting measures in place to protect the public. We also know, first-hand, that licensees look to the Council for guidance on regulatory compliance and standards of business practice. A survey conducted this year by an independent market research company to gauge licensee awareness, understanding and satisfaction levels indicates that 85 per cent of licensees agree that the Council is the key source of information regarding RESA and the Council Rules and 90 per cent of licensees surveyed agree that the Council keeps them informed on these matters.

At the Council we are committed to education, enforcement and engagement with the public, licensees, our partners, the Superintendent of Real Estate, and each other. By working together, we can achieve the common goal of building the real estate profession while at the same time protecting the public interest. This collaborative approach, in my opinion, has given the real estate profession in BC the strong platform upon which it is based.

In addition to Council Members, Council’s dedicated staff, and other industry stakeholders I have mentioned, I extend my thanks and appreciation to Chair Michael Ziegler and Vice-Chair Marshall Cowe for their diligence, support, and expertise.

Robert Fawcett signature

Robert O. Fawcett
EXECUTIVE OFFICER

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Mission

The Real Estate Council of British Columbia (the Council) protects the public interest by assuring the competency of real estate licensees in BC and ensuring their compliance with the Real Estate Services Act. The Council is accountable to and advises government on industry issues and encourages public confidence by impartially setting and enforcing standards of conduct, education, competency and licensing for real estate licensees in the province.

Vision

A self-regulated organization that is a leader in industry integrity, innovation and viability.

Values

The Council operates with the following principles and values:

Experience and Dedication Council members are experienced real estate licensees and public appointees, dedicated to protecting the public interest in real estate services and to improving the industry.
Consultative Approach Council supports a regular consultative approach with industry groups, government and the public.
Impartial, Effective Processes Council members and staff are impartial in setting and enforcing standards of conduct through effective education, licensing, and compliance processes.
Cost-effective & Responsive Services Council management and staff work to provide cost-effective, responsive services to consumers and the real estate industry by using current professional business practices and technology.
Open Communications & Trust Council members and staff work co-operatively to create a working environment where frank and open communications and trust prevail.

Performance Mandate

The Real Estate Council of British Columbia (the Council) is a regulatory agency established by the provincial government in 1958. Its mandate is to protect the public interest by enforcing the licensing and licensee conduct requirements of the Real Estate Services Act (RESA). The Council is responsible for licensing individuals and brokerages engaged in real estate sales, rental and strata property management. The Council also enforces entry qualifications, investigates complaints against licensees and imposes disciplinary sanctions under the Act.

Within its terms of reference, the Council is responsible for ensuring that the interests of consumers who use the services of real estate licensees are adequately protected against wrongful actions by the licensees. A wrongful action may be deliberate or may be the consequence of inadequate exercise of reasonable judgment by a licensee in carrying out the normal duties and responsibilities as a licensee while acting for the parties involved in the transaction.

The Council is also responsible for determining what is appropriate education in real estate matters for individuals seeking to be licensed as real estate practitioners and arranging for licensing courses and examinations as part of the qualification requirement for licensing. Under the authority of the Council, licensing courses are delivered by the University of British Columbia’s Sauder School of Business (Real Estate Division), Vancouver. In 2013, the Council was the recipient of the Pre-Licensing Education Program Award for the new Broker’s Business Planning & Financial Management Licensing Course. Awarded by the Association of Real Estate License Law Officials (ARELLO), the recognition reinforces the strength of the partnership with the Sauder School of Business.

The Council has been accountable since 1967 for ensuring that all licensed brokerages in BC have stringent controls in place to protect trust monies. Through an Office and Records Inspection Program, any deficiencies noted are shared with the brokerage to ensure compliance.

The effectiveness of the Council and recognition of its mature discharging of its responsibilities are evidenced by the fact that for over 50 years, successive governments have not considered altering the Council’s considerable powers but have, instead, broadened its role and delegated additional responsibilities to the Council.

In 2005, RESA replaced the former Real Estate Act. RESA significantly expands the regulatory authority and disciplinary powers of the Council.

 

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Organization of Council Members

The Real Estate Council of British Columbia (the Council) is comprised of appointed and elected representatives. The provincial government appoints three members and real estate licensees elect 13, three of whom are representatives and nine are brokers representing the various provincial counties. One individual is elected as the rental/strata management member. Those elected have traditionally been individuals of broad experience who enjoy the professional respect of their fellow licensees. Members are elected for two-year terms, with half of the Council elected each year, thus ensuring continuity. A Chair and Vice-Chair are elected each year by the members.

Members of Council July 1st, 2012 to June 30th, 2013

Michael Ziegler

Michael Ziegler (Chair)
County of Victoria
Managing Broker Member
Term ends June 30, 2013

Marshall Cowe

Marshall Cowe (Vice-Chair)
County of Westminster
(North of the Fraser River)
Managing Broker Member
Term ends June 30, 2014

Barbara Barry

Barbara Barry
West Vancouver
Lieutenant Governor-in-Council
Appointment
Term Ends June 30, 2014

John Nagy

John Nagy
Delta
Lieutenant Governor-in-Council
Appointment
Term ends June 30, 2015

Bruce Turner

Bruce Turner
Courtenay
Lieutenant Governor-in-Council
Appointment
Term ends June 30, 2014

Garth Cambrey

J. Garth Cambrey
County of Vancouver
Rental/Strata Management Member
Term ends June 30, 2013

Bill Binnie

William (Bill) Binnie
County of Vancouver
Managing Broker Member
Term ends June 30, 2014

Patrick O'Donnell

Patrick O’Donnell
County of Vancouver
Managing Broker Member
Term ends June 30, 2013

Bill Phillips

William (Bill) Phillips
County of Vancouver
Managing Broker Member
Term ends June 30, 2014

Abdul Ghouri

Abdul Ghouri
County of Vancouver
Representative Member
Term ends June 30, 2013

Subhadra Ghose

Subhadra Ghose
Combined Counties of Victoria, Nanaimo, Yale, Kootenay, Cariboo & Prince Rupert
Representative Member
Term ends June 30, 2014

Susan McGougan

Susan McGougan
County of Nanaimo
Managing Broker Member
Term ends June 30, 2014

MaryLou Leslie

Marylou Leslie
County of Westminster
(North and South of the Fraser River)
Representative Member
Term ends June 30, 2013

Bryon Brandle

Bryon Brandle
County of Yale
Managing Broker Member
Term ends June 30, 2013

Dave Rishel

Dave Rishel
County of Westminster
(South of the Fraser River)
Managing Broker Member
Term ends June 30, 2014

Sue Lynch

Susan Lynch
Combined Counties of Kootenay, Cariboo and Prince Rupert
Managing Broker Member
Term ends June 30, 2013

Staff

The day-to-day management of the Council staff is the responsibility of the Executive Officer. The management team and staff support the delivery of programs and services for consumers and licensees. As of June 30, 2013, the Council staff consisted of 42 full-time employees and one part-time employee.

RECBC Staff

Council Senior Staff. Back left to right: Larry Buttress, Deputy Executive Officer; Robert Fawcett, Executive Officer; Lisa Holst, Director, Accounting & Audit; Eric Wredenhagen, Director, Legal Services. Front row left to right: Maureen Coleman, Manager, Compliance; Lisa Kern, Senior Supervisor, Licensing; Caroline Allen, Education & Licensing Officer. Missing from photo: Debbie Morreau, IT Manager/Business Analyst.

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Rule Making Authority under Self-Regulation

Larry Buttress
Larry Buttress
Deputy Executive Officer

One of the hallmarks of self-regulated professions is their ability to set standards of practice for those working in the profession. The Real Estate Council of British Columbia (the Council) has been granted the authority to make rules respecting licensing, and regulating licensees in relation to the provision of real estate services.

One of the purposes of these rules is to set standards by which licensee conduct is measured, and the failure of a licensee to meet these standards can result in discipline. Of equal importance, however, is that licensees may look to these rules as a ready guide to proper behaviour. Professionals take pride in maintaining such standards because they know that a well-served public appreciates the value of the services provided.

As the provision of real estate services evolves with new consumer expectations and business models, so too do the Council Rules. In the past year the Council has fine-tuned its rules in a number of ways, including:

  • Changes were made related to the writing of licensing examinations to lower the risk of individuals re-writing exams on several occasions over a short period of time in order to memorize exam questions. The intent is to increase examination security.
  • Brokerages are now required to provide their reporting accountants with copies of any correspondence between the brokerage and the Council related to the books and records for the fiscal year upon which the accountant is reporting. The purpose is to ensure these accountants are aware of any outstanding record keeping issues between the brokerage and the Council.
  • Requirements that must be met when brokerages and licensees agree with their clients to either modify duties, or to provide trading services within the parameters of designated agency, have been clarified.
  • Standards have been established for the handling of blended payments received by strata managers who manage strata corporations with sections.

Since the first set of Council Rules was adopted in 2005, the Council has worked with the profession, the public, and the staff of the Ministry of Finance to ensure these rules are current, relevant, and serve to protect the public. Of particular note is the benefit the Council enjoys as a result of the cooperative and consultative relationship it has with the Financial and Corporate Policy Sector Branch of the Ministry of Finance. The Council is grateful to all those who took the time throughout the year to provide input and guidance during the various consultation processes undertaken.

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Sauder School of Business - Real Estate DivisionA Collaborative Approach Strengthens Educational Delivery Platform

Update from: Real Estate Division (RED), Licensing Education

David Moore
David Moore
Director, Licensing Education, Sauder School of Business

Strengthening the educational platform has been the focus of the Licensing Education group at UBC’s Sauder School of Business over the past year. The group recently leveraged UBC’s Blackboard software licence to create a separate instance for RED courses. This new instance will work in conjunction with RED’s existing proprietary learning management system, and will be used in partnership with the British Columbia Real Estate Association (BCREA) to provide the platform for anticipated online enhancements to the Real Estate Council of British Columbia (the Council)’s Applied Practice Course, required of all new real estate licensees in the province.

Licensing Course Enrollments: Course enrollments in the flagship Real Estate Trading Services (RETS) Course are cyclical and follow the residential real estate market, which means that we have experienced a slowdown in RETS course enrollments the past year.

Broker’s Course: July 1st, 2013, marked the end of the first year of the new Broker’s Licensing Course, which reflects significant changes to the course curriculum as a result of extensive industry review and input. Initial feedback is good and the refined focus on business planning, financial management, human resources management and leadership has been well received by licensees from all licence levels and in all categories of real estate services. In addition to providing the licensing education requirements for those who wish to become licensed as a brokerage, managing broker or associate broker, the course is well suited for those licensees looking to increase their knowledge on a variety of business, accounting and leadership topics. As usual, authors for the revised materials included a variety of UBC Sauder School of Business faculty members and instructors, including representatives from the MBA and Executive Education programs.

Strata Management Licensing Course Review: The Council and RED are currently reviewing the Strata Management Licensing Course and have already received significant input from strata management managing brokers and representatives, in addition to the input of various organizations and individuals representing owners, managers and the regulatory environment. The review is intended to provide recommendations that will lead to a comprehensive revision of the Strata Management Licensing Course curriculum.

Credit Programs Update: In addition to the licensing education programs, RED also provides credit and continuing education courses, including the nationally recognized Diploma in Urban Land Economics. Other program offerings include the Appraisal Institute of Canada’s distance education program, as well as a variety of other certificate programs. New course development includes BUSI 433 (Real Estate Business) which is built upon our links to subject matter experts from within the Sauder faculty, as well as from industry. New courses are continually being developed for the Continuing Professional Development program (some of which satisfy BCREA’s Professional Development Program (PDP) requirements, and include two new courses developed as part of a new Strata Reserve Fund Planning Program).

Background: The Licensing Education group at UBC’s Sauder School of Business provides provincial licensing education courses and examinations on behalf of the Council and on behalf of the Registrar of Mortgage Brokers, including:

  • Real Estate Trading Services Licensing Course and Exam;
  • Broker’s Business Planning and Financial Management Licensing Course and Exam;
  • Rental Property Management Licensing Course and Exam;
  • Strata Management Licensing Course and Exam; and
  • Mortgage Brokerage in British Columbia Registration Course and Exam.

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2012-13 Performance Review

Education

Broker’s Licensing Course 115 303 234 160 190 196 169 180
Trading, Rental Property & Strata Management Services Licensing Courses 5,486 5,024 4,760 2,451 4,590 4,044 3,860 2,835

Licensing

Representatives 14,042 15,649 17,071 16,178 17,065 17,655 17,942 17,859
Managing/
Associate Brokers
3,367 3,562 3,193 3,164 3,124 3,107 3,044 3,003
Total 17,409 19,211 20,264 19,342 20,189 20,762 20,986 20,862

 

Rental 272 304 331 350 395 434 446 470
Rental & Strata 211 231 255 268 272 270 288 311
Strata 281 304 318 359 409 442 454 461
Trading 7,514 9,330 10,654 10,420 11,376 12,214 12,853 13,164
Trading & Rental 8,715 8,607 8,240 7,517 7,306 6,971 5,903 6,009
Trading, Rental & Strata 405 416 442 405 411 411 420 427
Trading & Strata 11 19 24 24 21 20 19 20

 

Priority Inspections and Follow-up 80 96 70 122 133 158 110 101
1st Year and Procedural Inspections 102 99 80 106 75 121 122 130
Totals 182 195 150 228 208 279 232 231

Complaints

Complaints Received 461 543 563 574 562 493 503 538

Disciplinary and Hearing Processes

 
Hearings Held 16 14 10 5 6 4 1 3
Consent Orders 42 59 87 96 96 113 97 95
Qualification Hearings 3 15 9 4 10 13 5 6

Sanctions

Licences Reprimanded 32 40 47 64 60 57 76 78
Licences Suspended 34 31 55 39 40 47 43 35
Licences Suspended in the
Public Interest
2 2 0 0 2 2 2 1
Licences Cancelled 3 5 2 4 0 0 0 1
Discipline Penalties 0 12 15 27 22 21 24 28
Withdrawals from industry 5 3 1 1 8 3 4 4

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Committees & Advisory Groups

Council Meetings and Decision Processes

Council members serve on a number of standing committees and advisory groups. Various issues that arise at Council meetings, including matters brought forward by the public and staff, are first considered at committee/advisory group meetings. Staff provides research assistance, as well as makes recommendations where appropriate. Each committee and advisory group is led by an appointed Chair and is governed by Terms of Reference and a Code of Conduct. Once a particular issue has been researched and a solution agreed upon, the matter is then brought to the Council as a whole. The Council will then discuss the issue and either ratify the recommendation, send it back to the committee/advisory group for further investigation or reject it. The Council generally meets eight times per year.

Committee/
Advisory Group
Purpose Key Accountabilities

Complaints Committee

Assess complaint files referred by Council staff.
  • Decide if complaint files should be:
    • Referred to hearing.
    • Addressed by letter of warning.
    • Dismissed.
  • Refer complaints involving possible criminal misconduct to the Office of the Superintendent of Real Estate.
Consent Order Review Committee Review proposed Consent Orders submitted on behalf of licensees.
  • Accept, vary or reject penalty recommendations.
  • Ensure Consent Orders result in fair and appropriate decisions.
Education and Licensing Committee Consider and report on education exemptions and licensing requests from Council staff.
  • Liaise with the Education Advisory Group to ensure coordination with respect to pre and post licensing educational issues.
  • Research and report on amendments to legislation that impact education and licensing.
Education Advisory Group Strengthen and evolve real estate education.
  • Provide a forum for input from licensees, industry organizations and educational institutions
Finance & Governance Committee Ensure the Council meets its fiduciary responsibilities and enhance Staff and Council leadership.
  • Oversee fiscal requirements and recommend to Council proposed budgets, financial statements, capital expenditures and auditors.
  • Identify education and training for Staff, Council and Committee members.
  • Attract qualified candidates to run for elected positions on the Council.
  • Provide support and guidance to the Chair, Vice-Chair and Executive Officer.
Hearing Committees Conduct hearings related to licence qualification, discipline, and compensation claims.
  • Hear matters referred to it by the Complaints Committee or Council Staff.
  • Render fair and appropriate decisions in a timely manner.
Real Estate Services Act (RESA) Advisory Group To seek input from experts knowledgeable with RESA.
  • Provide a forum to discuss RESA, the General Bylaws and the Council’s Rules.
Rental Property Management Advisory Group To ensure Council access to expertise in the varied functions of rental property management.
  • Provide a forum for industry representatives to bring concerns and/or recommendations to the Council.
Strata Management Advisory Group To ensure Council access to expertise in the management of strata corporations.
  • Provide a forum for industry and public representatives to bring concerns and/or recommendations to Council.
Trading Services Advisory Group To ensure Council access to expertise related to the purchase and sale of residential real estate.
  • Provide a forum for industry representatives to bring concerns and/or recommendations regarding residential trading services to the Council.

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Financial Review

as at June 30th, 2013

Lisa Holst
Lisa Holst, CA
Director, Accounting & Audit

This financial review is based on the audited financial statements for the year ended June 30, 2013 and the comparative figures for the year ended June 30, 2012.

Overview

General operations are funded predominantly by revenues from licensing and assessment fees required under the Council Bylaws under the Real Estate Services Act. The fees collected are for a two year period in advance and are recognized as income in the period received. Deferred revenue is recognized on the effective date of the licence. Other sources of revenue include application fees, course revenue, net interest income, and discipline hearing cost recoveries. All receipts for discipline penalties may only be expended by the Council for the purpose of education of the public, licensee and other participants in the real estate industry in BC about the operation and regulation of the industry and issues related to real estate and real estate services These funds are held in trust and segregated from general operating funds.

Operations

Revenues

Total net revenues in fiscal 2013 are $5,400,230, a decrease of $383,720 from fiscal 2012 of $5,783,950. Recognized licensing and assessment revenues are $5,015,138 for fiscal 2013, a decrease by $367,750 from $5,382,888 in fiscal 2012. Recognized course revenues in fiscal 2013 are $191,500 and have decreased by $44,350 from $235,850 in fiscal 2012. Recognized interest, education fund, and other revenue in fiscal 2013 are $193,592 and have increased $28,380 from $165,212 in fiscal 2012.

Expenditures

Expenditures include general administration and facilities, Council and committee honorariums, per diems, meeting costs, and other corporate expenses, such as communications activities, election costs, and grants and endowments. Total expenditures increased in fiscal 2013 by $409,244 to $5,723,721 from $5,314,477, the previous year. Administrative expenditures were higher by $111,732, investigation expenditures higher by $109,271, and other expenditures were higher by $188,241.

Administration expenditures increased 3% respectively over the previous year. Investigation and other expenditures increased 14% in fiscal 2013.

Operating Deficit from Operations and Accumulated Net Assets

The excess expenditures over revenue for the year was $323,491 compared to a surplus of $469,473 in fiscal 2012. This deficit resulted in a decrease in the unrestricted accumulated net assets of $269,950 from $4,509,733 in fiscal 2012 to $4,239,783 in fiscal 2013.

Net Current Assets (working capital)

Net current assets were $1,914,956 at June 30, 2013 compared to $2,705,933 at June 30, 2012.

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Grant ThorntonIndependent Auditor’s Report

Vancouver, Canada – September 11, 2013

To the members of

Real Estate Council of British Columbia

We have audited the accompanying financial statements of Real Estate Council of British Columbia (the “Council”), which comprise the statements of financial position as at June 30, 2013, June 30, 2012 and July 1, 2011, and the statements of operations, changes in fund balances, and cash flows for the years ended June 30, 2013 and June 30, 2012, and a summary of significant accounting policies and other explanatory information.

Management’s responsibility for the financial statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with Canadian accounting standards for not-for-profit organizations, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Real Estate Council of British Columbia as at June 30, 2013, June 30, 2012 and July 1, 2011, and the results of its operations and its cash flows for the years ended June 30, 2013 and June 30, 2012, in accordance with Canadian accounting standards for not-for-profit organizations.

Grant Thornton
Grant Thornton
Chartered Accountants
Vancouver, Canada – September 10, 2013

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Statements of Financial Position

 

June 30
2013

$

June 30
2012
$

July 1
2011
$

ASSETS

    (Note 11)

Current

     

Cash and cash equivalents

852,921

1,371,855

1,348,857

Short-term investments (Note 4)

1,043,570

1,252,271

725,385

Accounts and accrued interest receivable

114,390

139,495

181,035

Prepaid expenses

92,918

143,898

99,708

 

     

 

2,103,799

2,907,519

2,354,985

       

Long-term investments (Note 5)

2,408,459

2,124,934

2,230,487

Property and equipment, net (Note 6)

485,308

301,347

386,155

 

     

 

4,997,566

5,333,800

4,971,627

 

     

LIABILITIES

     

Current

     

Accounts payable and accrued liabilities (Note 7)

71,768

127,566

181,091

Deferred revenue

68,850

16,150

69,925

Deferred capital contribution (Note 8)

48,225

57,870

57,870

 

     

 

188,843

201,586

308,886

 

     

NET ASSETS

     

Unrestricted

4,239,783

4,509,733

4,083,703

Internally restricted (Note 9)

400,000

400,000

400,000

Education Fund (Note 9)

168,940

222,481

179,038

 

     

 

4,808,723

5,132,214

4,662,741

 

     

 

4,997,566

5,333,800

4,971,627

 

Commitments and contingency (Note 10)
See accompanying notes and schedules to the financial statements.

On behalf of the Council

Michael Ziegler signature
Michael Ziegler
CHAIR

Robert Fawcett signature
Robert O. Fawcett
EXECUTIVE OFFICER

 

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Statements of Operations

Years ended June 30, 2013 and 2012

 

 

   

2013

   

2012

 

 

General
Fund
$

Education
Fund
$

Total
$

General
Fund
$

Education
Fund
$

Total
$

 

         

 

REVENUE

         

 

Licensing

         

 

Gross licence fees collected

1,593,844 1,593,844

1,565,668

1,565,668

Less: payable to Superintendent of Real Estate

796,922 796,922

781,609

781,609

 

           

Net fees collected

796,922 796,922

784,059

784,059

Assessments

4,218,216 4,218,216

4,598,829

4,598,829

Course fees

191,500 191,500

235,850

235,850

Discipline penalties

74,500 74,500

59,500

59,500

Investment income

98,549 98,549

105,712

105,712

Gain on disposal of property and equipment 10,898 10,898
Amortization of capital contribution (Note 8) 9,645 9,645

 

           

 

5,325,730 74,500 5,400,230

5,724,450

59,500

5,783,950

 

           

OPERATING EXPENDITURES

           

Administrative expenditures (Schedule 1)

3,288,647 3,288,647

3,176,915

3,176,915

Investigation expenditures (Schedule 2)

1,914,111 1,914,111

1,804,840

1,804,840

Other expenditures (Schedule 3)

392,922 128,041 520,963

316,665

16,057

332,722

 

           

 

5,595,680 128,041 5,723,721

5,298,420

16,057

5,314,477

 

           

(Deficiency) excess of revenue over expenditures

(269,950) (53,541) (323,491)

426,030

43,443

469,473


See accompanying notes and schedules to the financial statements.
         

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Statements of Changes in Fund Balances

Years ended June 30, 2013 and 2012

 

  General Funds Restricted
Fund
 
 

General
Fund
$

Technology
Fund
$

Legal Defence
Fund
$

Legal
Defence
Fund-
Special
Compensation
$

Education
Fund
$

Total
$

 

         

 

Net assets, June 30, 2011

4,083,703

100,000

150,000

150,000

179,038 4,662,741

Excess of revenue over expenditures for the year

426,030

43,443 469,473

 

           

Net assets, June 30, 2012

4,509,733

100,000

150,000

150,000

222,481 5,132,214

Deficiency of revenue over expenditures for the year

(269,950)

(53,541) (323,491)

 

           

Net assets, June 30, 2013

4,239,783

100,000

150,000

150,000

168,940 4,808,723

See accompanying notes and schedules to the financial statements.

   

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Statements of Cash Flows

Years ended June 30

 

2013
$

2012
$

 

   

Cash flows derived from (applied to)

   

 

   

OPERATING ACTIVITES

   

(Deficiency) excess of revenue over expenditures

(323,491)

469,473

Adjustments for items not affecting cash

   
Amortization of capital contribution (9,645)

Unrealized gain on investments

(1,350)

Gain on disposal of property and equipment (10,898)

Amortization

176,532

184,774

 

   

 

(167,502)

652,897

Changes in non-cash operating working capital

   

Accounts and accrued interest receivable

25,105

41,540

Prepaid expenses

50,980

(44,190)

Accounts payable and accrued liabilities

(55,798)

(53,525)

Deferred revenue

52,700

(53,775)

 

 

(94,515)

542,947

 

INVESTING ACTIVITIES

   

(Sale) purchase of short-term investments, net

208,701

(42,983)

Purchase of long-term investments, net

(283,525)

(377,000)

Net purchase of property and equipment

(349,595)

(99,966)

 

 

(424,419)

(519,949)

 

Net (decrease) increase in cash

(518,934)

22,998

Cash and cash equivalents, beginning of year

1,371,855

1,348,857

 

Cash and cash equivalents, end of year

852,921

1,371,855

 

See accompanying notes and schedules to the financial statements.

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Notes to the Financial Statements

June 30, 2013

1. Nature of operations

The Real Estate Council of British Columbia (the “Council”) is a regulatory agency established by the British Columbia provincial government. Its mandate is to protect the public interest by enforcing the licensing and licensee conduct requirements of the Real Estate Services Act (the “Act”).

The Council is responsible for licensing individuals and brokerages engaged in real estate sales, rental and strata property management. The Council also enforces entry qualifications, investigates complaints against licensees and imposes disciplinary sanctions under the Act.

Pursuant to section 149(1)(1) of the Income Tax Act (Canada), the Council qualifies as a non-profit organization and is exempt from income taxes.

2. Summary of significant accounting policies

Basis of accounting

These financial statements have been prepared in accordance with Canadian accounting standards for not-for profit organizations (Part III). In addition to the following significant accounting policies, the Council has applied The Canadian Institute of Chartered Accountants (“CICA”) Handbook Section 1501 First-Time Adoption by Not-for-Profit Organizations in preparing these first financial statements in accordance with Canadian accounting standards for not-for-profit organizations (Note 11). The Council applies Canadian accounting standards for private enterprises (“ASPE” or “Part II”) to the extent that Part II standards address topics not covered in Part III.

Fund accounting

The Council follows the restricted fund method of accounting.

Cash and cash equivalents

Cash and cash equivalents includes all balances held at banks excluding overdraft amounts, and all highly liquid financial instruments purchased with an original maturity of three months or less. Cash equivalents consist of money invested in a term deposit and are recorded at cost plus accrued interest, which approximates market value.

Short-term investments

The Council has elected to measure its short-term investments at fair value, which is estimated to be cost plus accrued interest.

Long-term investments

Long-term investments in equity instruments that are quoted in an active market are measured at fair value without any adjustment for transaction costs. The Council has elected to measure all other long-term investments at fair value. Investment income, which consists of interest and realized and unrealized gains and losses, is recorded as revenue in the statement of operations. Transaction costs are expensed as incurred.

Property and equipment

Property and equipment are recorded at cost and are amortized on a straight-line basis over their expected useful lives as follows:

Computer equipment 3 years
Office equipment 5 years
Automotive equipment 6 years
Leasehold improvements term of the lease plus one renewal period, being 10 years

The Council applies the half-year rule in the year of acquisition of assets.

Revenue recognition

The Council follows the restricted fund method of accounting for revenue. Restricted revenues and expenses of specific funds are recorded as increases or decreases to the respective funds only.

The Council collects licence and assessment fees for a two year period in advance. These fees are unrestricted and are recognized as revenue in the current period received because the Council has no continuing obligations with respect to the fees and does not refund licence and assessment fees. License and assessment fees received in the current period that relate to the subsequent period are recorded as deferred revenue.

Course fees, interest and investment and other income are recorded when received or receivable if the amount to be received can be reasonably estimated and collection is reasonably assured.

Capital contributions received for the purchase of property and equipment are deferred and recognized as revenue at the same rate as the property and equipment’s amortization.

Use of estimates

The preparation of financial statements in conformity with Canadian accounting standards for not-for-profit organizations requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenue and expenses during the period. Actual results may differ from those estimates.


3. Financial instruments

The Council’s financial instruments consist of cash and cash equivalents, short-term investments, accounts and accrued interest receivable, long-term investments, and accounts payable and accrued liabilities. Financial assets and financial liabilities are initially measured at fair value.

The Council subsequently measures all of its financial assets and financial liabilities as follows:

Financial instrument Subsequent measurement
Cash and cash equivalents Amortized cost
Short-term investments Fair value
Accounts and accrued interest receivable Amortized cost
Long-term investments Fair value
Accounts payable and accrued liabilities Amortized cost

Changes in fair value are recognized in excess (deficiency) of revenue over expenditures for the year.

Financial assets measured at amortized cost totalled $967,311 at June 30, 2013 (June 30, 2012: $1,511,350; July 1, 2011: $1,529,892).

Financial assets measured at fair value totalled $ 3,452,029 at June 30, 2013 (June 30, 2012: $3,377,205; July 1, 2011: $2,955,872).

Financial liabilities measured at amortized cost totalled $71,768 at June 30, 2013 (June 30, 2012 $127,566; July 1, 2011: $181,091).

4. Short-term Investments

The Council’s short-term investment portfolio is composed as follows: a government bond having a June 30, 2013 estimated fair value of $302,771 (GICs at June 30, 2012: $635,635; July 1, 2011: $116,251) with maturity date of June 1, 2014, bearing interest at a rate of 3.1% (2012: between 1.75% and 4.56%; 2011: 1.8%); and, mutual funds having a June 30, 2013 estimated fair value of $740,799 (June 30, 2012: $616,636; July 1, 2011: $609,134).

It is management’s opinion that the Council is not exposed to significant interest rate, market, liquidity or credit risk arising from the short-term investments.

5. Long-term Investments

The Council’s long-term investment portfolio is composed as follows: a government bond having a June 30, 2013 estimated fair value of $Nil (June 30, 2012: $307,423; July 1, 2011: $306,073) bearing interest at a rate of (2012: 3.1%; 2011: 3.1%); and, GICs having a June 30, 2013 estimated fair value of $2,408,459 (June 30, 2012: $1,817,511; July 1, 2011: $1,924,414) with maturity dates ranging between December 11, 2014 and March 13, 2017, bearing interest at rates ranging between 2.00% to 3.85% (June 30, 2012: 2.30% to 3.85%; July 1, 2011: 3.00% to 4.56%).

The Council’s investment philosophy is to invest conservatively with highly rated counterparties to preserve capital while earning a reasonable rate of return.

Interest rate risk
The Council manages any interest rate risk exposure of its fixed income investments by using a laddered portfolio with varying terms of maturity. The laddered structure of maturities helps to enhance the average portfolio yield while reducing the sensitivity of the portfolio to the impact of interest rate fluctuations. The Council did not hold any investments in equity securities at June 30, 2013 or 2012.

Currency risk
The Council does not hold any investments denominated in foreign currencies; therefore, it is not exposed to any currency risk.

Credit and market risk
The Council has an investment policy that restricts the types and amounts of its eligible investments and requires dealing with highly rated counterparties. Risk and volatility of investment returns are mitigated through the investing in only government bonds and GICs.

6. Property and Equipment

 

June 30, 2013

   

 

Cost
$

Accumulated
amortization
$

Net book
value
$

 

Computer equipment

916,725 759,221 157,504

Office equipment

482,689 344,227 138,462

Automotive equipment

47,890 2,590 45,300

Leasehold improvements

401,294 257,252 144,042
 

 

1,848,598

1,363,290

485,308

 

 

June 30, 2012

   

 

Cost
$

Accumulated
amortization
$

Net book
value
$

 

Computer equipment

785,334

670,656

114,678

Office equipment

361,441

311,312

50,129

Automotive equipment

50,417

33,915

16,502

Leasehold improvements

326,608

206,570

120,038

 

 

1,523,800

1,222,453

301,347

 

 

July 1, 2011

   

 

Cost
$

Accumulated
amortization
$

Net book
value
$

 

Computer equipment

710,382

569,969

140,413

Office equipment

348,550

275,642

72,908

Automotive equipment

50,417

25,511

24,906

Leasehold improvements

314,485

166,557

147,928

 

 

1,423,834

1,037,679

386,155

 

7. Government remittances payable

Included in accounts payable and accrued liabilities are government remittances owing for payroll remittances totalling $Nil (June 30, 2012: $Nil; July 1, 2011: $Nil).

8. Deferred capital contribution

In 1997, the Council received $250,000 from the Real Estate Errors and Omissions Insurance Corporation as a contribution towards the Council’s licensing database with a modern information management system.

During fiscal year 2013, the remaining balance in this contribution, totalling $57,870, was spent on the development of a new information management system. The deferred capital contribution balance at June 30, 2013 was $48,225 (June 30, 2012: $57,870; July 1, 2011: $57,870).

9. Internally restricted net assets and education fund

 

2013
$

2012
$

2011
$

 

Technology Fund (a)

100,000

100,000

100,000

Legal Defence Fund – General (b)

150,000

150,000

150,000

Legal Defence Fund – Special Compensation Fund (b)

150,000

150,000

150,000

 

Total internally restricted net assets

400,000

400,000

400,000

Education Fund (c)

168,940

222,481

179,038

 

 

568,940

622,481

579,038

 

[a] Technology Fund

The Technology Fund is to be used for modifications to the licensing systems software.

[b] Legal Defence Fund

In 2003, the Council established a Legal Defence Fund to be used to pay, on behalf of the Council, its members or employees (collectively, the “Party”), all sums which the Party becomes liable to pay as compensating damages arising out of a claim made against the Party by a member of the public, a member of the Council, or an employee of the Council alleging a Wrongful Act, or made against the Party because of the Party’s status as a Council member or an employee thereof, provided that, in either situation, the claim relates solely to the performance by the Party of services as a member or employee of the Council in their capacity with the Council. The maximum amount to be paid by the Legal Defence Fund – General is $100,000 for each claim regardless of the number of parties. There is also a separate Legal Defence Fund – Special Compensation Fund for $150,000 for the potential defence of claims related to the Real Estate Compensation Fund Corporation.

[c] Education Fund

In compliance with Section 43 under the Real Estate Services Act, an Education Fund was set up during 2006 from licensee payments of discipline penalties. When the discipline committee determines that a licensee has committed professional misconduct or conduct unbecoming a licensee, that licensee is required to pay a penalty in an amount of not more than $20,000 in the case of a brokerage or former brokerage, or not more than $10,000 in any other case. Under Section 44 of the Real Estate Services Act, money received by the Council on account of a discipline penalty under Section 43 may be expended by the Council only for the purpose of educating the public, and licensees and other participants in the real estate industry in British Columbia about the operation and regulation of the industry and issues related to real estate and real estate services.

10. Commitments and Contingency

[a] In fiscal year 2013, the Council renegotiated the lease for their office premises for a five year period ending on September 30, 2019. Base rent due within each of the next five years is estimated as follows:

 

$

 

2014

240,098

2015

251,669

2016

263,240

2017

274,811

2018

286,382

Thereafter

72,119

 

 

1,388,319

 

In addition to base rent, the Council is responsible for paying its portion of operating costs.

 

[b] The Council may, from time to time, be subject to claims and legal proceedings brought against it in the normal course of business. Such matters are subject to many uncertainties. Management believes that adequate provisions have been made in the financial statements where required and the ultimate resolution of such contingencies will not have a material adverse effect on the financial position of the Council.

11. First-time adoption of Canadian accounting standards for not-for-profit organizations

These financial statements are the Council’s first financial statements prepared in accordance with Canadian accounting standards for not-for-profit organizations. The date of transition to these standards is July 1, 2011.

The Council’s significant accounting policies disclosed in Note 2 have been applied in preparing these financial statements. Further, the Council has applied CICA Handbook Section 1501 First-Time Adoption by Not-for-Profit Organizations in preparing these financial statements.

First-time adoption mandatory exceptions and optional exemption applied

Upon transition, CICA Handbook Section 1501 First-Time Adoption by Not-for-Profit Organizations prohibits certain mandatory exceptions and permits certain optional exemptions from retrospective application of these standards. The Council has applied all of the mandatory exceptions and has elected to designate all of its short-term and long-term investments to be measured at fair value.

First-time adoption transitional adjustments, reconciliations and disclosures

Upon transition, CICA Handbook Section 1501 First-Time Adoption by Not-for-Profit Organizations requires the Council to (1) present its opening statement of financial position at the date of transition; (2) present a reconciliation of its net assets at the date of transition; (3) present a reconciliation of its excess of revenue over expenses for the year ended June 30, 2012; and (4) disclose any material adjustments to its statement of cash flows as a result of the translation to Canadian accounting standards for not-for-profit organizations.

There was no impact to the Council’s net assets at the date of transition, no impact to its excess of revenue over expenses for the year ended June 30, 2012, and no impact to operating, investing or financing activities within the statement of cash flows as a result of the transition to Canadian accounting standards for not-for-profit organizations.

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Schedule of Expenditures

Years ended June 30, 2013 and 2012

 

Schedule 1
Schedule of Administrative Expenditures

 

 

2013

 

2012

 

 

General
Fund
$

Total
$

General
Fund
$

Total
$

 

Amortization

176,532 176,532

184,774

184,774

Council members’ honoraria

130,817 130,817

140,254

140,254

Equipment maintenance

27,545 27,545

26,000

26,000

Insurance

13,830 13,830

11,084

11,084

Office rent and operating costs, net

535,482 535,482

463,073

463,073

Postage, mailing and delivery

123,196 123,196

152,453

152,453

Printing and stationery

66,612 66,612

50,849

50,849

Professional services

66,602 66,602

117,858

117,858

Salaries

1,819,331 1,819,331

1,654,833

1,654,833

Telephone

16,079 16,079

15,289

15,289

Travel and accommodation

200,057 200,057

237,546

237,546

Visa and bank charges

112,564 112,564

122,902

122,902

 

 

3,288,647

3,288,647

3,176,915

3,176,915

 

Schedule 2
Schedule of Investigation Expenditures

 

 

2013

 

2012

 

 

Unrestricted
Fund
$

Total
$

Unrestricted
Fund
$

Total
$

 

Court reporter services

7,288 7,288

8,762

8,762

Criminal records searches

2,390

2,390

Forensic investigations

39,156 39,156

72,915

72,915

Professional services

372,988 372,988

426,785

426,785

Salaries

1,532,404 1,532,404

1,333,908

1,333,908

Spot audits

15,160 15,160

27,798

27,798

Travel and hearing (recovery)

(52,885) (52,885)

(67,718)

(67,718)

 

 

1,914,111

1,914,111

1,804,840

1,804,840

 

Schedule 3
Schedule of Other Expenditures

 

   

2013

   

2012

 

 

General
Fund
$

Education
Fund
$

Total
$

General
Fund
$

Education
Fund
$

Total
$

 

Conferences

110,060

110,060

74,753

74,753

Dues, subscriptions and publications

48,460

48,460

43,204

43,204

Electronic communication

139,705

139,705

118,735

118,735

Post-licensing education/grants

8,964

128,041

137,005

2,185

16,057

18,242

Printing

80,782

80,782

75,698

75,698

Public relations

4,951

4,951

2,090

2,090

 

 

392,922

128,041

520,963

316,665

16,057

332,722

 

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