Many municipalities in Quebec want to show their commitment to prevent corruption by implementing programs and risk management.

In recent years, Quebec municipalities, as well as the provincial government, have not been spared from the corruption concerns that have greatly tarnished the reputation of the municipal and provincial world.

Through scandals and media headlines, this phenomenon is also reflected in the rest of Canada and around the world.

As a result, many municipalities in Quebec want to demonstrate to taxpayers their commitment to preventing corruption and other wrongdoing by implementing programs and risk management in this regard. While some large cities can afford a full-time Inspector General, this isn’t the case for all municipalities.

The International Organization for Standardization (ISO) has instituted ISO 37001 to provide public and private organizations with a mechanism for demonstrating to stakeholders a level of quality assurance and integrity in proxy processes. This is why some municipalities would like to take the necessary steps for aligning with the standard or obtaining ISO 37001 certification.

Did you know that…

According to ACFE’s 2018 Report to the Nations, corruption is the main offence in eleven of the fifteen sectors of activity identified, the main offence in five of the eight high-risk departments and represents 62% of all crimes committed by senior managers and executives, and 77% of all crimes committed in proxy departments.

What are municipalities doing to deal with corruption?

Nowadays, transparency, ethics and social responsibility are values high in demand that somehow reflect the evils of our society: a general lack of trust. This widespread feeling undermines the credibility of the public service, including municipalities on the front lines.

To address this and exhale these values, it becomes imperative for municipalities to have thorough administrative systems and measures in place to manage risk and protect the organization.

Prevention is better than cure

The ISO 37001 standard is recognized throughout the world and defines an anti-corruption management system that establishes the procedures to be introduced for preventing, detecting and mitigating corruption. This standard identifies measures to be implemented within organizations that seek to adopt best practices and demonstrate their commitment to ethics, transparency and accountability.

In concrete terms, the purpose of applying the various clauses of this standard is to train and raise awareness among all municipal staff working directly or indirectly in the field of municipal contracts. Whether the choice is to align with the standard or obtain accredited certification under ISO 37001, organizations must ensure that they have an anti-corruption management system in place to prevent, detect and mitigate risks.

Ethics and compliance – The new tool for prevention, transparency and accountability

For municipalities, adopting such a policy helps show the population that public actors do not evade corruption and that they are taking all necessary measures to fight it by adopting best practices.

In addition, the implementation of ISO 37001 makes it possible to establish a climate of trust and predictability with business partners and set more rigorous parameters in the proxy process. These parameters will motivate, if not require, contractors and suppliers to demonstrate their own commitment to ethics and anti-corruption measures if they wish to continue doing business with municipalities.

Beyond the image and trust aspect that this standard conveys for municipalities, it is also necessary to look at the competitive advantages that it generates for service providers.

Municipal - Villes

Reduce costs and increase productivity

The commitment to adopt ethical practices and a robust compliance program with regard to integrity and anti-corruption provides a clear competitive advantage for providers.

In addition to reducing legal and reputation costs and risks, such a program supports the development of a culture of organizational integrity that results in increased productivity and higher quality products and services.

In a context where municipalities evaluate contracts on the basis of alignment or ISO 37001 certification, providers demonstrating their commitment to ethics and compliance will have a competitive advantage over their competitors.

Restoring confidence

The introduction of these processes is intended to restore citizens’ confidence in their municipal administration. This approach establishes a consistent and predictable regulatory proxy framework based on an ethical organizational culture that enhances transparency and accountability.

In an environment where municipal leaders must demonstrate their proactive actions to counter corruption, collusion and other wrongdoing, the question is not about the need for a compliance program, but about the scope and implementation.

Thanks to the strength of Raymond Chabot Grant Thornton’s network and our partnership with leading experts in the anti-corruption field, we are able to offer a multidisciplinary service focussed on sound risk management and ethical governance.

Through a proven approach, we offer advice and support for the implementation of best practices in compliance and anti-corruption management systems within your organization, which may eventually qualify you to receive, if you wish, international ISO 37001 certification.

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Groupe Maison de l’Auto implemented a succession plan several years ago to ensure its growth and plan for a change in governance.

Relationships were established in 2012 between the managers of the Maison de l’Auto and our firm’s entrepreneurial succession experts.

A family business

In 1948, Luc Verreault’s father, Oswald, decided to go into business and opened a service station in Saint-Félicien. By applying the organization’s philosophy of always putting the client first, the company experienced outstanding growth and now has numerous car dealerships in Lac-Saint-Jean.

A third-generation family business that is constantly growing, Groupe Maison de l’Auto consists of seven large-scale dealerships offering Chrysler, Dodge, Jeep, ProMaster, Ram, Mazda, Kia and Mitsubishi vehicles.

Recognized for its professionalism, the organization offers an exceptional buying experience and five-start after-sale service.

Preparing the succession and ensuring the organization’s longevity

Luc Verreault began to reflect about the future progressive transfer of the business. He wanted an integrated succession plan built on key factors to support the success of such a process. To reinforce the new governance, he benefited from the assistance of a team of experts covering all aspects: human, strategic, financial and tax.

Luc Verreault’s shareholders were his three children and two non-family members, Jean-Michel Genest and Tony Bonelli. They were all targeted as transferees and the owner therefore wanted to ensure he had all the necessary tools on hand and appropriate work methods to ensure the business’s continuity.

It was with this in mind that the owner called on our firm’s services. Our team of experts, headed by Éric Dufour, the firm’s Entrepreneurial Succession Leader, helped the organization clearly define each person’s objectives and expectations in order to carry out the transfer plan.

Raymond Chabot Grant Thornton - image
Raymond Chabot Grant Thornton - image

Undertaking a diagnosis and setting up a succession plan

Once intentions had been diagnosed and the feasibility analyzed, we were able to implement a monitoring system based on the right agreement and concept, which included coaching on various aspects and the creation of a family council.

Five candidates were evaluated based on the diagnosis and succession plan. We assessed complementary areas and risks in terms of the targeted structure. We also highlighted each candidate’s strengths and weaknesses in order to assign them a strategic position within the organization.

Emmanuelle Verreault, the owner’s daughter and one of the five candidates, was designated to take on the role of Executive Vice-President.

Rethinking governance

The diagnosis brought to light an issue regarding the change in governance. The business model had to be reviewed to ensure greater synergy and foster team work rather than by dealership.

We highlighted various comparable business models in Quebec and mapped competitors, profiles and expertise mixes.

Staying attentive

In addition to the financial and tax aspects, there is a major emotional component in an entrepreneurial succession that has to be skillfully managed. This was all the more so for Groupe Maison de l’Auto because it was a hybrid transfer: family and non-family members. Using a global approach that took into consideration all aspects as well as recognized efficiency tools and practices, we leveraged our experts’ expertise to help the transferor and transferees overcome this emotional phase.

Initiating and maintaining contact with the various parties throughout the process was also critical to guarantee that the process took place efficiently and transparently, while ensuring a smooth transition where all parties knew their role and responsibilities.

Today, we are working with the owners of Groupe Maison de l’Auto to implement and adjust the succession plan. It is a long process that can take up to eight years. Thanks to a unique relationship that transcends the professional context, we can support each player in the transfer process to achieve the objective sought and ensure that this family business keeps on going.

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During the 3rd International Tax Symposium organized by Raymond Chabot Grant Thornton last March, Grant Thornton International tax experts provided their views on various topics related to international tax changes for Canadian businesses.

U.S. tax reform, transfer pricing matters to watch for and emerging international taxation trends are discussed by the specialists from the Grant Thornton International organization in the following videos.

Video 1 – International tax trends to watch for

Video 2 – Transfer pricing issues for Canadian businesses

Video 3 – Impact of the U.S. tax reform on companies doing business in the United States

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Mathieu Lendick
Partner | CPA, CA, CISA, QSA | Management consulting

 

Information security is extremely important in business. This is particularly true for financial institutions.

It is crucial that they have a rigorous and efficient evaluation process to rely on as evidence that they meet the compliance requirements they are subject to.

A solid understanding of the applicable standards and frameworks in each situation is essential to satisfy these often complex requirements. The expertise of specialists is invaluable to make sure that such a compliance exercise is carried out correctly.

An exercise requiring know-how

Our IT compliance and audit team recently assisted a financial institution in carrying out all of the activities required to attest to their compliance with Interac Corp.’s security rules.

This was a very complex engagement, as Interac has established a wide range of security rules, ranging from general rules to those that are specific to situations and transactions.

For example, different rules apply depending on whether we are dealing with a debit card issuer or a terminal or ATM operator and the type of transactions that are accepted: direct payment, flash payment or terminal withdrawals.

For each set of rules, it is important to understand which components apply to the client’s situation. This requires in-depth knowledge of Interac’s regulatory framework. Our team of experts has developed this knowledge.

We had to provide an attestation to Interac that the required IT control measures exist and were applied.

In the case at hand, we also proposed methods to our client that would better structure the process for documenting evidence of the controls. These enhancements will make it much easier to perform the annual Interac compliance program attestation.

Additionally, we ensured that all of the required controls are always properly performed by determining the responsibility for such controls within the organization’s various teams. This ensures that information is collected on an ongoing basis, even when there are staff changes, and that knowledge of the control processes within the organization is shared.

Thanks to our structured approach, it was possible to:

  • Present a complete compliance file, in accordance with Interac’s requirements;
  • Submit the report within the stated deadline;
  • Maximize efficiency in preparing the report;
  • Standardize the supporting documentation.

Secure practices for all industries

Regardless of its industry or size and the complexity of its compliance exercise, any organization must be able to rely on well-designed IT processes and controls.

We can help you evaluate your IT environment in accordance with the applicable frames of reference for your situation to provide you with the assurance that it does not comprise significant risks, in particular in terms of security processes and controls. Should weaknesses be detected, we present recommendations to address the issues, based on a cost-benefit assessment to prioritize actions taken.

Our experts are specialized in evaluating compliance with PCI-DSS standards and conducting control attest engagements relating to special reports using recognized audit standards (CSAE 3416, SSAE18 SOC 1 and 2, CSAE 3000 and 3001).

03 May 2019  |  Written by :

Mathieu Lendick is an expert in Management Consulting at Raymond Chabot Grant Thornton. Contact him...

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