FSRA’s webinar on Mortgage Administrators’ Financial Filing Requirements (June 12, 2024)

0:05
Hello, everyone, and welcome to today's webinar, Overview of Final Guidance on Mortgage Administrators' Financial Filing Requirements.
0:15
Before we get started, I would like to go over a few items so you know how to participate in today's event.
0:21
You have the opportunity to submit text questions to today's presenters by typing your questions into the questions pane of the control panel.
0:29
You may send in your questions at any time during the presentation.
0:33
We will collect these and address them during the Q &A session at the end of today's presentations.
0:39
I would now like to introduce Raka D 'Angela, Senior Manager, Mortgage Brokers Policy at Fezra.
0:49
Good morning, everyone, and thank you for attending our webinar on our proposed guidance on mortgage administrators' financial filing requirements.
0:58
My name is Raka D 'Angela, Senior Manager, Mortgage Brokering Policy, and I'm joined by Antoinette Liang, Head of Financial Institutions and Mortgage Broker Conduct.
1:09
We are your hosts for this morning's webinar.
1:13
If we perhaps turn to the next slide.
1:25
So Antoinette will be conducting the presentation, but before we do that, we'll do the land acknowledgement.
1:31
After the land acknowledgement, Antoinette will present an overview of the mortgage administrator sector, explain why FISRA is proposing this guidance, why there's a need for the guidance, what in the guidance remains the same, so what provisions remain the same, and what might be new and the effective date of the new requirement.
1:52
And also, how can mortgage administrators prepare for this guidance or to adhere to the guidance?
1:59
How can the auditors prepare?
2:02
And once the presentation is done, we'll have some time for questions.
2:06
We'll try to answer as many questions as possible today.
2:09
For those that we don't get to, we will provide answers and then post them on the website, along with a recording of this webinar and the PowerPoint for this webinar.
2:23
Thank you.
2:23
Next slide, please.
2:26
So as I said, we would like to acknowledge the land that we are on.
2:32
This land is the traditional territory of many nations including the Mississaugas of the Credit, the Anishinaabeg, the Chippewa, the Haudenosaunee and the Wendat peoples and is now home to many diverse First Nations, Inuit and Métis peoples.
2:50
We acknowledge that Toronto is covered by Treaty 13 with the Mississaugas of the Credit and the Williams treaties signed with multiple Mississaugas and Chippewa bands.
3:01
Next slide, please.
3:04
So at this point, we would like to begin the presentation and I turn it over to Antoinette. Thank you.
3:11
Thank you, Raka. Good morning, everyone.
3:13
Thank you for joining us.
3:15
And I thought we're going to start by showing you a little bit about how our sector looks like.
3:22
And I also wanted there's a slight clarification.
3:25
This piece of guidance is in fact, And some of you know that we're working on multiple pieces of guidance.
3:31
That's why initially when we mentioned that this is in draft form, this is actually in final form and it is currently effective.
3:40
But what we're going to do is we're going to start with the sector overview.
3:43
So we can turn to the next slide.
3:47
So here are data that we've collected through the annual information return from our licensed mortgage administrators.
3:54
you notice that there is quite a substantial increase since 2020 of the value of mortgage under administration by our licensed firms. That has gone up in the last few years by 40%.
4:10
The number of mortgages under administration has also gone up. It's by 15%.
4:17
It's not this a percentage, but it's definitely an indication that there are more and more investors relying on mortgage administrators to manage their mortgage investments.
4:29
The number of firms have also increased since 2020 that has gone up by over 20%.
4:37
So as you can tell from this slide, there are more value of mortgages that are being administered by this sector.
4:49
So from a consumer protection perspective, our biggest concern is that the funds and the mortgage investments that an investor entrusted with an administrator are either mishandled, misused or lost.
5:04
So within our legislation, so the AMBLA, there are specific requirements to address this risk.
5:11
Mortgage administrators are required to hold funds and investments in a certain manner and they are also required to engage an external auditor to provide certain reports about how they're handling funds and assets under administrations. So the purpose of this guidance is to clarify these requirements.
5:35
So if we can move over a couple of slides to the next one, please.
5:42
Thank you.
5:43
So on this slide, we lay out why we are proposing this guidance.
5:49
This guidance intend to update a previous guidance that was issued by our predecessor, FISCO, and it intended to clarify the requirements relating to filings and audits that a mortgage administrator has to conduct. So there are few key reasons why we are doing this.
6:13
First, as I've shown you earlier, the sector has grown tremendously and the amount of assets and funds that are being managed by mortgage administrators have also gone up substantially.
6:26
And another thing that we've also noticed is that the role of mortgage administrator has evolved over the years.
6:33
Through our supervision activities, we notice that mortgage administrators are doing more than simply collecting and remitting mortgage payments from borrowers to investors. They are doing other activities.
6:49
For instance, many mortgage administrators are also responsible for communicating to their investors the performance of their mortgage And also, in some cases, investors have also delegated to their administrator certain authority, for example, to make specific decisions or take specific actions when a mortgage came into become in arrears and or there's an issue with payments.
7:18
So the role of administrator has definitely changed over time.
7:23
We're seeing more and more investors are relying on them to make quite critical decisions regarding their mortgage investments.
7:32
So the purpose of this guidance is for us to clarify what administrators as well as their auditor can do to help indicate what the administrator has done in safeguarding the investments and the funds that their clients have entrusted in them.
7:51
We can move to the next slide.
7:55
This is just quickly laying out our approach in putting out this piece of guidance.
8:02
As many of you know, we are principle-based, but what does it exactly mean?
8:07
So the most important thing is we want to make sure that we're focusing our requirements and our guidance on the most important consumer outcome.
8:16
As I said earlier, many or more investors are relying on administrators to handle their mortgage investments, as well as funds relating to those investments.
8:28
And so the most important consumer outcome for us is to make sure that consumers are being treated fairly in that their funds and their investments are handled properly.
8:38
So that's the primary focus of this piece of guidance.
8:41
We also want to be effective and efficient as well as risk-based.
8:47
So what we have done is since administrators are required to engage external auditors for certain financial reporting purposes.
9:00
We also want to leverage the existing relationship that administrators have with the external auditors to help provide assurance that their investors' funds and investments are being handled properly.
9:15
The last thing is that we want to be as transparent as we can, clarify our expectations so that it is easy for administrators as well as the auditors to meet the existing requirements.
9:29
So if we can move to the next slide, what I'd like to do is to first start off with emphasizing what is not changing, because the guidance does not impose additional requirements.
9:43
It is providing additional clarification.
9:45
So on the next slide, we highlighted the few things that are not changing.
9:51
So, first of all, there are still going to be three filings that mortgage administrators are required to file 90 days after the end of its fiscal year.
10:05
First one is the audited financial statements.
10:09
Second is what we called an auditor's report on internal controls deficiencies that they've in an external audit, in a financial statements audit, which we generally call management letter.
10:22
And then the last foulings that is in auditor's reasonable assurance report on compliance with certain part of the legislation relating to trust account and assets and liabilities under administration.
10:37
So the three key foulings are not changing.
10:41
There are no additional reports or foulings that a administrator needs to provide.
10:48
Okay, so if we can turn to the next slide, want to give a little bit more specifics on the nature of these filings that are also not changing.
10:59
So first thing, I want to remind everyone that even when an administrator has no mortgage under administration in a reporting year, They are still required to file financial statements with us, and they are still required to provide us with the management letter that the auditors provided.
11:23
And lastly, there should still be some form of indication of their compliance because even though there may not be mortgages under administration, other prevention may still apply.
11:35
So that's something that's continuing.
11:37
the auditor who can take on these assignments, they have to provide the report on all three filings.
11:49
So if you hired an auditor to do your financial statements audit, that same auditor has to be the one preparing the other two filings.
11:59
And lastly, we've included the email here for where you should be your financial filings that also hasn't changed.
12:07
And then the last thing I want to emphasize as in not changing is that the auditor who can provide these filings have to be a licensed public accountant and you can find a list of accountants who have a public accounting license on the CPA Ontario website and the directory is listed there and you're going to find this slide deck after the webinar on our website, and you can through the link, you'll be able to get to that directory.
12:38
And of course, financial statements have to be prepared in accordance with a gap as set out in the handbook for the CPA.
12:47
So with that, I will speak about what changes we are making in terms of these three pieces of file links. Next slide, please.
13:01
So, first of all, wanted to provide some clarification on the management letter or report by auditors on internal controls regarding financial reporting.
13:14
So, as I indicated, the requirement to provide a copy of the management letter to us have not changed.
13:23
What has changed is what happens when an auditor does not provide any communication to you about internal control deficiencies.
13:32
So in the past, a mortgage administrator will have to notify us that the auditor will not issue a management letter.
13:41
Now, under CPA handbook, an auditor is actually required to communicate deficiencies and internal controls if they notice them.
13:50
So what we have done here is really aligning our language with the requirements under the a handbook so that it is easy for an auditor as well as their client.
14:03
What we're asking now is for the mortgage administrator or their auditor to let us know that they have not identified any internal control deficiencies.
14:14
So we hear that substantively the requirement hasn't changed, but we're aligning the language with the Canadian auditing standards.
14:22
So, this requirement is effective already for fiscal year ending now, so that this slight change is in effect right now.
14:35
So, we can move to the next slide.
14:40
So, this has to do with the Auditor's Reasonable Assurance Report on compliance with specific requirements under our Act.
14:51
So the first key change here is that the auditing standards that an auditor has to follow when they're preparing this report has changed.
15:01
So under the old interpretation, auditors have to follow a direct engagement standard that is outlined in CSAE 3001 and 3531.
15:13
So a direct engagement assignment is one where the auditor actually does the work to provide an opinion directly on whether a mortgage administrator have complied with the relevant or specified requirements.
15:29
Now with the new requirements, we're updating the standards that auditors need to follow.
15:35
They now need to follow the attestation engagement standards, which is under CSAE 303530.
15:43
So what is an attestation engagement?
15:47
So in these type of engagements, a mortgage administrator, so being management of the mortgage administrator, they have to prepare a statement indicating how they are complying with the specified requirements, and then an auditor will provide an opinion on whether that management statement is materially correct.
16:06
So we updated the standards, it's because when we were talking to public accounting firms, we understand that most firms will accept an attestation engagements, but many firms will not accept direct engagements.
16:21
So as a result, we're updating the auditing standards so that it is easier for market administrator to find an auditor who are willing to do the work and issue this report.
16:32
This standard is also in effect right now, it's effective for all the fiscal years ending after November last year.
16:42
So we can go to the next slide.
16:46
So this is the last change that we have made, is to really clarify the sections that an auditor will need to issue an opinion on.
17:00
So, under the Act, the auditor have to report on a mortgage administrator's compliance with requirements relating to trust account and the assets and liabilities under administration for the year.
17:17
So, the old guidance doesn't really specify what other specific sections under EMBLA that the report have to cover.
17:26
Majority of the auditor's report that we've received covers sections relating to handling of trust funds as well as trust account operations.
17:36
So these would be section 33 to 39 of regulation 18908, sorry, 193.04.
17:47
There was a table there, we're gonna change that to give you the correct reference for that section.
17:54
But with the new guidance, what we've done is to clarify specifically what sections of the regulation that we would like a auditor's report on compliance.
18:07
What we have done is that the sections articulated that are in addition to trust funds and trust accounts, it's in the green box there, which are section 23, 24, 28, 29 and 32.
18:25
So all these sections relate to handling of funds and record keeping.
18:31
Our understanding based on discussion with auditing firm is that a lot of these sections, a lot of these requirements, auditors are already assessing as part of the financial statements audit.
18:47
Okay, if we can move on to the next couple of slides, maybe the next one.
18:55
So what mortgage administrators can do to prepare for this change.
19:01
The most important thing that is changing is really with respect to the report on compliance with requirements.
19:08
So because we're moving from direct engagement standards to attestation standards, mortgage administrators would now need to prepare a statement of compliance.
19:18
So the most important thing for you is start discussing with your auditor way ahead of the work in terms of the statement, the format and wording of that statement, because it is important that the auditors know what they are auditing.
19:35
So have that discussion early obviously review this piece of guidance, review the exact requirements as outlined in the Act.
19:45
The second thing is when if you are you know engaging with your auditor, mortgage administrator, share a copy of the guidance as well as the relevant sections of the Act with your auditor.
19:59
Talk to them ahead of time and make sure that they are aware of this change and throughout the process just coordinate with them.
20:07
And, of course, if there are any questions, you can always contact FISRA.
20:13
Now, I believe we do have some auditors online, so we can talk a little bit in terms of auditors what you can do to prepare. We can move forward a couple of slides. Next one.
20:28
So, again, familiarize yourself with the following requirements, as well as the specific sections of the requirements that you will be asked to provide an opinion on.
20:44
Confirm the audit engagements with your client, the mortgage administrators, and also make sure that you do discuss with them the statement of compliance that you will be providing an audit on.
20:59
And last thing is, of course, planning the audit with your client, making sure that there's sufficient time, especially when there is this change, that you will have the time to complete your work and prepare the report so that your client can submit the required file links to us within the 90 days after the fiscal year end.
21:22
So maybe with that, we can open up for some questions.
21:34
Thank you, Antoinette. Thank you for the presentation and the many clarifications.
21:40
We have a few questions that have come in.
21:44
Let me start with the first one.
21:48
Let's see.
21:50
Okay, question one.
21:52
Is there additional audit work that needs to be performed based on the mortgage administrator financial filings guidance?
22:00
Are these changes going to increase my audit costs?
22:06
So it really depends.
22:09
As I mentioned before, auditors have always been asked to report on compliance with requirements that are relating to trust account and assets and liabilities under administration.
22:21
So the requirement itself is very broad.
22:23
So, if in the past, your auditors only test compliance with respect to trust accounts and trust account operations, which are section 33 to 39, then going forward, the scope are changing a little bit.
22:42
It does include other sections that has to do with, other sections that deal with handling of payments to investors as well as some record keeping.
22:52
Now, I want to emphasize that these additional sections, those are for fiscal year ending December 31st, 2024, so there's a longer transition period.
23:06
So if your auditors in the past are only auditing on the trust accounts requirement, then going forward, so for fiscal year ending December 31st, 2024, the audit work has expanded.
23:21
But if your auditors have always been, you know, doing a very broad audit, then that shouldn't change that much.
23:29
Just in terms of the question of would the cost increase, based on our discussion with auditors and a lot of the work that will be required to cover their audit of compliance with these other they do overlap with some of the steps that they would already be doing as part of the financial statements audit.
23:54
Thank you, Antoinette. So this one might be a little bit related.
23:59
The mortgage administrator financial filing guidance specifies the sections in EMBLA that auditors are required to review for compliance.
24:08
What is the reason for specifying these sections?
24:11
Yeah, so one of the reasons, so it is to provide clarity.
24:18
As I said before, in all the filings that we received in the past, we get variation of it.
24:27
And from our perspective, we want to help mortgage administrator as well as the auditor, so that we are being very specific on the exec sections.
24:39
The more clarity we can provide the auditor the easier it is for them to do the work and hopefully it should be a more efficient process so there's benefits to both the auditor as well as the mortgage administrators.
24:56
Great thank you and I know you touched on this during the presentation but the question is is there a difference in requirements if my fiscal year end is on or before December 31, 2024 or after December 31, 2024?
25:15
So the requirements don't change, but the scope of the report on compliance have changed.
25:25
So for all fiscal year ending before December 31, 2024, the scope of that audit is focusing on trust accounts operations. So these will be section 33 to 39 of the regulation 189.08.
25:47
However, for fiscal year ending after December 31st, 2024, the scope of that audit has increased to include these other sections. So that was in that previous slide that we showed.
26:04
So the would include 23, 24, 28, 29, and 32.
26:14
Thank you.
26:15
The next question.
26:18
Do I have to notify FISRA if internal deficiency is identified by the auditor in addition to submitting the annual financial filing?
26:29
Yes, you do.
26:31
If there are internal control deficiencies, then your auditor would be obligated to put it a letter to you, especially if they are material, so that information you can just submit a copy to us.
26:45
If they communicate some deficiencies verbally because these are not material, you should also be sharing that information with us. Great, thank you.
27:00
The next question, Can my auditor provide the three reports to FISRA or do I, the mortgage administrator, need to be involved in the process of reporting?
27:14
Yes, so the obligation to provide the filings is on the mortgage administrator.
27:21
Now, if as a mortgage administrator you have agreement with your auditor to submit directly with us.
27:28
We will not turn those filings away, but I would definitely ask if you're taking that route, be very clear when you send those filings in the name of the administrator as well as your license number.
27:43
Thank you. Next question.
27:48
What should I do if the auditor refused to provide an auditor report on internal control?
27:59
So, I think that there should be enough auditors out there who will be willing to do that work.
28:06
For everyone's benefit, we've actually have done some quite a bit of conversation with the audit community, so auditors before we put out the guidance.
28:18
It's exactly to avoid a situation where a mortgage administrator cannot find auditors to do the work.
28:25
So we're quite confident that there will be auditors out there who will be willing to take on the work.
28:35
Thank you. A few more questions.
28:38
Could I ask for an extension to submit the annual financial filings?
28:46
So, unfortunately, FSRA doesn't have the authority to provide an extension on the financial filing requirements.
28:58
So under the act, you will have to meet that March 31st, or not March 31st, the 90 day after year end, financial filing deadline, because we do not have authority to provide any extension.
29:15
Okay.
29:17
The next question, can Pfizer recommend an audit company I can use?
29:24
No, we don't.
29:25
The only the requirements that we have is that they have to have a public accounting license. They're in good standing. But what we have done is to include the link to the CPA Ontario directory where you can get a list of auditors, and you will be able to select one from them.
29:48
Thank you.
29:49
Next question. Are there training sessions or resources provided by FISRA to help understand the new guidance?
29:58
Yeah, so this is one of them. Our webinar is going to be posted so administrators and auditors can refer back to this.
30:08
We are also very open to answering questions.
30:12
If administrators or your auditors have questions about these, We are more than happy to, you know, to talk to you on a one-on-one basis to answer questions.
30:24
Thanks, Anjanette.
30:25
I think you answered this next question, which was, What should I do if I have questions or need clarification about the new guidance during the audit process?
30:34
Yes, get in touch with or refer to the information on our website.
30:40
Great. Next question. Just waiting for that one to come through.
30:59
Well, how about this one in the meantime?
31:03
What are the consequences if a mortgage administrator fails to comply with the new guidance? And how will FISRA enforce compliance with the new guidance?
31:14
Yeah, so we do notice over the years that many administrators are late in providing the filings or not providing the filings at all.
31:27
As many of you know, we have the ability to impose summary monetary, summary M's, summary administrative monetary penalty.
31:36
So that is going to be the, you know, the immediate course of action for us.
31:42
And obviously, if there continuous non-compliance, then that actions that can be taken include, you know, licensing conditions, replication, as well as other enforcement actions.
31:57
And for this next question, we also talked about this during the presentation.
32:02
Can the reasonable assurance report be prepared by an auditor other than the one who audits and prepares my financial statements?
32:12
No, in this case the regulation is very clear that the auditor who provide the financial statements audit have to be the same auditor who prepared that report and actually there is also a business efficiency perspective because if you have the same auditor that have to do both audits it is actually a more efficient process so there's some benefits to having the same auditor other than That's what the that's what the legislative legislation said.
32:44
So for the next question, documentation is always very important.
32:48
So the question is, what specific documentation do I need to prepare and maintain for my annual financial filing?
32:58
So, I think this is a, this for us, the financial following doesn't entail additional record keeping requirements, you know, there are already specific requirements under MBLAW that talk about, you know, maintaining trust account, doing reconciliations, as well as keeping records for a certain period of time.
33:25
So, all those haven't changed and we don't anticipate you need to do any new record keeping.
33:33
The only thing new is for a mortgage administrator to prepare a statement of compliance.
33:40
And I think the best course of action is to have a conversation with your auditor just to discuss and confirm the form of that statement.
33:49
If you have questions in terms of what records you need to maintain in order for them to to be able to conduct that audit.
33:57
They will be the, they should be the first person you go to to have that conversation.
34:06
Thank you.
34:09
This next question asks, with regards to deficiencies, if there are deficiencies in the report and we correct them, is this okay?
34:20
Absolutely.
34:21
The whole point is we are all human, right?
34:26
And the purpose of those reports, partly is to highlight whether there are weaknesses or deficiencies.
34:37
What we're asking for as a regulator is that you know about them and you take actions to rectify it.
34:45
So having a deficiency doesn't mean you're not needing, you're automatically being sent to enforcement.
34:54
the most important thing is if you have deficiencies and you're taking actions against it.
35:00
The caveat obviously is there are some bad actors out there where deficiencies was due to deliberate mistreatment, mishandling of funds.
35:11
So in those cases, obviously as a regulator, we will be taking actions.
35:16
But if deficiencies were a result of maybe it was just a one-off or maybe it's a new process that you're testing and there was something that you need to work out.
35:27
As long as it doesn't indicate a systemic issue and you're taking actions to deal with it, then we will be very willing to take a look at what actions you're planning to do and through monitoring to confirm that you are in fact taking actions.
35:48
Thank you, Internet.
35:49
I think only two more questions.
35:52
So second to last, when does this guidance become effective?
35:57
Will there be a grace period for mortgage administrators to adjust to the new guidance?
36:04
Yeah, so the new guidance is already effective.
36:09
Period, or we'll call a transition period, is relating to the expanded scope of the report on compliance.
36:17
As I mentioned earlier, the current scope of reports for compliance is solely relating to trust accounts.
36:31
So for all fiscal year ending before December 31st, 2024, that report on compliance only have to cover sections relating to trust accounts operations.
36:44
So, Section 33 to 39 for fiscal period ending after December 31st, 2024.
36:52
That's when the expanded scope or I would say additional sections will come in.
36:58
So, we are providing a transition period.
37:03
Great.
37:03
Thank you.
37:04
And I think this is a good question to close with.
37:07
The question is, how can I best prepare for an audit?
37:12
I think the first question, the first response I always say is start with your auditor.
37:19
You know, talk to your auditor so that they can clarify what information they need to start the audit, conduct the audit.
37:27
And then secondly, once you have that conversation, the normal course is usually going to go check back whether you have that information, and if not, start preparing those.
37:38
And a lot of times my experience has been auditors are quite helpful because the more prepared you are, the easier it is for them as well.
37:47
So it makes the process a lot more efficient. So definitely start with your auditor, have a conversation.
37:53
Great. Thank you for that, Antoinette. And thank you to the attendees for joining us this morning.
38:05
This webinar was recorded and will be posted on our website in the coming days or coming weeks, and we hope you found the session helpful.
38:16
If you do have follow-on questions for us, please don't hesitate to contact us, and we're always here to try and assist as best we can.
38:26
I think that's it from my perspective.
38:28
I don't know, Antoinette, if you have any closing remarks, Otherwise, we wish everybody a great rest of the day.
38:36
Thank you.
38:37
Thank you for joining us.
38:40
Thank you, everyone.

1. What additional audit work does the Mortgage Administrators’ Financial Filing Requirements Guidance requires me to perform and will these changes increase my audit costs?

Whether additional audit work and cost will result from the new guidance depends on your previous audit on compliance.

In the old Guidance, FSRA and its predecessor did not specify the scope of the auditor’s report on trust accounts and assets and liabilities under administration (s. 3(1)(c) filing). We are aware that many audit reports that we received in the past covered only the MA’s compliance with the deemed trust funds requirements under O. Reg. 189/08 (i.e. s. 33-39).

Under the new Guidance, specific MBLAA sections are specified to provide more clarity for mortgage administrators and their auditors over FSRA’s expectations. The MBLAA sections covered are related to the accounting aspect of mortgage administrators’ business, such as handling of deemed trust funds and payments to lenders, recordkeeping, maintenance of trust account and financial guarantee. We expect that the audit work on compliance with these specific requirements is primarily covered as part of existing audit work.

2. Is there a difference in filing requirements if my fiscal year end is on/ before December 31, 2024 or after December 31, 2024?

The reasonable assurance report (as required by O. Reg. 189/08 s. 3(1)(c)) issued for a fiscal year ending on/before December 31, 2024, is required to provide the auditor’s reasonable assurance on the administrator’s compliance with sections 33, 34, 35, 36, 37, 38, 39 of O. Reg. 189/08, i.e. managing deemed trust funds.

Reasonable assurance report (as required by O. Reg. 189/08 s. 3(1)(c)) issued for fiscal year ending after December 31, 2024 is required to also cover other sections:

• s.23 Payments to lender, investor
• s.24 Payment on redemption of mortgage
• s.28 Duty to have financial guarantee
• ss.29, 30, 31 Recordkeeping
• s.32 Monthly reconciliation

3. Why was a change introduced in the CSAE used in the auditor’s engagement (i.e. from CSAE 3001 to CSAE 3000 and from CSAE 3531 to CSAE 3530)?

Based on discussions with several public accounting firms, we understand that auditors regularly perform assurance work using the attestation approach, but not all auditors will perform work using the direct engagement approach. As a result, we updated Canadian Standard on Assurance Engagements (CSAEs) to increase choice of auditors for mortgage administrators.

4. What specific documentation do I need to prepare for my annual financial filing?

Licensed mortgage administrators should keep all documentation on hand to assist their external auditors in compiling the following reports:

• audited financial statements
• management letter - Internal controls regarding financial reporting
• compliance with trust account and assets and liabilities under administration requirements (reasonable assurance report)

5. When does this guidance become effective. Will there be a grace period for Mortgage Administrators to adjust to the new Guidance?

The guidance became effective on November 27, 2023.

Notwithstanding this, the auditor is required to provide a reasonable assurance report on the administrator’s compliance with sections 23, 24, 28, 29, 30, 31, 32, starting only from fiscal years ending after December 31, 2024.

6. Do you have a sample of a statement of compliance should look like, the info it should contain?

FSRA does not provide a sample of the statement of compliance. Please contact Chartered Professional Accountants of Ontario’s (CPA Ontario’s) professional advisory services team for support at 416-204-3106 or 1- 800-387-0735 extension 4456.

7. With regards to deficiencies, if there are deficiencies in the report and we correct them, is this, ok?

Yes. The purpose of the reports from the auditors is to point out deficiencies to the administrators. For FSRA, it is important that the administrator is aware of the deficiencies and takes steps to rectify them.

8. Could I ask for an extension to submit the annual financial filings?

No. FSRA does not have the ability to provide extensions under the Act. The financial filings are required to be submitted 90 days after mortgage administrator’s fiscal year end date according to O. Reg. 193/08 s.3 (1).

9. Can FSRA recommend an audit company I can use?

No. FSRA does not provide recommendations on which auditing company a mortgage administrator should be using. The administrator should ensure that the auditor they are engaging is in good standing with CPA Ontario. Administrators can obtain a list of CPAs with a Public Accountant licence on the CPA Ontario website under the Public Accounting Licence Directory.

10. What are the consequences if a Mortgage Administrator fails to comply with the new Guidance and how will FSRA enforce compliance with the new Guidance?

Where appropriate, and without limitation to any other sanctions that may be available, FSRA may impose a summary administrative monetary penalty of $1,000 when a mortgage administrator is not compliant with the reporting requirements as outlined in this Guidance.

FSRA may also impose a range of enforcement actions, including letters of warning, licence conditions, licence revocation or suspension, and administrative monetary penalties of up to $100,000 for individuals and $500,000 for entities, per contravention.

Failure to pay any penalty imposed by FSRA is grounds for revocation of a licence.

1. How can the accountant at the administrator prepare for the auditor to complete their audit?

The new guidance requires the reasonable assurance report to be prepared in accordance with the CSAE 3000 and CSAE 3530, instead of CSAE 3001 and CSAE 3531 as required under the old guidance. More specifically:

• CSAE 3000 and 3530 (new guidance) deal with attestation engagements 
  • In an attestation engagement, an auditor performs work to opine on whether a statement of compliance prepared by the management is materially accurate. 
• CSAE 3001 and 3531 (old guidance) deal with direct engagements
  • In a direct engagement, an auditor performs work to opine on whether a firm is complying with specific requirements.

Therefore, under the new Guidance, mortgage administrators are expected to prepare a management’s statement of compliance with the required sections of O. Reg. 189/08 which the auditors will then conduct the reasonable assurance engagement on.

Mortgage administrators should discuss with their auditors in advance regarding the scope and nature of the reasonable assurance engagement, deadline for submission of the financial filings, engagement time and the corresponding documents required to complete the engagement. Any delay in engagement may lead to missing the financial filing timeline requirements.

2. Can the reasonable assurance report be prepared by an auditor other than the one who audits and prepare my financial statements?

No. The reasonable assurance report for a fiscal year must be prepared by the CPA who audits the financial statements for that fiscal year.

3. Can my auditor provide the 3 reports to FSRA or do I (mortgage administrator) need to be involved in the process of reporting?

Yes, the auditor can provide the 3 reports to FSRA on your behalf.

4. Do I have to notify FSRA if internal deficiency is identified by the auditor, in addition to submitting the annual financial filing?

No. FSRA will review the annual financial filing and will reach out to the licensee if any follow up is required based on the information obtained from the filing. However, we will appreciate if you proactively inform us of deficiencies noted and your plan to rectify them.

5. What should I do if the auditor refused to provide an auditor report on internal control (O. Reg. 193/08 s. 3(1)(b)?

Mortgage administrators should discuss the MBLAA annual financial filing requirements under O. Reg. 193/08 and FSRA’s mortgage administrator financial filing requirements Guidance, and the required work with their auditor before the engagement starts. It is important to ensure that the mortgage administrator’s expectations regarding the auditor’s work and deliverables are well understood by the auditor. It is the mortgage administrator’s responsibility to ensure the required reports are completed and submitted to FSRA.

1. Are there any training sessions or resources provided by FSRA to help understand the new Guidance?

FSRA held a webinar on June 12, 2024, to educate the sector. The webinar recording, presentation deck, and Q&As have been posted on this page. Further inquiries can be directed to our contact centre at 1-800-668-0128 or via email at [email protected].

2. What should I do if I have questions or need clarification about the new Guidance during the audit process?

Further inquiries can be directed to our contact centre at 1-800-668-0128 or via email at [email protected].

3. Where can I find the previous financial filing requirements for mortgage administrators?

The financial filing requirements that were in effect before this current guidance, are available under the “Inactive” guidance category on FSRAs website. You can review this here as well: Reporting Requirements for Mortgage Administrators.