Some benchers argued for a deeper audit of the statements or the inclusion of a note on the scandal
Law Society of Ontario benchers passed a motion to approve the regulator’s audited annual financial statements for 2024, following a heated debate in which some benchers called for a more in-depth audit and for the statements to include information on ousted chief executive officer Diana Miles’ salary.
Benchers passed other motions with less fanfare at a meeting on Thursday, including one that proposed to amend an LSO bylaw to explicitly state that the benchers, collectively known as Convocation, must approve the LSO CEO’s contract of employment as well as changes to that contract.
Bencher Sid Troister brought the motion to approve the LSO’s audited annual financial statements, which provide an overview of the regulator’s financial situation. Troister chairs the LSO’s audit and finance committee.
Introducing the motion, Troister noted that while the LSO obtains an independent audit of its annual financial statements each year, these audits have a limited scope.
“The sole purpose of the audit is to provide reasonable assurance that the information presented in the financial statements as a whole are free from material misstatements and to give comfort to Convocation, our licensees, and the public that they can rely on the information as presented in the financial statements as to our financial position,” Troister told Convocation.
“It is an audit of the financial statements. It is not an audit of operations, of our systems, of compliance with bylaws or the law society act or other issues,” Troister said. “It is not a forensic audit, and it is not an opinion whether everything is fine at the law society.”
He added that the audit is not designed to include an in-depth investigation into suspected or alleged fraud.
Miles’ pay, which increased significantly without Convocation’s knowledge or approval last June, is reflected in the 2024 financial statements. Trositer said the independent audit by BDO Canada LLP, which is conducted in accordance with Canadian auditing standards, found that the 2024 financial statements “are free from any material misstatements.”
He noted that the auditor was able to review the report that former associate chief justice of Ontario Dennis O’Connor produced on the circumstances of Miles’ pay hike and discussed the matter with the LSO’s treasurer and chief financial officer. LSO management concluded there was no requirement under Canadian accounting standards to include a note in the 2024 financial statements about Miles’ contract or the amount of money paid to her. The auditor affirmed that the statements complied with Canadian accounting standards.
“The good news is the law society ended 2024 with a positive financial result, and our financial position is solid, setting us up well for 2025,” Troister said.
Multiple benchers sought to weigh in on Troister’s motion, but he rejected one bencher’s suggestion that Convocation discuss the motion in camera, stating, “There has been so much in the public domain already that I would not want anyone to think… that we are hiding anything.”
Speaking first, bencher Louis Gagnon argued that the 2024 financial statements needed to flag Miles’ pay. “The issue here is that the payment… was unapproved by the board,” Gagnon said, adding the audit “should flag an improper payment of $500,000 if it violates applicable accounting standards, and it does.”
Sean Aylward, who is part of the audit and finance committee that recommended Convocation approve the 2024 financial statements, said he agreed with Troister “that the purpose of a public auditor such as BDO is to look at the financials prepared internally by the staff of the organization and to opine upon their quality.”
However, Aylward called for “a very robust manifesto of reform” at the LSO, led by a forensic audit. “We've had evidence of very serious – I think I'm being charitable – misconduct at the highest echelons of the organization,” Aylward said. “It's not proper to simply let it go and say that the regular financials have been reviewed by a public audit. That's not their role.”
He added, “I do worry that people in public and the profession who don’t understand the quality of what an audit means will look at this as a ratification by the law society of what's occurred.”
Another bencher, Heather Hansen, noted that the point of appending a note about Miles’ pay to the financial statements was informing the public. Because the financial statements were technically compliant with Canadian accounting standards without the note, Hansen suggested leaving it out and discussing the pay debacle “openly and transparently” at the LSO’s annual general meeting instead.
Bencher Rebecca Durcan agreed that because the financial statements didn’t include a note on Miles’ pay due to “the instructions, the guardrails, the standards that apply to the audit,” she was willing to approve the audited financial statements. However, she said, “This isn't the end of the story.”
Durcan said the limited scope of the audit doesn’t prevent the LSO from further addressing Miles’ pay hike. “As Heather said, whether it’s the AGM, whether it’s other forms of communication, this isn't going to die in some hole. This is clearly a live issue,” she said. Adding a note to the financial statements in defiance of accounting standards raises concerns that the LSO is “changing the rules” from a governance and policy perspective.
Convocation passed Troister’s motion by 37 votes. Eleven benchers voted against the motion, while two abstained.
The benchers passed three other motions brought by the LSO’s governance review task force, which unveiled a series of controversial governance reform proposals last year.
The first motion proposed amending the task force’s mandate in light of O’Connor’s report so that it includes advising Convocation on how to implement O’Connor’s recommendations as well as a March 20th action plan presented by LSO treasurer Peter Wardle. Both O’Connor’s recommendations and Wardle’s action plan propose potential changes at the LSO following Miles’ pay debacle.
The second motion proposed an amendment to the LSO’s bylaws explicitly stating that Convocation has the authority to determine the terms and conditions of a CEO’s employment, including their compensation.
The third motion asked Convocation to dissolve the LSO’s compensation committee, which was involved in talks on Miles’ pay hike, while the task force considers amendments to LSO bylaws to formalize a new committee and clarify its mandate and authority.
