HomeMy WebLinkAbout1987-1946.Booth.92-11-20EMPLOYESDELA CO”RONNE DEL’ONTARIO ~E;L;;~ Co~M,SS,ON DE
SETTLEMENT RkGLEMENT
BOARD DES GRIEFS
IN THE MATTER OF AN ARBITRATION
Under
THE CROWN EMPLOYEES COLLECTIVE BARGAINING ACT
Before
THE GRIEVANCE SETTLEMENT BOARD
BETWEEN
OPSEU (Booth)
- and -
Grievor
The Crown in Right of Ontario
(Ministry of Revenue) Employer
BEFORE: M. Gorsky Vice-Chairperson
M. Lyons Member
H. Roberts Member
FOR THE
UNION
N. Wilson
Counsel
" Gowling, Strathy 8 Henderson
Barristers & Solicitors
FOR THE
EMPLOYER
0. Costen
Counsel Legal Services Branch
Management Board of Cabinet
HEARING May 26, 1989
June 16, 1989
October 20, 1989
April 25, 26, 1991
June 18, 1991
February 10, 1992
May 11, 1992
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E
The Issue
The Grievor, James David BooFh, whose date of hire was ,M:irch
17, 1975, filed a grievance on August 7, 1.987 clalmlng thdt he W.IS
misclassified as a Financial Officer 2 Atypica I ) , and that he
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should be reclassified as a Financial Officer 3. This positif>n ias I
amended at the hearing so that thi reclassification being sought
I was Financial Officer 4 (Atypical),. In his grievance, Mr. Bovttr
claimed retroactivity to June iof 1984 and also requested 1
retroactive pay, benefits and rnt$rest to June of 1984. at the
time of his grievance ?Ir. Booth h+ld the position title of Flrld
Auditor. I
.At all material times, Mr.
Booth was employed in the Retail
I Sales Tax Branch of the Ministry llocated at 33 King Street West,
Oshawa, Ontario, which is in the Eaistern Region. The Retail Sales
Tax Branch, which administers the; Retall Sales Tax dct and 11:s I
regulations, was, at the material times, divided into three
sections: 1) Services and Revenue Control, 2) Admlnistratlon and
Fi.ninc:e and 3) Audit. Mr.
! Booth yorked in the Audit section.
The position taken on behalf oi the Grievor was that he should
I be prc,perly classified as a Financial Officer 4, the Union relying
I
on a usage argument. The comparator relied upon was Euqrne
Bristow. who was classified as a Financial Officer 4 Atypical and
who also works in the Retail Sales Tax Branch, Audit Division, of
the Ministry at Oshawa.
Both Mr. Booth and Mr. Bristow performed a refund audit
function. There were no refund sections in the other Regions at
the material times, the only refund section being located in the
Eastern Region at Oshawa.
Position of the Union
On May 25, 1989, the then counsel for the Union sent a letter
to counsel for the Employer (Exhibit 2), which is as follows:
Re: OPSEU (Booth) and Ministry of Revenue
GSB File No.: 1946/87
Further to our discussion of yesterday, May 24,
1989, this is to confirm your advice to us that the
Ministry now takes the position that the parties should
exchange written summaries of their factual positions
with respect to this case. Accordingly, we herein set
out the Union's factual position.
.This is.also to acknowledge receipt of your delivery
by fax yesterday, on May 24, 1989, of the position
specification for the job held by-the grievor. The
position specification is for the position title of
"Field Auditor" and the ,class allocated is. that of
Financial Officer 2 (Atypical). We would note' that it
was our. understanding that this position specification
applied to the grievers employed at the 2300 Yonge Street
location. Moreover, it was. also our understanding that
the position held by Mr. Booth was described by a
separate position specification form. More particularly,
it was our understanding that the positions held by
i .~udit.ors perform,lnq reEur$,rebate work had been .~sc~-i.l.:~~~l
new ~xxition specifications some time after the form.it,,,i'>"
of L( separate group of workers performing solr:lv r.1 L
primarily reEund;'rebate ,work. Finally, Mr. Booth had
never realized that he Iwas classified as 3 Financial
Officer 2 (Atypical) (8s indicated by the posirlon
specification with which; you have provided IIS), r a t II c-. r
than as a regular Financial Officer 2.
As I have outlinedlin our discussions, 1t 1s l.hi.
Union's position that ithe grievor is not pr0perl:
classified because "at$pical" classification C;I""<->l!
constitute a proper class allocation. There does not
exist a class definition for "Financial Officer ?
(Atypical)" against whichito measure the actual duties ,>E
the grievor. Furthermore, it is the Union's posltlon
that the grievor's actual; duties do not conform to those
described by the class definition of Financial Officer 2
(class code 202031. It is also the Union's position that
the grievor's actual duties conform to those performed b\
Mr.
Eugene Bristow. Mr. Bristow is classified as il
Financial Officer 4 tclats code 202071.
In summary, the Unib" states that the grievor has
not yet been properly classified and that the pr-,,per
classification for the igrievor is that of Financial
Officer 4. In the alternative, if neither this nor
another classification isithe proper one, then it is thre
responsibility of the EmpIoyer to create a classificLst.iun
which conforms to the duties actually performed by The
grievor. I
The Union's factual [position follows herein. I
The grievor is a" iemployee of the Ministry of
Revenue in its Retail Sales Tax Branch located in Oshawa.
Within the Audit Department of that Branch of the
Ministry there exists thel,"Refu"d Unit". The grievor is
employed in the Refund Un;lt.
The Refund Unit is imanaged by a Group ?Ianager -
Audit. tinder his supervision are a Refund Supervi,sor, a
Financial Officer 5 charged with technical support and
training, several clerks; (in the Office Administration
Group series). several Financial Officer 4's, and several
Financial Officer 2's. /
I The Refund Unit performs work which is separate and
apart from that which i$ performed by "Audit Units",
which are also within theAudit Department of the Retail
Sales Tax Branch. The mahdate of the Refund Unit IS to
verify all refund claims r'eceived by the Retail Sales Tax
Branch wh.ile protecting. the tax base .and enhancing
voluntary compliance with the law and policies.
Within the Refund Unit, the grievor is presently a
Financial Officer 2. The Financial Officer 2's and the
Financial Officer 4's are commonly referred to as "Rebar:e
Auditors". The terms "rebate" and "refund" are used
interchangeably. Vendors who detect overpayment 111 f
retail sales tax may submit refund claims to the Retail
Sales Tax Branch.. These claims are dealt with centrally
from the Oshawa office of the Ministry.
A Rebate Auditor is assigned claims by the Group
Manager - Audit. He will then review the claim and
preplan a rebate audit. Th,is involves practices such as
checking the tax compliance and refund claim history of
the applicant vendor.
Afterpreplanning, the Rebate Auditor contacts the
claimant and~arranges for his attendance at the location
of the vendor in order to conduct the rebate audit. .4t
the location of the vendor, the Rebate Auditor verifies
the claim. This involves verifying the eligibility of
the claimant by gathering information and ensuring a fit
with statutory requirements. Further, the Rebate Auditor
must verify the eligibility of claimed items. For
example, certain manufacturers enjoy exemptions for
certain items used in their production processes. 'The
claim verification process involves interviewing a vendor
representative and the examination of vendor records such
as books of entry, invoices, journals, bank records,
payroll, financial statements, etc.
After conducting the. verification- inquiry, the
Rebate Auditor prepares a verification report. This
report wilL state the claim requirements, the test done
to determine whether requirements are met, the findings
of these tests, and the Rebate Auditor's conclusion.
Refund claims are assigned to Rebate Auditors based
on the following criteria: claims in amounts up to
$500,000.00 are assigned to a Financial Officer 4: claims
over $500.000.00 are assigned to a Financial Officer 5.
The complexity of a Refund Audit will depend on the
amount of preplanning required, the variety 0 f
legislation and regulations which may be applicable to
the cl'aimant, and the variety of items that are dealt
with in the claim. A claim in an amount less than
$50,000.00 may be more complex than a claim in an amount
greater than $50.000.00 and vice versa. Further, the
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At the hearing, Yr. Wiison, cdunsel for the Union. Indirated
I
and that the classification being sought on behalf of the C,r,ievc,!
was that of Financial Officer 4 (AFypical), being the one held by
Ml-. Bristow. I I
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xl-. Wilson also indicated thdt the claim for retroactivity
would be limited to the 20 day perked prior to the filing of the
grievance on October 7. 1987. I I
Counsel for the Employer relied upon palmer et al?, 2llO!86
I et-c. (McCamus). In &lJJxx, there were a series of grievances b)-
grievers classified in the Financiil Officer class series at the
Financial Officer 2 level who claimeh that they were entitled to be
classified as Finacid Officer 4’s. / There was also an alterrutlve
argument that the grievers were engabed in work which did not bring
them within the Financial Officer $lass series and, accordingly,
t. h J. t the Board should order the: Employer to classiify them
properiy. In the Paa case, the board stated at p.2-13:
I
I I
5
The grievances arise from certain changes effrctej
by a reorganization of the Audit Division of-the Retail
Sales Tax Branch which took effect on October lst, lgiih.
Two different types of changes occurred at that time.
First, the employees of the Division who were engaged in
auditing work were reclassified from the Tax Auditor
series into the Financial Officer series. -Employees who
were classified as either Tax Auditor 1 or Tax Auditor 2
were reclassified as FD2 Atypical. Employees previously
classified at the Tax Auditor 3 level were reclassified
as FO4 Atypical. For the sake of completeness, we shoui~?
note that some employees who had been classified at the
TA2 level were reclassified at the F02 level but were
required to undertake the same kinds of responsibilities
as. those conferred upon employees classified at the FO?
level. Subsequently, those employees were reclassified
at the F03 level with a view to being reclassified at the
F04 level once they attained a professional acc.ounting
qualification such as that of a Chartered Accountant
(CA), Certified General Accountant (CGA) or Certified
Management Accountant (CMA), a professional qualification
of this kind being a requirement of the FO 4
classification.
A second and related aspect of the reorganisation
was the creation of a formal division of the kinds of
audits undertaken by the Division into three separate
categories. From the Employer's perspective, the vsriou-i
categories are meant to reflect the varying -size and
complexity of.audits. The defining characteristics of
the categories rest on the size of the gross revenue or
retail tax payable by individual taxpayers (Or
"vendors"). Thus, the A category of audits, which
concern the largest vendors, consists of vendors who
either have a gross annual re.venue of over $200 million
or remit retail sales taxes annually in an amount in
excess of $1 million. The B category audits concern
vendors whose revenue falls within a range from $30
million to $200 million or whose remitted .taxes fall
withi,n a range from $200,000.00 to $1 million. The C
category audits, the category containing the smallest
vendors, consists of audits of vendors whose revenues is
up to but not in excess of $30 million or whose taxes
‘remitted do not exceed S200,000.00.
These.newly established categories of audits - and
this is the important point for present purposes - were
then assigned to auditors at specific classification
levels. Thus, the C category audits were assigned to
auditors at the F02 level. B level audits were assigned
to auditors at the F04 level and A category audits were
assigned to auditors at the FOS level. It was further
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audits under the supervis:ion of an Frj'5 audItor. Furrher,
those FO2 zluditors who were, some time aEter the Oc~oi,<-:
1st. 1'186 chdnges, reclassified to the F0.3 ievei !C r-: r r
also expected to work on\B category audits. As tr.3s I,cr~n
indicated above, it was expected that these FO3 audltzrs
would be reclassified at the FO4 level once t hcv ll.~I~~
secured an appropriate professional, yuallficatlon.
The first branch of thr+se grievances in~polv~ .A"
attempt to gain J reclas$ificatlon from the FO:! Iv;I~~ t.!>
the FO4 level. To accom$lish this ot)-jectivc the i;t-~:-vor.%
must obviously establish! two points. First, they Inust
establish that the work ithey are performing at: tile F'cI?
level is sufficiently simglar to the work belnq perfr,rmt+
by auditors at the FO4 level that they can justlf::11:1!
claim an entitlement toi classification at that lev:::!.
Since the work of both FO2' s and F~04'~ is csse~~t~allv
confined to auditing, this means that the Grievers mL;it
establish that work donti -on c audits 1s sufficlYrIt.lV
slmllar to the work done/by F04's on A and B audi:s that
this claim is made out.i Secondly, the Grievor5 mllst
establish that the Gequirement of professi:-,rl.i 1
qualification which is on+ of the dlstinguishlng featurf::s
of the FU4 classification is unjustifiable and thrrcfcarc
to be ignored. From the' Employer's perspective. if lr
can be established eith&r that there are siynlficant
differences between the bark done by FOZ's end kll.L's OL
if the professlonal qualification is sustalnablc ,AS a
leqltimate quaIiflcat+on. L 1: fi I lows th;st 1. hf Sf.!
yrievances cannot succeeq on their first branch.
The bulk of the eviidence led in this proceeding
related to the first of !these two points. that 1,s the
Grlevors' allegation that !the work that in which they 31-r.
engaged as ,FOZ' s is sufficiently similar to the w0t.k of
the F04's that they bre entitled to the 1;rttC3r
classification. In supbort of this proposltlon, the
Grievers have obviously b$en obliged to argue that there
l.s no significant difference between the conduct of
audits on small vendors 'and the conduct of audits on
large vendors. The Gri&vors do not shrink from thus
thesis. It is their pdsition that the conduct of a
retail sales tax audit 'on a corner variety store 01
jewellery store is as coiplex and difficult a matter &as
the, conduct of such ai audit on a huge retallincl
operation or a large maiufacturer. In support of this
view, the evidence of the representative Grievor, ML‘.
Peter de Freitas, currently classified at the FO? level.
was to the general eff&t that while the volume of
paperwork would be diff'erent in a large audit, the
approach taken to both large and small audits is similar
in all material respects. Some support for this view was
drawn from,the Ministry's "Audit Handbook", filed ,as
Exhibit 10, which sets out the general approach to be
taken to 'c' audits to be the same or. similar.to that
taken with 'B' and 'A' audits, respectively. That his to
say, they all involve similar steps or stages of work
beginning with "In office review of files..." etc. Ei"d
ending with "Follow-up". Further, Mr. de Freitas noted
that prior to October 1st. 1986, he himself engaged in
audits which would now be considered to be in the B
category. The distinction between B and C audits was, in
his view, quite arbitrary and artificial. This
artificiality is emphasized, he suggested, by the fact
that under the current policy, if an F02 auditor begins
what appears to be a C category audit and fu.rther
investigation demonstrates that it is a B category audit.
the F02 auditor may be allowed to continue with the. audit
on his own.
It is urged on behalf of the Employer, on the othi-r
hand, that there are significant differences between the
kitid of work being done by FO4's and FO2's. If the
stages or steps in each category of audit are, accrordlny
to the Handbook,~ the same or .similar in each type of
audit, the actual planning and implementation of those
stages is not. Simply stated, the Employer's p?Fition is
that the larger audits are both mc;e important and mot-c
complex than the smaller audits and accordinyly, that it
is desirable to have them performed by the more high11
skilled and more highly qualified auditors. With respect
to the former point - the importance of the larger .audits
- The Employer provided evidence in the form of a chart,
filed as Exhibit 14, which provided actual numbers in
support of the obvious point that the very large vendors
provide the most important source of tax revenue. Thus ,
the 750 A audits yield revenue in the amount of $4
billion and the 3,&00 B audits yield revenue of $2
billion. The 207,000 C audits, on the other hand,
provide a total of $3 billion. Thus, a tiny fraction of
the audits provide two-thirds of the tax l-eL'e"Ue
collected by the province. The total number of auditors
engaged in carrying out the 4,350 A and B audits total
68, whereas the 207,000 C audits can be accomplished by
75 FO2's. The A and B audits take substantially longer
than do the C audits and, obviously, yield, on average,
much more tax revenue. From these facts, the Employer
argues that there is much more at stake in the A and B
audits and accordingly, that it is important to have
highly skilled auditors doing this work. The financial
impact of error in an A or B audit is potentially much
more grave :than the risk of error in a C audit. The work
The Employer ar$~uesI that the FO4 .w<jrk 1% nc,C OILI!
more Important or responsible in this sense, hcw:vr:r, but
that this work 1s also mol-e dlfflcult or ~mplex than the
work undertaken by the FO'L's. I" our "lew, t h PC: e 1' i d c n c ::.
led L" these proceedings is, broadly speakjn?l, CCIISJ CitelIt
with this submission. Thus, we view the evidence of bar!]
Nt-. Robinson. who was iaIled by the Emplo~cr and lr.
Smith, who was called on! behalf of the Grlevors. '.o i,:v
consistent. with the propdsltion that the perfnrm..lnc,:t: <If
A and B audits requires h different level of skill artid
trollniny than does the performance of C audits. 'ihC~!
point on which these wit&asses differ, to which we will
return in due course, I 1s whether a professlon.ri
qualification or designation 0 f some kind 1s 3"
appropriate requirement f4r appointment at the ~04 IPV,:!.
On the other hand, both iSmith land Robinson apparentl\~
aqreed that in order t.o c,onduct A and B audits one must'
have a good understanding of the kinds of account lng
practices employed by firms oE a size placing them wIthIn
the A and B categories.! As Robinson explalnc:d the
auditing takes place in ari accounting environment and thy?
accounting environment 0~2 the A and B audits is simply
more complicated than the: accounting environment of ~3 (:
audit. The accounting environment of the larger vendors
is more likely to involv& complex computer Yyst.ems drrlc!
the auditor must understan'd how those systems function in
order t. 0 develop an Fppropriate audit StratPqv.
Robinson, who had performed both at the ~02 levei and ~1'.
the FO4 level in his work'for the Employer, identifl4 ;i
number of illustrations of items of a greater ~xmplexit:;
which were, in his view,: more likely to arise in th<!
context of A and B audits. Thus, an A and B audit would
more likely involve dcaljng with the retail s~lcs tax
complexities that arise in the context of vendors who
have research and developient departments, vendors which
manufacture items for their own use, vendors whlr:h
include computer software development depart-mf!nl:s,
vendors which are large; enough to have tntercompanv
transfers of various kindsand so on. The larger vendors
are likely to have subsihiaries 01 divisions of their
operation which add a" el{ment of complexity. The large
vendors are likely to require .a more elaborate sucilt
strategy. Thus, for exkmple. in dealing wlrh fIxed
assets in a c audit you mi!ght well be able to physically
see all of the fixed asgets. With a large vendor,
kind must b! testing or sampling strhtegy of Some c
developed. With a larger vendor, the information basr: .IS
Ilkely to be more sophisticated. Thus, the audltor ma\
be required to work rj,th consolidated fL";r"clal
LO
statements and annual reports in an attempt to fcrrc!. out
the implications of the structure of the corporation for
retail tax purprjses. Further, it is more likely in a
large audit that the vendor will be provided with
professional advice of various kinds. The larger vendor
is likely to have an expert in-house staff - a dirertot-
of taxation or similar official. Tax counsel are more
likely to be involved. The auditor is more likely to be
required to make presentations to such individuals or
groups of individuals or to enyayje I" s p i r i t e d
negotiations with them.
On the basis of this and other evidence to the same
effect, we are satisfied that the Employer has ;Impl>
supported the proposition that A and B audits are
typically more complex and more difficult than c audits.
The evidence relied upon bv the Grievers, however, has
persuaded us that the dividing line between c ArId B
audits is, in some sense, an artificial one. No doubt,
-there may be some B audits that are not as complicated as
some C audits. It would appear that complexity varies to
some extent with the type of business involved. Thus,
Mr. Robinson, the employer's witness, indicated that the
auditing of a car dealer would be quite slmi iat-
regardless of whether the volume of business in question
placed the car dealer in category C or category 8.
Further, the fact that F02's were permitted to do what
would now be category B audits prior to October lst, 1386
and, on a discretionary basis, ares still allowed to do so
persuades us that, indeed, no rigid line can be drawn
between what might be referred to as 'more straicjht
forward" audits and -more complex" audits. In our vi&,
however, the fact that the boundary between B and C
audits is, in this sense, somewhat arbitrary does not
defeat the Employer's argument with respect to the
validity of attempting to draw some distinction between
large vendors and small vendors. It appears to be
inherent in the nature of this work that a simple "bright
line" test cannot be drawn. Indeed, the fact that the
Employer does permit, on a discretionary basis, FO2's to
continue with audits which they discover to be B audits
indicates that the Employer itself does not take a riyid
view with respect to this dividing line. More
importantly, however, we are satisfied that the division
of audit categories by vendor size does constitute a good
faith attempt at fixing a rough approximation of leveis
of auditing difficulty and, accordingly, constitutes a
reasonable basis for differentiating the skill levels of
the auditors to which it wishes to assign these tasks.
It appears to be true that the system that was adopted in
October of 1986 is somewhat less flexible than the
previous practice. Although the Division had
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.A s we dt-(3 satisfied that the Employer hay
cstabllshed this point, it fbl lows that these ~r,~~.~~nc~s
cannot succeed on theif- first branch, that is, thr:
Gr~cvors have failed to &stablish entitlement 1.1,s a" I:114
clas*ification. It also follows that it is unnecessary
for. this Panel to deal wlith the second Point made by the
Grievers on this first branch of the qrievance, that I
the suqgest1on that! the FO4 requirement of .3
professional credenilal or qualification IS
unjustifiable. We do wis'h to observe, however, that the
evidence on this point /is in conflict. It was Yr.
Smith's view that the actval credential 1s riot important.
Mr. Smith, is himself a CA, currently serving as a" FO4.
In Smith's view, it is important for a" .Ffl? to h.+vo .:I
background in public acc&ntinq. But it was not h,ls view
that the obtaining of a!professlon credential was the?
only way of acqu.lring th& background. ,Yr. Roblnscn. on
the other hand, who has the CMA drslgnatlon, bell,-ves that.
the professional credent&l 1s relevant for two reasons.
First, i1: was his view that the courses required by thv
proqjram oE study leading to the credential pt?V?‘J,
necessary* instruction with respect to the acc:ofi,nr ~ncj
environment in which ihe FOJ 1s likely to wti :+i .
Secondly, it was his viewland the view of YI-. ~;lrlry. the
Senior Nanager - Audit of the Retail Sales Tax Branch -
that the designation /was important I" t e L‘ "1 :; 11 f
credibility with large v&ndors. Large vendors arc vet-y
likely to be represented by people w.lth s ~miidr
credentials who ~111 be r+re likely to take seriously the
views of a proEessionally qualified auditor. I n t hr
Ilqht of our earlier finding, it 1s unnecessary for u.+ to
resolve the question of whether the professional
credential or qualification is a justifiable requlrrment
for the F04 classiflcatloi. WC do note, however, th.at '~‘1
d Id not find compelling the second uf the t 'A <,>
justifications offered on'behalf of the Employer. It is
our view that the expecthtions of the vendor community
with respect to the statue or prestlqe of a" lndivldual's
professional qualifications is not, in itself, likely to
w3 r ran t. consideration 4s a n#+tisfactory b;rsls Ear I
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:imposi.ng such a requi,rement. Accordingly, 1.1; 3ar view,
a' satisfactory justification of the requirement w:~ul:i
better rest on considerations such as the rnlevanc:- of
the traininq in question to the task performed. As. we
have indicated, however, it is unnecessary to esp!o:~*!
this issue in the present context inasmuch as t il r:2
Grievers have failed on this first branch <of their
grievance on the basis that the work performed by ~04
auditors is significantly different from that perfornreYl
by auditors classified at the FOZ level.
It was acknowledged that the grievers in the Palmer case ~(zre
employed in the Central Region, and that their ,I u d i it
responsibilities differed from those of the Grievor. The Gi-ie\ror
performed anaudit funct'ion with respect to refund claims made
under the Retail&ales Tax_* to see whetherthey were justified.
This function was ~claimant driven, whereas the work of the grievor-s
in the Palmer ~case was revenue auditing based on random audits of
taxpayers to see if the proper tax had been paid. Th,is w.3 s
described as a "search mission."
ame comments on the aoplicabilitv of the Palmer case
Counsel for the Union attempted to distinguish the Palmer case
on the basis of its being concerned with the revenue .audit
function. Notwithstanding the difference in the audit funct'ions
being carried out by the Grievor and by the grievers in Ps~lmer,
there are cert'ain similarities affecting both audit functions. The
description in the Pal~mer case of the reorganisation of the Audit
Division of the Retail Sales Tax Branch which took effect on
October 1, 1986 applied to the refund audit function in Oshawa.
550,0130 to S500,OOO and refund cat6gory C where the amount cl~~.rnc~l
!
The R.Afund g.andhook and refund~~.audkg
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In the Refund Handbook, the "~ndate," "goal" and "role" f:>uncl
at pages l-l and 1-2 with respect to the auditin,g of reflrnd claims
provides:
The mandate of Refunds is to verify ,311 refund ::!.xims
received by t.he Ret.311 iSales Tax Branch in <j t,lnwl!,
manner while protecting: the tax base and enhaw?Irl$j
voluntary compliance with the law and pcjlicy. I
The yoal of the Retail Siles Tax Branch 1s to provide a
high level of professional service to nil c:laimant~ wh~,lv
ensuring the integrity of the payout process.
The goal is pursued by: ;
glvlng
high prlotity to the processlny and
verifying of clpims and a II t. h o I' 1 I< i n g I. h c
disbursement of public funds when applicable
treating all claimants and their representatLves In
a business-like and lcourteous manner
::onsistantly applying the iegisl~ation, p" 1 i I: !. e [i ,
guidelines and procedures to all claims
providing information to ~claim~nts
securlny the payout process by staking the
appropriate action on any refund 12' h E r e t h e
claimant:
(a) is currently in default of filing returns or
(h) owes monies to the Branch.
1.1.2 Rolf
The role or Refunds in reaching.the goal of the Branch is
to:
verify and process all refund claims received by
the Branch
provide verbal and written legislative information
to claimants as required to encourage future
compliance
liaise. with other operational units whenever
necessary in the verification process
prepare comments, where applicable, when a Norice
of Objection is filed on a disallowance
liaise with mother Branches and Ministries on ,any
matter pertaining to refunds
assist Tax Advisory Programs in conducting seminars
for concerned groups
identify law, policy and marketplace issues for
resolution and provide this feedback to Audit,
Legislation and Services as applicable
Section 3.2. found at page 3-l of the Refund Handbook
provides:
3.2~ SUPERVISORY CONTRQL OF WORK
(1) He was made a FO2 on October 1 1986, his prior IL: i&ss,l f !~‘.\r ian
haviny been as J. TA -3. S.~ncc being classified 3s .I" FIIL, !:LS
1 refund audit functions have been confined to refund c~tt:*-~:,ry
C clainls, beiny those up ~CJ S$O,OOO. Referrlnr, to t!>c: ch~:.t
found at p.3-2 of the Refunj Handbook, which prnvldes i n
section .3.3 2 that refund assl(g,nments to refund aud'it(,rs xoulcl
be based 'on category A reflind claims being assigned t I.1
dudltors in the FOS classiflcdtio"; refund cclteqory !? ,-'l~ir~::,
being ;Isslgned to auditors i;n the FO4 classlfizatlon .-*nr:i
refund category c claims being :assigned to auditors in thr: ~c,J?
classlficatlon, he stated tha( this was how "the s\jstem ,i.x!i
wppsused to work. " In practi6.e there were occasions uhcn R
claims were assigned by the G&p Manager - Audit to F02'~ .~ru.i
C claims were assigrled to FO4;'s. although this was "ot t;:t?
rule.
When he was classified as a T.j-?, he performed refuhd ;ludlts
with respect to claims both ove:r and under $50.000. .\fter t h?
I
(31
(4)
Iii
reorganization which occurred on October 1, 1986, hc was onl:
infrequently assigned claims over S50,OOO.
In his view, the size of a refund claim made no difference A:<
far as claims from $5,000 to $200,000 were concerned, as the
skills and knowledge required to perform such refund .at.ldits
were the same, as were the procedures required to be taken 'set
out in the Refund Handbook. He added that in dealing wi.tih
such'claims the refund auditors dealt with the same businesses
and the same people and that claims for under .55O,llo(lO k~ere
sometimes made by large corporations.
Only large corporations made large refund claims, and he ‘rr:is
assigned, al,most exclusively, to deal with claims made by
large corporations, although usually with respect to cl:xims
within the C cateyory. Although Mr. Booth ti.as involved with _
large companies, he acknowledged that Mr. Bristow was .involved
with larger corporations more than he was. ,From his
perspective, F04's and FO2's were required to review the same
kinds of records, to address the same issues, use the same
processes as set out in the Handbood, and apply the same
policy as contained in relevant legislation.
An F04 would take more time per audit thanan FO2 because the
"bundle" to be audited by the former was usually much larger.
, I!ii I , I!ii
I
I I
(7)
*
(9)
I
WCI'C: regarded as creating spec(ial difflc.ultlcs for him ‘1% ht:~
I usually dud not have the now+sary i n f 0 t-ma t 10 n I3 v.3 i I ,3 b I ~-2 1. 0
I
him at. his desk, which information he could access I" t.i1t:
field. In his experience, idesk audits in\polved smaller
I
claims, although some out-of-province claims, which tcnde:! t,:
!
be large, were frequenlty per{ormed as desk audits. rt tills
his recollection that less ejperienced auditors, who we~.i:*
still being trained, were assigned to the Spec,lai Vendors
!
Llssistance Program and performed most desk audits, which he
regarded as usually being lessj complex.
!
F132's frequently travelled from/one municipality tc-, anothcl- t<:
perform refund audits. whereas/ FO4's usually remained at t: h >C
!
s.3me employer's site with no ad/3itional travel being requlrw1.
?lost of the claims dealt with jby him were for amounts und~,r
5?5.000. One or two of the: five audits that he usuall)
I
performed in a week fell in thi+ $25,000 to $50,000 range.
tl+ did not have an sccountlng idesignatIon, although had 'h:jd
completed two years of the SMA!course.
Mr. Bristow testif ied that:
(1) He was first hired by the Ministry as a TA1 in 19h7, and x;is
at the time of the grievance classified as sn ~04 (htyylc;:ii!.
At the time of his hire he was assigned to Belleville where he
audited small businesses. Around 1978, while statj.oned in
Belleville, he became a TA2. In either 1982 or 1983, he rias
transferred to Oshawa. At the time that .the refund audit
function was centralized in Oshawa, he was assigned to audit
such. claims along with Mr. Booth. At the time of the
reorganization, he was a TA3 for a short period of time and ~.~
then became an F04 (atypical).
(2) He did not recall that there was any distinction between
refund audit claims based on dollar value, and all refund
auditors wbrked on every size of claim. He acknowledged that
this changed around October 1, 1986 when the guidelines set
out irr the Refund Handbook came into effect.
(3) There was no difference in the way in which a refund claim was
handled based on its'dollar value, nor was the dollar value of
a claim related to the complexity of a refund audit.
process,
Including the relevbnt legislation and z?llnlstr!
policy. Sometimes, in the cash of large claims, the .aqents
were tax lawyers or accountant:s.
I
!
ti) When he started to perform refund audits, few: vendors ;rud tt4 I
had a computerised accounting system. As the number c!f
1 computerised accounting systems' grew, refund aud1::ors *
encountering them in their work had to become Eamrli:Ar wit11
them. When' sampling was requ:ired it was necess.3ry for tr,r2 I
refund auditor to be familiar with the record kceprnti 21~4
accountlnq system of the vendor: whose claim was being audlt~x:l.
I
(6) Although it was a rare occurr!ence. there were times when a
vendor made a claim for a Irefund in l?scIess of SjO, OUI,
involving only one item.
(7) Refund audits that he conducted took from a low of one-h;llf
day to a hiqh of 3110 hours with one week being the avcraqe
time. Treating the averaqe c<aim as being for SlOO.OUO, the
one week estimate was equated ito 35 hours.
x
3
(
/
1 LO) Although he recalled that there was no more difficulty in
2 u
81 Factors a.if(ectinq the length of an. audit were: 11 trave! ti.me;
2) the number of different categories of refunds ::l.:iimed; and
3) the number of departments maintained by a vendor that had
to be dealt with.
9)
Travel time could account for a large proportion of audit
t .Lme . In 1986-87 he.covered the entire province as well as
some locations outside of the province.
performing large or small amount refund audits when ho was a
TA2 prior to 1986, he also stated that when he became an F'U4
and dealt mostly with refund claims of over $50,000, tiis job
became more
complex and difficult because, on a v c ,~"A g e ,
refund claims of larger entities were more difficult to
perform. At the same time, he stated that the work of pre-
planning did not differ between larger and smaller claims:
The figure cited by him werewas claims under S50,OliU when
compared.with claims of up.to $400,000.
11) He was more likely to be required to carry out sampling when
dealing with the higher range of claims. A $50,000 claim
could be made up of a thousand small items, as could one for
$400,000.
(13) The same issues arose whateverlthe doll.+r value of a cI.x~m.
\
(14) He identified a number of cas+s (usually more complex ones)
where he would dedl w,lth a vdndor's lawyer (usually AL 1:I;e
objection st'age), although thisiwas C3 rare occurrence. It WAS
mot-c usual for him to deal\ with a vendor 1 s acco un c a II t
(internal or external, or both;).
(15) On occasion, circumstances required him to deviate from t.trc
methods set out 1n the Refhnd Handbook. For example,
deviation from the sampling methods was undertaken between 20
and 30 per cent of the time! When questtoned Ln cross-
examination as to whether devfation was more likely 1n rhl::
case of large. multi-nationa! corporations, Mr . Bristo%
answered that he did not know :+E this was the case.
(16~ He performed some desk audits kn 1986 and 1987.
(17) Desk audits were performed when; documentation was submlttcd Ln
support of the claim so that the manager could decide to have
verification carried out In the office.
(20) D#?sk audits were said. on average, to be simpler than field
a:udits.
--
(21) During his cross-esamination he acknowledged that hi:; job
became, more complicated after he was made an FOJ, because he
was dealing with more large corporations. He adrlf?d that
dealing with large corporations usually meant that there woul:.i
be greater involvement with larger claims, mo r e et~hensivc
tra\;el and having to interact with with tax experts "all the
time."
(22) A mistake made in auditing a large refund claim cou'ld havfe a
considerable impact on the tax base. He compared this with
the lower loss that would occur as a result of a mistake made
by a TA3 who would more often be dealing with smaller claims.
(23) As an F04, he was more likely to deal with large multi-
national corporations, which corporations presented speciai
difficulties that usually did not arise in the case of a one-
site vendor. In auditing refund claims made by large multi-
national vendor, he would invariably have to deal with ,I
representative who possessed tax expertise, many of whom had
advanced accounting credentials. This led to more
sophisticated challenges being made on both content and
substance.
(24) In cross-examination, when asked whether larger vendors would
be more likely to have consolidated financial statements, the
existance of which would necessitate his becoming familiar
I
23
with their corporate structure, he responded that this was
generally not the case when performing refund auditing. He I
acknowledged, however, that thefe were instances when this was
the case, and he gave as ani example a refund audit with !
respect to the T. Eaton Company' ,and noted that that case was
about the third time that he yas called upon~to deal with a
consolidated financial statement.
(26) Multi-national vendors would be more likely'to have research I
and development departments. I This raised special issues when
dealing with retail sales Fax audits, and there were
guidelines that had to be follok in dealing with such cases.
An example given was the case 4f manufacturing companies that
expend monies for the purpo!se of creating designs and
improving existing products. This is regarded as a sideline
to manufacturing, as ~a product 'must be first developed before
it is manufactured. There are: cases where a corporation is
I
established solely for the pur?se of designing and developing
a product but not to manufacttre it, where no research and
development factors have to belconsidered.
(26) As an F'O4, he did not have to deal with problems relating to
f:txed assets that did not fall Fnto any category, but he did,
on occasion, examine fixed assets in the process of dealing I
with claims for exemptions. de gave an example of a fixed
asset, which could be a pieceiof production equipment that
(
24
might be exempted from the payment of sales tax. T II s L1 c !h
circumstances, he would have to attend at the premises to
examine the item to verify that it met the necessary criteria.
He did n&t regard-the process as being any less complex when
dealing with a smaller vendor because he would still h.~ve to
examine the piece of equipment. He acknowledged that such
visits were more often necessary in the case of large vendors.
27) Larger vendors were more likely to have specialized accounting
processes with which he would have to be familiar in order to
carry out his responsibilities. Using Toyota as an example,
he said it would be more .difficult to deal with an audik
involving a large .corporation with its own specialized
accounting processes.
(28) Ref~erring to cases where product was manufactured for the
vendor's own use, he stated that it was not any more difficult
to deal with the smaller or larger vendors, the approach and
principles employed being the same in all cases.
(29) I-n 1978 he completed the requirements and was awarded the
designation 6f Certified Management Accountant.
(30) He regarded that fact that he has his professional credentials
as a CMA shown on his calling card as being of some importancf
I ; hecause it put him on an equal!
of the persons representing vendors. j I
!
t:e stated that a typical aydit in th.at arcrl would tJk,J
j 12) Referring to a T. Eaton Compjny audit, he stated thrdt his
involvcm+nt with court proceedings arising out of thus ::asc I
boas unique as it represented the only "very large" venrl:Jr that
he had dealt with on his own dho used a credit card system.
!
(33) When he had all the material that he required, he would
sometimes perform a desk audlti.
complexity In carrying zut refund audits:
a) Frequently, when agents lwere involved on behalf of .A
vendor, they would intentionally "Iodd" a claim w1t.h
ineilgib
auditor.
le items which represented a challen(le for the
I !
b) Certain claims were submitted on the basis r~f J. formula
which was, in part, I based; on a "guesstimate" of thrt tax
payable. An example given was in the case of .I
manufacture for own use claim where some of the ii.g~z~'~~~
would be based on an estimate made by a consultant.
There were methods established for calculation hut no
prescribed formula, with the consultants submitting the
formula. In such cases, the prorating of ove;.hea:~!
created special problems.
(35) He did not regard the courses he had taken in cost
accounting as having other than a'short term effect on
his ability to perform his work..Because of'his extensive
on-the-job experience, it was now difficult for him to
estimate the impact of accounting courses taken by him
many years ago. Nor ,did he regard his having accounting
credentials as being a significant factor except in
relation to how he would be viewed by representatives of
vendors. Although some vendors' representatives held the
generally more higher regarded CA,designation, he did not
feel that his only having the CMA designation affected
his relationship with them in any way.
&idence of Robert Waterman
Mr. Waterman, the Regional Manager - Audit, Retail sales Tax
Branch, Eastern Region testified that:
The audit functions within the ;Ret;iil Sales Tax Etranch b~r~arnc
I
increasingly complex start,lng lin 1968, partly as a rrstiit: t,>f
I
the growth of computcrization, and around 1981 manaqemvnt
decided that it was necessary to upgrade the .+dur:.3tlan,21
quallf icat ions required by the, audit staff.
When management found itself unable to hire suffu:irnt nurnb~~:,-~
of employees with professional idesignations, sllch ;1s C.4, 13L\,
CYA, within the Tax Auditor: series, lt was decided ta
reorganize t-he area, and ‘on Oct.ober 1, .I986 the Finanri.:Il
Offlser series was created which provided for an incrpase in
salary levels. As a result, it became easier to hire l.:rnpIl>yr?f.!n
with professional designations !and the turnover df staff with
professional dcsignat,ions was keduced.
28
(5) When the Financial Officer class series was 1nt r!:>dlicr~~l ,
m.anayement set about deciding which classification wouid be
assigned to audit which files. The result was the desi,;jnatj~on
of .files as falling within either the A, B or C categ<>r>- 'as
above described. A decision was, also made to assign the files
in the, manner set out in the Refund Handbook. a s ahove
described.
(6) In hirings employees at the F04 and the FO5 level, a minimum
requirement was established that incumbents have a
professional accountiny designation. As at October 1, 1986,
in hiring new Fb2's, a requirement was imposed, that those
emloyees so designated have completed all courses up to and
including the third year of a designated accounting course and
be actively enrolled and .takiny courses leading t a
accreditation.
(7) Management regarded claims over $50,000 as being more complex~.
For this reason, claims for lower dollar amounts, which were
considered to be, on average, less complex, were assigned to
F02's.
More complex claims were said to involve such matters as
more sophisticated sampling, special issues arising out of
manufacturing enterprises, more complex matters of statutory
($1 Li f?
.icknowleged that the work performed by FCI2's has I":'; r
I
(9) F~evenue audits were conductedjon a random proactlvp tr: mike
certain that a vendor had p;ild the proper amount r.1: t.ak.
:
L,arge vendors would frequently/ have comlex accountlnq s!'st:+rns
which created special problem$ for t.ax auditors in I:!.~II~:!~~~Ic,~
stales and in arriving at the tax payable. This was ust:~li;~
not a factor in the case of skller vendors.~ Rrvvnuc al,ri, ,: i
were divided into a, B and;C catcgor1rs. w 1 t: h A .:,uc! i.I i
.~omct imes being conducted by 7 team of aud it.ors he.-sJt:d by ,111
E.05, xlth the C audits being performed by FO2’s.
I
110) Refund claims were dealt with; reactively, in the sense that:
they were conducted when refund claims were submitted by. by
vendors. A single claim made :hy a vendor could cover one+ C-JL
I
many items in a single claim. iRefund claims made by small .-lnd
large vendors, and the reason6 supporting them could be oh<<
ilme. I
Ill) The legislation being interpreted by auditors is the same f;it
large .and small vendors and in the case of large and small
cl*xims.
(12) The general approach‘ to conducting an audit is the same in aI1
cases.
(13) The audit handbooks with respect to revenue and refund audlt:j
are'different. The Refund Audit Handbooks came into cristencc
in 1985, prior to the 1986 reorganization, and has not changed
significantly since that time.
(14) The process~ for conducting refund audits has not changed
substantially from that set out .in the original handbook,
except that prior to October of 1986 there was no policy with
respect to the assignment of claims to refund auditors
dependent on the size of the claim. .
(15) When questioned ln cross-examination as to whether Mr. Bristow
and Mr. Booth carried out their functions. in the same way
prior to October 1 of 1986, he stated that they might have but
he regarded the size of a claim as not being as significant a
factor at that time..
(16) Prior to the change implemented in October, of 1986, the
Xlnistry conducted a study with respect to the' refund and
(.t8) Claims for over $5f1,000 were likely to cover more ,arcas :::f tiw
law applrcable to refund claims.
!
(191 There WI? t-e some F04’s in jthe East.ern H e g 1 0 n wir.Ilr!Irt
I
professIona accounting design<tions after 1986, who t:ad t:w!:
hired before that time. I
(20) In larger audits, with more cohplex accountlrig systems and :I
(21) .Although .Clr. Bristow and Mr.! Booth could ‘be asslqncd tc-2
pm:rform refund audits with respect to the same vendrJr, and
I could encounter the same is sues;. there could bc man? m:,,-l-~
different issues to be dealt with in the case of the I:+rqr.t
I
claims, only one of which might; be common to the smaller ones.
(221 Prl<,r t.o 1986 there were a number of TA3’s who becam<: t’O3’s
arter the reorganization, altpough they performed the same
.: _'
In'<> rk tic5 FO4's. As 3 result of yr1sv.anccs ,) '" 62 ."? We.<:
reclassified .as FO4's. Mr. Waterman believed that there we~-e
three or four employees in this cstegory.
Mr. Rytwinski testified that:
il) He has been Group Manager - Audit for the Ministry of Revenue
in the Western Region since March of 1989. From June of L987
he was Group Manager - Audit for refunds in Oshawa for sever.~J
months.
(2) From Octobe; of 1986 to June of 1987 he was classified as an
F05 in the Refund Unit, being part of the 'Central Audit
Program.
(3) He was first employed by the Retail Saltic Tax Branch in either
May or June of 1981 in an audit training position as a Cj.erk
4 and remained in that position- until 1983 when he WJZZ
classified as a TAl. He was later classified as a TA?. He has
a Bachelor of Commerce degree from the University of Toronto,
and obtained the CMA designation in 1984.
I \ I
IT) In 1985, and until Ociwber 1, 1986, he was an audit supc-rvlccr
Ln Toronto.
(61 When he supervised the Grierwi .and Mr. Bristow in 1387. the
refund unit was p.art of the Ce'ntral Awiit Program.
.
(71 The complement of the refund tinit was: 1) group managrr; -'I
refund supervisor; 3) group leflders (F05's); 4) five cl~:~:.:.rl
'staff reporting to the refund /supervisor; 5) up to ten ?02's
(one of whom was Mr. Booth); ';.I up to three FOJ's (in?l~r:lirl~;
!-It-. Rr1srIc,w).
~81 Refund sales tax audits were p!erformed by FO?'s, l's and 5':;
stationed at Oshawa, and usual~ly Lnvolved vendors rerj1~t:vrr4
with the sales tax branch although some were performed with
respect to non-rcgistered.vend~ors.
19) Because the largest vendprs USUally had siophLst L::.1tcd
accounting systems, It was necdssary for FOl's to havr: expert
knowledge in this area whethe,r they performed a revenue ,:I
refund audit function. In adpition, because larger vendors
were frequently represented ~by experts (accountants, tdx
l,awyers, former sales tax auditors, and senior executives), 2
professional background in accounting and excellent
communication skil,ls were necessary to successfully deal with
the professional challenges presented. n
.lO) Elr. Booth was said to perform 20 to 75 per cent of his audits
as desk audits, while Mr. Bristow was said to perform only
five per'cent of his -audits as desk aidits. .Desk audits were
performed on written instructions from a manager contained on
a refund assignment form. A schedule was available for the
auditor's use and -reasons for the decision were usually
completed in less than a page. C audits were divided into
three categories. The first category involved claims which
could be approved based on the statements contained in the
application and supporting documents. The second category was
represented by claims approved subject to an audit beinq
conducted. These were based on the manager's judgement that
there was a small r.isk of error, because of the vendor's !size
and history. The third category was made up of claims
approved to an audit based on prior identification. This
category usually involved large vendors making large dollar
claims.
(11) Few claims of other $5O,UOO were approved subject to audit or
.by arrangement.
might be made, and such peisons will more 0 f TV C! n h~!<::-~llw
involved in larger claims. ;
I
(14) In the case of larger claims, befund auditors frequently h.xb--c
to deal with a vendor’s comptroller and wit.h persons from .i
number of dlf ferent departmehts: sale!+Z, aticounts payat-11,. I
marketing, printing. In the. ;case of smaller claims. it 1.5
more usual for the .auditor to deal with only one person &ho is
familiar with the entire syst&.
Clj) Eecause of the size of claims iand the number of transactions
Included in files assigned to; F04’s, there was usually more
pre-planning for them to do. IIn~ addition, they ,TIL’C requ i.rt.d
to do more sophisticated sampling because of the number of
transactions included in a cliim.
,J .I
(16, Smaller claims are usualiy narrower in scope: 011 ave1:aLJe 'Ciiic!
schedule covering 30 transactions, compared with an avzrage of
100 schedules containing 3,000 to 4,flllO transactions,
encountered in the case of larger claims.
(17) It is frequently necessary, in many of the larger cl.xin~
assigned'to FO4's, to change,the approach in carrying out the
refund audit after the pre-planning stage. It is also more
likely that it will not possible to obtain the information
required by accessing a supplier's file in the case of larger
claims. In the case of smaller claims it is common to be able
to, obtain the necessary documents and records from the
supplier's files.. The search for information in the case of I
larger vendors was likened to .searching for a "needie in ;i
haystack,"‘ reference being made to ~a search for a Gener.31
Motors or IBM invoice.
(18) Larger claims involved the use of m-Ore judgement in
establishing the form of sampling to be used: the challenge
_ being to verify the largest amount of claims with the smallest
sample, but with sufficient certainty that all areas claimed
have been covered.
(191 In the smaller claims a~ssigned to F02's, it was not always
necessary to carry out sampling because of the small number of
transactions.
st.,atements. This made for,comhlexity in the carrying :jut !:I
the audits of largf!r claims. I
B~!l?aIISe assets transferred b:tween divisions and betwr:**Jll
subsidiaries have different tax :lmplications. It was nwessar:
f&r aurIit,ors (such as FO4’s) woiking with IarqPr v+r:dors to !.::I
.~ble to deal with the complesit,ies created by sutih t.ransfe1.s.
II: was unl Lkely that, F02’s wollld encounter problems ;(~‘1,.s~n~q
out c>f the existence of divisiops and subsldiarlcs related :::I
a vendor.
(21) FO3’s rarelv encountered prohliems involving refunds arislnc.:
01rt of a vendor ’ s claiming iexemptlons for research and
I
df:Velopment activities.
!
I
:: 8
(‘22) FO4’S vere more likely to encounter problems invo lvlnj, tll:it
grey areas of legislhcion. Examples given involved de,:+! iq
with vendors operating railways, airlines and min.es.
(23) Reference was made to Mr.~ Bristow's.assignment to a CBC muiti-
million dollar refund claim involving facilities in ~ontrresl,
Ottawa and Toronto. Areas dealt with inc,luded pr3ducti:w;
studios, broadcasts, simulcasts, -mobile studi~os 3ild A
manufacture for own use claim. Each area was challenqed by
consultants and lawyers for the Corporation, and there were
complex and detailed notices of,objection filed.
(24) Managers endeavoured to assign F02's to smaller vendors with
larger claims being assigned to F04's and F05's.
(25 Of- the approximately 12,000 claims handled annually by the
refund unit, approximately 1,200 were performed in the field,
with the rest being performed as desk audits. CUE the
approximately 1,200 field audits, approximately 120 were
performed by the senior auditors, with the rest being assigned
to FO2's. It was estimated that an F04 would handle
approximately 40 field audits in a year and that a F02 would
handle approximately 100 field audits.
(26) In'addition to the Refund Handbook, there was a four volume
interpretation manual entitled "Understanding Ontario Sales
the extent that FO2’s could. I
whether taping could be considered to he manuf;~~:tnr~ng. Yr- .
Uristow also had to deal with,’ mobile studios that tr.Ave!.l:,:.l
I interprovinci,ally, and to make decisions as t.o which KAS 1.h~;
primary use, where dual uses e.xisted. Mr. Brlstow st.llAlpd ::h;~
cntlrr: orgcanization of the CBC ;to dotrrmine primary USC: LII rhc.:
case of such items as, cameras, props, sets and stayl.ng. He
:Itso had to ,employ a good dea’l of judgement. in deal~ny !<Lth
questions arising out of production materials teca~~e th>
H;lndbook only contained one ge@cr;ll paragraph on this sul>ject.
(27) As part of his duties he had i-eviewed both Nr. Bristoti’s and
nr.
Booth’s fllr:s on a reguldri basis and was familiar wi,t..h t hn
cases they were involved in, ‘the sampling performed by th:?m
.ind the rcisu1ts of sampling, their rrcommendat ions, t he
!
iL'8) 4s part of his du,ties, he signed off after revj.ewing refilnd
audits performed by refund auditors such as The Grievor and
LMr . Brlstow.
(1) .,The fundamental argument of counse 1
Booth performed the same job as
for the Union was that Mr.
Mr. Brlstow, and t.hat any
difference in their duties and responsibilities were
-inconsequential. They dealt with the same legislation, the
same type of claims, employed the same processes, and had to
deal with the same issues and people, and the difference j.(:
their paper credentials was said to be irrelevant to the
performance of their work. We were asked to find that the
evidence of Messrs. Waterman and Rytwinski that larger claims
were more complex and called for geater professional acumen
was unsupported by any relevant evidence.
(2) Reliance was had on the fact that prior to October 1. 1986
both Mr. Booth and Mr. Bristow did the same work and there was
no differentiation between them based on the size of refund
claims they audited. We were asked to find that. the
complexity of the duties and responsibilities of a refund
/ (21
: (41
.After October 1, 1!)86, refund' auditors formerly in th+ IY:!x I
cl.~sss scrirs (FO2 - FO4 - Fc)~) and those 1n the FO4 1.1~' FA.?
classlf~.cat ion were req111red td have an .-rccountiny deslqn;rt ~cn
(CA, cm, CGA). Another change rnvdlved the class,~fication ID!
claims by size: A claims, exceeding S500,OOO being assiynetl I:c:
FOj's; 6 claims, between S50,(100 and $500,000 heiny .>ss~qn~d
to F04's, and C claims, bein; those for less thdn S5II.~llll.
t,einy assign4 to, F02's. Cnunse for the Union submlttecl th.:,t
such a divisj,on was both arbitjrary and lacking :~n Iojrll,-:.
Yr. Booth, who prior to Octob& 1, 1986, had Leen assiqr~~l rc:
.ludit rrfund claims irrespective of SLLC, ~4s. jftel- that
date, rssiyned to audit cldiis under S50,OOO. Mr. B r i s t :.iw ,
whu, slmildrly, had, prior tX October 1. 1986, audit.f:d .ill
sizes of claims, was now assigned claims between S50,~)OO an4
S500.000. This change was said to have left unaffcctcd thrs
vendors whose claims were dealt with by the Grievor and Mr.
Er1stow, procedures that were; followed by them, the persons
they dealt with when auditing claims, and the compexitics they
enc.ount.ernd in carrying out their audit funr:tir)ns.
5
6
The Refund Manual, which came into existence .aro~und 1985, i.,;l,i
only imaterial changes made to it after October 1, 1926. and
the only changes m6de in the policies and procedures t:c be
followed were said to be lacking in significance .artd only
related to the way in which claims were classified grid
assigr,ed.
-The requirement that an F04 have an accounting designation lyas
said to be both illogical, unnecessary, and not specified in
the class standard. Mr. Bristow's evidence that only refund
.auditing experience obtained on the job and not professional
designation was significant was relied upon. In addition,
reference ~was made to Mr. Waterman's evidence that not all
F04's had a professional accounting designation.
( 7 1 Although the number of items dealt with hy Mr. Booth was
usually smaller than those dealt with by Bristow, it was
submitted that this did not' affect the way in which they
performed their duties and responsibilities in any significant
respect.
(8) Mr. .Booth was said to have dealt with the same kinds of
persons (comptrollers, tax la-dyers , tax consultant~s,
accountants etc.) as did Mr. Bristow. Reliance was had on the
evidence of Mr. Bristow that he and Mr. Booth carried out
preplanning and subsequent audit functions in substantially
The Employer submitted that: I
!
(21
That the .P&m.er case should ! be followed even thou<-rh rh<.
yr ievances there concerned Reienue Auditors. It was Arglwd
t.hat the ski I Is and abi I it.ieis :required of Refund And Il~v~rl~l.::
Auditors were quite similar arid t.hat the Palml:r clccislon {GAS
relrv.ant to the case before usi In that case, and in the OI:V
before us, the auditors had to ;ensure compliance with the It-t.
T hr? ‘It-II?“OCS in palmer were 602’s as was Mr. Booth. l‘h?
tya!.m.el grievers sought reclassification as FOl’s JS :1~d MI-.
Euoth, -3 nd the changes that’ were effected in thr AU.? 11:
.
, 1
In the Palmer case, the assignment of audits was based on i.h-
size of the vendor "s.ize of the gross .revenue or ret;iiil sales
tax payable by individual taxpayers (or 'vendors')".
(31 In dealing with the claim based 'on substantial similarity, the
Board in the Palmer case, noted, at p.5, that the grievers
must establish that the work done by them on C audits tias
"sufficiently similar to the work done by FO4's on A and B
audits," and Chat the requirement of professional
qualification, which was one of the distinguishing features of
the F04 clas.sification, ".3S un.justifiable and should. be
ignored. It was also noted, at p.5, that~ if t.he employer
could establish either that there were "significant
differences between the work done by FO, "'s and FO4's or if the
professional qualification is sustainable as a legitimate
yualification," it would follow .that the grievances could r,ot
succeed on this branch of the case.
As in the Palmer case, at p.5, the Grievor, -- in the case b&ore
us , argued that he was engaged in work that was sufficiently
similar to the work of an F04 so as to entitle him to the F04
classification.
In the Palmer case, the evidence 0E the -..--..- rcpresent;,r ;\,.=
grievor, at ~3.6, was to the general effect that whlie .i ldr<~~e
audit would involve more paper&ork, the approach t..lkcn I.” tht:
case of large and. small audits was similar .in ali materiS!
respects. All audits, whether large or small, wcrc :;r~:d he,
“involve similar steps or stag&s of work beginning with ‘In-
office review of files...’ etc. and ending with ‘I;r,lI:>w-up.‘”
The representative grievor testified that he had engaged in
audits In the B category prlot: to October 1, l!JOh, and thrit
the distinct ion between B and C audits was arhitr.lry .:dnd
i7) The position taken on behalf of the Grievor was quite similar
to~.that taken on behalf of the grievers. in the palmer case.
That 15, similar steps or ,stages of work were carried oui: t,;;
the Grievor and by Mr. Bristow: they began with the 'same
processes‘and ended' up with the same processes. In addition,
both the Grievor and Mr. Bristow had performed audits,
-whatever the dollar amount of-the .claim, prior to October I.,
1986. .
iBi counsel for the Employer ackriowledged that ."lr. Booth miyiht he
involved in claims made by large vendors, but he yelled :,n
evidence called on behalf of.the Employer that indicsited that
his assigned duties usually involved him in auditing smaller
claims and there was a greater likelihood that he would be
.dealing with small vendors than would Mr. Bristow.
(9) As in the case before us, the employer in Palmer. at‘pp.C-7,
submitted that there were significant differences between the
nature of the work performed by F04's and FO2's. It was also
submitted that: "If the stages or steps in each category of
Simply stated. the Employel”s positlon is that the I~rg::t
.audits are b1,t.h more lmpor:tant and more complt:x t,h,trl th:.,
smaller ,3udits and accordingly, that It is de<lr;,bl:; 1.~‘~
have them performed by the more highly skilled AIICI m.’ I’:,:
highly qua1 if ied auditors:. With respect tr, the f:-,:rzwr
point - the Importance of’ the larger audits - l’h<s ! 51’: I
Employer provided evidenc:e in the form of a ch;ir.t . . .
which provldcd act,llal numbers in support. of thf L,~v~~:~~c;
point that the very lar:ge vendors provide the ~KJSI:
important source of tax: revc?nuc:. . . . Thus, ,,, t III’.’
fraction of the audits provide two-thirds of thft :.A!<
revenue collected by the province. The total numtwr :jf
auditors engaged. in carrying out the 4,350 4 and R .-11:rl:rs
total 68, whereas the’ ~07,110U C alldLts CA!, ]; >,,
accomplished by 75 FOZ’S. The a and B yiudit s r.:~k:?
substantially longer than do the c audits and. rjtvi:>usl,:.
yield, on ci”er;lge, much more tax revenue. br;>m + l,:,.:+,:
facts, 1:he Employer argues that there is m11::h :rv;!‘:” .I!
stake 1.n the A 2nd B audits and accordingly, that it 1s
import,xnt to have highly; skilled auditlvrs ;ia~ntl !.~ILc.
work. The f1nancia.l imp,>ct:of error in an A or B .rurl~,t v-
‘potentially much more ~qra(re than the r.lsk of C~L-TCCI’ ;,;: .a
c audit. The work in the A and B audits in”,.: I ‘.~ci
therefore, a(:cordlng to the Employer, ~II higher deqrx~! c~C
responsibility.
Ill.; The Employer. in the r-:ase befoke us, transpused thv .I(rqument
I, E 1:hc crnplr~yer in the Pa 1 r&r case, SC t. out in the la!;l.
nllmbered paragraph, and endeavoured to apply It to the fat.1.z
bsforc us.
i
I
(13) In the case before us, as was the case in Palmer, St p.5, thi:!
positiowwas taken on behalf of the Em~l':yer that- the duti.<<!:<
and responsibilities required of an F04 were not oni:; m;,~e
responsible than those required of an F02, but that they were
also more difficult and complex.
114) In the Palmer case, at p. -__ 8, there was some agreement between
witnesses called on behalf of the employer and the ;Irievor
that was consistent "with the proposition that the performance
of A and B audits requires a different level of skill and
training than does the performance of C audits." There vicls no
such agrement in. the case before us. Nor was there any
agreement, as there was in the Palmer case, between the
evidence called by the Employer and-the Union:
. . . that in order to conducts A and B audits one must havse
a good understanding of the kinds of accounting practices
employed by firms of a size placing them within the A and
B categories. As Robinson [called by the employer1
explained, the auditing takes place in an accountin<
environment and the accounting environment of the A and
B audits is simply more complicated than the accounti~ng
environment of a C audit, The accounting environment of
the larger vendors is more likely to involve complex
computer systems and the auditor must .understand how
those systems function in order to develop an appropriate
audit strategy. . . . Thus, an A and B audit would more
m.3de to that case, at p.10: I
The evidence t-e1 ied u&n by the Grievors . . . h.; s
persuaded lls that the dividing line between c ;A~CJ R
audits is, in some sense,; an artificial one. ,N’r-J d~,ut;l. ,
ther? may be some B .~udi~.s~ that are not as r:ompl ~rr;+twi AS
some c audits. It would +ppear that complexity varies tr,~
some cxtcnt with the type of business involved. . . .
Further, the fact. that FOZ’s were permitted to dn wh.:lt
would now be category B 3tidit.s ‘prior to October 1st.. I ‘)Rti
and, on a discretionary basis. are still allowed to :~CJ .w
persuades us that, indeed, no rigid line can be d!;:ltin
between what might be +ferred to as “more sr.r.:,tqht
forward” *-iudit.s and “morf? ;complex” audits. 1” out- “LCW,
howevr, r , the fact that the boundary bet.ween B end C
,audit~s is, in this sense, so"!ewhat a rbi.t r-ar1.r dot2.5 iii:: r
defeat thie ~mployer's argument with respect to rho
validity of attempting to draw some distinction between
large vendors and small vendors. It .appea'" t:3 b<;
inherent in the nature of this work that a simple "briqht
line" testy cannot be drawn. . . . 1More importantly.
however, we are satisfied that the diviisirJn !> f it II d AL 11
cateqories by vendor size does constitute a qood faifh
attempt at fi?ting a rough approximation of 1 c? v e I .5 of
auditing difficulty and, accordinqly, c 0 n s t 1. r. u t e s a
reasonable basis for differentiatinq the skill lc;l::!lj oi
the auditors to which it wishes to assign the;? tasks.
It appears to be true that the system that w<as adr;ptr:vl iri
October of 1986 is somewhat less flexible th,in thiz
previous practice. Althouqh the D 1 v i s I 9 II ha<i
established, prior to October lst, 1986, an Industrial
Se-~-vices L'nit which specialized in large audits, it does
appear to be the case that durinq that period thczri- :v a 5
no artificial constraint on the abiliizy of the Yo? t::
work in what would now be classified as a B cateqorlCr
audit. The fact that the new r~eorganizcd systerc 1s
somewhat less flexible. however, does nor: undermine the
main thrust of the Employer's argument, that is that the
work assigned to F04's is of significantly qr-eare,r
importance and difficulty than the work assigned to th,?
FOZ's.
(Ii Althouqh the evidence called by the Employer and by the I'rlion
differs in that the Employer's witnesses ,testjfied that the
performance of .B audits required a different level of skill
.and training than the performance of C audits, and that' the B
audits were more difficult and complex, the evidence satisfies
us that:
(al B audits, with which Mr. Bristow was largely concerned,
.were more likely to involve a complicated ;~cCl~Untin~J
environment, more complex computer systems, rl II d
t h <a t
these systems had to be understood by a refund auditor.
This was much less likely to be the case in C audits;
vendors who manufacture ;itoms for their own uslfr ..!:l:i
(E) ;1 large vendor’s rnformalion base is likely to bit nwrr:
sophisticated and there i’s a greater likcl ihood t.l~.>r. r,hc-
.auditor would be requ i red to work with consol ~.d.tc:xl
flnanclal statements and ;annu;ll report-s in ;An art:=mpt. r~-:
ascertain the implications of the vendor”% corporate
I
structure for retail tax:purposes; and
(h) the conduct of B audits more often involves 1 ii r :' ;? L‘
individual claims, and it is significant that ?lr. Bristow
acknowledged that the larger a claim is, the $~reater i.?r
the responsibility on the auditor assigned to carry it
out because of the potential impact of a mistake an
revenue.
(3) While we agree that the boundary between B and C .audits
is somewhat "arbitrary," in the sense described at p.111
of the Palmer case, we are satisfied that the divis.ion o.E
refund audit cateyories by size of claim does, ss it did
in the Palmer case, "constitute a good faith aixternpt: ,TK
fixing a rough approximation of levels 'of auditing
difficulty and, acqordingly, constitutes a reasonable
basis for differentiating the skill levels of the .auditor
to which [the employer1 wishes to assign these tasks."
(4i As was found in the Palmer case, we ~ayree that the
reoryanized system that came into existence on October 1,
1986, while it was "somewhat less flexible," did not
affect the employer’s main submission that the "work
Employer constituted a iood faith r~quir~rwnt rihlch.
represented a real If "roirqh approximation of II::\-+!:+ c:f :
auditing difficulty." / I
As we have found that the; Employer h.>s rnrabli;h,~d r.ll.:!.
the work perform4 by' ?lr. Hristow as an FO4 l.3typi(.all :S f;f
siynlflcantly yreatcr importan$e and diffic:ulty th.,ln thrt :~ork
p:?rformr4 by Mr. Boot-h as an iF0.J (3typizal 1~. the yr~~v.,n:~:-~
must be denied. In the circumst+nces, 1t 1s unnecessary for Lli
t .> de.3 I with the second Cll'9UllF"t made 3"~ txh‘~lC 0 f r hc
Grievor: that the requirement that A" FQ4 poss~?ss 4
professional accounting desiynition is unjuntlflahl~:.
54
Dated at Toronto this 20 dayof November, 1992.
M. Gorsky - Vice Chairperson
/ WI.- , M. yona - mbeY - I
H. Robcrtn - Member