Get to Know RECA: Finances and Fees
| April 01, 2022
In order to fulfil our mandate, we require revenue, which is largely obtained from our annual licensing fees. This edition of Get to Know RECA explains our financial position; answers some frequently asked questions; and the details regarding RECA’s revenue, expenses, and fees.
Unless otherwise indicated, all numbers in this report are based on 2021 fiscal year-end data.
Established in 1996, the Real Estate Council of Alberta (RECA) is the independent governing authority that sets, regulates, and enforces standards for real estate brokerage, mortgage brokerage, property management and condominium management licensees. Alberta is one of only a few jurisdictions in North America with a fully self-regulated real estate industry.
At RECA, we are committed to transparency and rely heavily on stakeholder input. Our central mandate is to protect consumers, and to protect against, investigate, detect, and suppress fraud as it relates to the business of our licensees. Transparency in our processes allows the Government of Alberta, the public (consumers), and licensees to determine if we are, in fact, an independent and accountable regulatory body fulfilling our mandate in a manner intended by the legislation.
How the Money Flows
Our proposed budget is reviewed and amended by our Finance and Audit Committee, which is made up of Board members appointed by the Board. The final budget is brought to the Board for approval and then currently reviewed by the Minister of Service Alberta for final approval.
Please refer to RECA’s year-end Financial Statements for a full, up-to-date look at our financial position.
Where the Money Comes From
The largest portion of our revenue—over 60% most years—comes from the fees licensees pay annually. Our licence fees haven’t increased in nearly 10 years (since 2014). The revenue received from education courses has played a large part in being able to keep licence fees the same for so many years.
An important distinction to note, is that all RECA licence fees are due each year by our fiscal year-end deadline on September 30. This creates the largest cash balance, as reported in the year-end financial statements. It is important to note that license fee revenue is not reoccurring and this annual (one-time) source of revenue, is drawn down throughout the next fiscal year and must be prudently managed.
This is a much different fee process than some other jurisdictions, which operate on a rolling renewal system, which provides for injections of cash from licence renewal fees throughout the entire year.
On average revenue received from education course delivery has accounted for approximately 34% percent of RECA’s revenue.
Beginning in the 2022-2023 operating year, RECA will see a significant decrease in operating revenue, due to its divestment of course delivery.
Other Income in 2021
- rental revenue: income from RECA office building tenants
- investment income: bank interest and interest on short-term investments
- non-operational revenue: fines*, penalties, and hearing costs recoveries
*fines are charged to those found to be in violation of the Real Estate Act, Rules, Regulations, or Bylaws.
What the Money Goes Towards
The RECA team is responsible for complaints, hearings, disciplinary reviews, suspensions and industry and consumer education/awareness.
The largest portion of RECA’s operating revenue goes towards salaries and benefits of employees. RECA requires capable and professional staff in order to fulfill its mandate. RECA’s team is made up of professionals who manage:
Capital Assets & Education Development Costs
A portion of our expenditures goes towards investments in capital assets (IT hardware, office, etc.) and education course and examination development. With the divestment of education, we are not forecasted to have additional licensing education course development costs in the future.
The Professional Services line item on RECA’s Financial Statements is largely made up of the legal costs required for court action brought against RECA. This expense has been exceptionally high, as we have been facing multiple and ongoing lawsuits since 2019 on matters that are unrelated to licensee livelihoods.
We expect to be successful in our defense on all matters; however, the resources required for outside counsel and for the time of our senior staff are exceptional and are a considerable burden.
What Stakeholders Really Want to Know
What does RECA do with Excess Revenue
As a not-for-profit, if we generate revenue that exceeds our expenses in a fiscal year, a portion of the excess revenue over expenses can be contributed to an internally restricted general reserve at the recommendation of the Finance and Audit Commitee and with the approval of the Board. The general reserve serves to ensure the stability of the mission, programs, employment, and ongoing operations of the organization.
It is normal business practice to have at least 6-18 months of operating expenses in reserve.
As reported on September 30, 2021, we had $6,484,500 in our General Reserve, which amounts to approximately 6 months of operating expenses.
How does RECA Plan to Achieve its Mandate with the Loss of Education Revenue?
Part of the reason we could keep our license fee the same for so long is through the offset of revenue we received from education. Conversely, a license fee increase or cost cutting measures may need to be considered in future years to offset the effects of the divestment of education. That being said, the Board takes its role in setting our budget seriously and will only ever increase licence fees when it is absolutely necessary to do so for us to adequately fulfill our mandate. As well, an increase in the cumulative number of licensees entering the industry in recent years has attributed to a larger than average revenue stream from license fees which, if continued, could help offset the loss of education revenue.