A biting financial audit of the Miramichi Emergency Centre for Women alleges bad bookkeeping and “questionable donation and receipting practices,” a CBC News investigation has found.
The audit was prompted by employees, concerned about the shelter’s future, sounding the alarm.
“We’ve all hit a point where we’re no longer willing to stand by and see the centre perhaps close because of mismanagement of funds,” said one of three employees whose identities CBC News agreed to protect because they feared being fired if they spoke publicly.
The chair of the board of the Miramichi Emergency Centre for Women (MECW) denied the shelter is in a financial crisis, but refused to release the centre's financial recovery plan to CBC News.
The audit report obtained by CBC News, dated September 2014, shows the shelter dropped from a healthy operating budget to a deficit between 2011 and 2014.
Department of Social Development auditors point to “insufficient governance” from the board of directors as being at the heart of the issue.
The audit states that after “serious concerns” were brought to the attention of Mary McCormack, a Social Development manager, she and the department decided more scrutiny was in order.
“In our opinion and based on the results of our financial review, we feel there is insufficient governance provided by MECW’s board of directors from a financial perspective," according to auditors.
'Morale is starting to come back'
Three shelter employees have spoken with CBC News since the audit’s completion and feel the root causes of the problems have not been addressed. They would like accountability and transparency from the board.
“The morale is starting to come back,” said an employee.
“[We’re] hoping that maybe working with the CBC will bring everything to the open, that the board can start being accountable or we can get some new members on the board ... and get people on there that care. Get people on there that want to see this place thrive, not just survive, but thrive, so we can offer more services to more people,” she said.
The centre provides a safe place and counselling services to women in crises, including abused women and their children. It’s been operating for 27 years.
The department provides more than $250,000 to the centre each year in funding. The community chips in tens of thousands of dollars in funding for the not-for-profit centre as well.
Harold Parlee, the chair of the centre's board for the last three years, declined to participate in an on-camera interview with CBC News.
But he said the house would not close and that its finances were getting back in order.
'Absent additional funding... MECW will be unable to meet its immediate future financial obligations' - Department of Social Development audit
He refused to provide a copy of the financial recovery plan recently submitted to the department in response to the audit.
The audit shows that between 2011 and 2014, operating budgets were identical, year over year, for three consecutive fiscal years, while actual operating costs climbed.
The budgets, which showed a total of $259,014 three years in a row, were exceeded in actual expenditures by $34,547 in 2012 and $62,804 in 2013.
The centre went from approximately $78,000 cash and $55,000 working capital in 2011, to a depleted cash flow and a capital deficiency of approximately $26,000 in in 2014, states the audit.
That total did not include other debts owed to employees and the government totalling an additional almost $15,000 at the time of the audit.
“Absent additional funding, borrowing, donations or a reduction in expenditures MECW will be unable to meet its immediate future financial obligations,” stated auditors.
Social Development would not comment on any specifics of the report, saying the regional office was working with the not-for-profit’s board currently, and that,
“The board of directors has the ultimate responsibility and accountability for the efficient and effective management of the facility," the department said.
“Social Development will make every effort to support the functioning of Miramichi Emergency Centre for Women as this is a valuable and needed resource in the community."
More financial oversight needed
The audit identifies several events which prompt recommendations for better financial oversight from the board.
In the period examined by the audit, the shelter received $259,014 per year in grants from the department.
MECW was overpaid more than $8,000 by Social Development and though the problem was identified, the money wasn't repaid.
When the error was identified, a cheque was cut to repay the department, according to the audit.
“it appears a cheque was prepared on July 29, 2013 to repay this amount. The cheque was an outstanding item on all subsequent bank reconciliations, which suggests it was never sent to or received by [Social Development],” it said.
Auditors state the centre’s ledger indicates payment was reversed on March 31, 2014, and that the money had been “effectively spent” since at the time of the audit the chequing account balance showed a deficit of $160.29.
In another instance, $6,122.66 was received by MECW, to be paid out to employees as pay equity. The amount was deposited in February 2014, but still hadn't been paid weeks later. According to employees, it took months for the pay equity to be disbursed.
"The pay equity, we were supposed to have it in February and we did not get it until July,” said one employee.
“It was only from calls being made, anonymously to higher up to make this happen. Even though we were begging and asking that we were entitled to the money that we were supposed to receive … And yet it was five months after the fact that we were able to get paid,” she said.
The employees alleged that wasn’t the only pay issue, stating they sometimes had to wait before cashing their pay cheques.
“I can remember at least three occasions we were told within the last few years that we could not cash our cheques,” said an employee.
“We had to wait, and then the director at the time said it's OK. That's pretty fearful, knowing you can't work from day to day and be able to have your paycheque,” she said.
No cheques are outstanding now, they say. Parlee said he was unaware of any delays in cashing cheques and denied there was ever any danger employees wouldn’t be paid.
Possibility of questionable practices
The audit singles out a donation made by the board’s vice-chairperson Jill Stewart, and her husband.
The report states the couple made a donation of $5,000 “with the expectation that MECW would hire their granddaughter so she could complete an employment experience requirement for the university program she was enrolled in.”
It states auditors determined there was an income tax receipt issued for the money, and “our review of the general ledger salaries account indicates that $5,000 was paid to [the granddaughter].”
The report says Stewart made another donation, for which she also received a charitable donation receipt, to cover the employer portion of Canada Pension Plan and Employment Insurance for the employment, totalling $374.50.
The report goes on to provide Canada Revenue Agency guidelines on donation receipts, noting that a gift only qualifies as such “provided no benefit accrues to the donor or anyone not at arm’s length to the donor. Donors cannot choose specific beneficiaries of their donations.”
It then provides CRA information on penalties for issuing receipts with false information.
The report says Stewart told auditors that the chair had been consulted and board members were aware of the situation and aware that her granddaughter had prepared a report on her research findings for the board.
The audit states however that when the audit findings were presented to the board in September 2014, “it appeared that most members who were present were not aware of the situation.”
Stewart declined an interview with CBC News on the audit’s findings.
Damage to reputation, loss of credibility
The auditors recommend strengthened governance and better financial oversight from the board.
“It’s important for the board to consider that insufficient oversight and an inadequate internal control system can lead to issues that can generate a negative image in the public sphere, which can result in damage to reputation, loss of credibility, funding shortfalls and associated challenges.”
The workers at the shelter say there is too much hanging in the balance to not have the board and the shelter’s finances in good working order.
“We are an abuse shelter to help women,” said one worker.
“It is very worrisome because this house has been in effect for 27 years. The proof is in the pudding. The need is there. There are people that depend on that house.”
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