Update: The Friends face dissolution as it struggles under mountain of debt
Note: The final section of this article was updated with an interview with lawyer Constance M. Brothers, who is speaking on behalf of the Friends.
After 25 years of promoting Revelstoke's two national parks, the Friends of Mt. Revelstoke and Glacier is close to ceasing operations, faced with a mountain of debts, many unpaid bills, and an audit by the Canada Revenue Agency.
“We’re insolvent and as soon as you’re insolvent you’re bankrupt,” lawyer Constance M. Brothers told the Friends at a special members-only meeting at the Powder Springs on Wednesday evening where the board of the Friends revealed the organization's dire situation.
The meeting was reportedly emotional, though only 19 of the Friends' 168 members attended.
The Times Review attempted to attend the meeting but left after being told it was members-only. Following the meeting, the Friends issued a news release written by board member David Rooney, the publisher of the Revelstoke Current.
According to a news release, the Friends has more than $214,000 in debts and owes money to the Government of Canada for unpaid payrolls taxes; contractors who renovated the Balsam Lake store, suppliers, the City of Revelstoke, the Revelstoke Credit Union and other individuals, companies and organizations.
It is being audited by the Canada Revenue Agency due to its non-payment of payroll taxes.
“The vast majority of these 68 individual debts were concealed from the Board of Directors," said president Travis Hunt. "They came to light only after Treasurer Marie-Helene Ostiguy and Interim Executive Director Josée Timperio went back through the Friends’ records and discovered the true extent of the group’s financial situation. Their findings were presented during an emergency board meeting held on November 23.”
Reports of the Friends' difficulties have been circulating for months. The Times Review tried to contact Hunt several times over the past month to find out about the status of the organization, before he sent an e-mail on November 29, saying he would not conduct an interview.
At the meeting, the board recommended to its members that the Friends be dissolved. “It’s impossible to make financial decisions when you’re not given the proper information,” Hunt said.
2012 marked the 25th anniversary of the Friends of Mt. Revelstoke and Glacier. It was launched in 1987 as a volunteer organization working in conjunction with Parks Canada in Revelstoke. It was set up as a way to create volunteer opportunities in the Park.
Over the years, it has undertaken projects like the re-construction of the Glacier Circle Cabin and the opening of the Balsam Lake store. The Friends has published books, maps and posters. It has provided nature walks and children's programs, conducted wildlife studies and more.
“The organization itself has become very strong," former executive director Neills Kristensen told the Times Review in January. "We’re growing and the community is starting to figure out who the Friends are.”
While the organization may have been growing in membership, its financial situation was declining perilously. The Friends' financial statements that are made available to the public by the Canada Revenue Agency illustrate.
Over the past five years, it went from a position of financial stability to one of heavy annual losses, with many outstanding debts, and fewer assets than liabilities.
At the end of the 2007–08 fiscal year, the Friends reported it had $86,239 in the bank but by March 31, 2012 it owed more than $6,000. Total assets declined to $98,030 from $230,562 in that time period.
Meanwhile, the Friends started to rack up debts, going from almost no liabilities in 2008 to having $136,917 in accounts payable and $23,466 owing to "non-arm's length parties" as of March 31, 2012.
The Friends revenue has increased from about $242,000 to $280,000, but expenses have gone up even more, to $332,000 from $217,000 – meaning the Friends lost more than $50,000 last year.
So, what went wrong? There were some problems that were outside the Friends' control, such as the closure of the Rogers Pass Centre for renovations from September 2009 to May 2011. That cost the Friends significant revenue due to the closure of their gift shop there. The organization had to use cash assets to stay afloat, said Glen O'Reilly, the president of the Friends at the time.
Then there was the devastating flood of the Parks Canada building in 2010 that saw much of their inventory destroyed.
O'Reilly said that when he left the board in 2011 he felt they had weathered the storm of the previous two years.
However, the Friends financial situation started to deteriorate before those events and the organization still lost more than $50,000 last year, after the Rogers Pass Centre re-opened. It is unclear how the Friends was able to rack up so much debt.
One of the people who is owed money is Janice Jarvis, a lifetime member of the Friends. She and two other people were contracted through the Friends to conduct a bird banding survey near Revelstoke.
The $50,000 survey was contracted out by BC Hydro through the Canadian Wildlife Service (CWS). According to Jarvis, in the past she was contracted directly by CWS. This year, the money was also sent through the Friends.
"It was decided it would be better if it went through a non-profit organization because it's better for the Canadian Wildlife Service to contract through a non-profit as opposed to individuals," she said in an interview last week.
Jarvis told the Times Review that when they filed their first invoices to get paid in August, they had to wait more than a week for a response. When a reply did come, they were told by executive director Neills Kristensen that the Friends hadn't received the funding yet.
"We never got anything until October," she said. "When we were given a cheque it actually bounced and then we were told the money had gone missing."
Eventually the contractors received $5,000 of the $50,000, Jarvis said.
An official from the CWS has not responded to questions about the situation.
Jarvis said they notified the RCMP of the situation but they were told it would be better to try and resolve the situation without the police involved, otherwise they likely wouldn't get any money.
"At this point we're really thinking about (court)," said Jarvis.
Staff-Sgt. Jacquie Olsen confirmed the RCMP was notified of the bounced cheques but said there was no investigation into the Friends.
In 2011, when the Friends of Banff closed down, the local Friends sent out a statement saying they weren't going anywhere. “Our board is adamant we’ll stay strong and keep going,” Kristensen told the Times Review at the beginning of 2012.
Now the future of the organization is in the hands of the members. While the board has recommend the organization be dissolved, the ultimate decision is being left to a members' vote in early 2013.
Lawyer Constance Brothers, who is speaking on behalf of the board, said in an interview on Thursday that they are still trying to figure out what happened to all the money.
"We can't afford to hire a forensic accountant and we're going to use every avenue we can to find out what has happened because we think we owe it not only to the Friends but also to all the creditors to give some explanation as to what happened here," she said. "Truly the Board of Directors was not in the loop as to the financial status of the company until the last month or six weeks or so."
Why the Board was not aware is unclear. Brothers said the information was not relayed to the members by the executive director, however the financial information was easily accessible on the Canada Revenue Agency website and it paints a clear picture of an organization that was experiencing large annual losses since at least 2008-09
"Whether you can point the finger at the board or not, it's a very difficult thing to do because it depends on the information that the board is given," said Brothers. "Just because you looked at the financial statements and they looked in poor shape, certainly the information of $215,000 in debt was never there and it was never information given to the board. Certainly non-payment of payroll taxes was never information given to the board. That's a red flag in itself. I would suspect if the board were told that then all hell would have broken loose but they didn't know that."
Brothers said even within the past month the Board was looking at ways to carry on, but "it became clearly evident in the last couple of weeks that the debt is so large that there is nothing they can do."
The Friends is looking to sell the $90,000 in merchandise it holds in inventory to help pay off some of its debts. They are organizing a convoy to help bring merchandise from the Rogers Pass Centre back to town this Sunday, Dec. 16, and will conduct a count to see exactly how much is there.
Brothers said the amount owing in payroll taxes to the Government of Canada is about $20,000 and the Friends will pay unsecured creditors on a pro-rata basis.
She wouldn't attribute the debt to any one cause or person.
"There's no doubt that $200,000 in debt is quite extraordinary but we don't even know how long that debt has been accumulating for," she said. "Slowly but surely all of this will unfold, and we'll have a better idea. It's really one step at a time. To a large extent its because we just don't know what happened."