Burns Lake council approved a motion last week against the advice of the village’s chief administrative officer and the Burns Lake mayor.
Effective July 1, 2017, the new policy would prohibit the village from undertaking administrative duties to all non-profit organizations in the community.
“I spoke against the motion passed by council prohibiting the handling of funds for non-profit organizations in our community,’ said Burns Lake Mayor Chris Beach. “I believe this will prove to be extremely financially harmful to many volunteer groups in the Lakes District.”
Many local non-profit organizations rely on the village to process their grant applications. By using the village to assist them, these organizations benefit from tax advantages.
“Groups like the Burns Lake Mountain Biking Association and the Burns Lake and District Community Foundation Society deal with large grants, and the funds saved through a significant tax advantage are substantial,” explained Beach.
“This means that an entire grant is usable for its purpose and, most importantly, those saved dollars go right back into the community,” he continued.
“This will no longer be the case for numerous organizations that bring grant money into our town,” he added. “This move will likely decrease opportunities and capacity and have a negative effect on our economic diversity rather than a positive one.”
The motion was proposed by councillor John Illes, who says he was motivated by a conversation he had with the village’s auditor about a loan on the village’s financial statements.
“I expressed my concern that we did not consult with the public on providing a loan to the society in question,” explained Illes. “In my opinion, all loans should undergo some sort of public consultation to ensure the public is comfortable with the risk the municipality is accepting by providing the funds.”
Illes said he hopes his motion will give council “time to carefully research” the village’s future direction on financial transparency.
“Some non-profit organizations have benefited from the arrangement with the village; however, I think this change will not hinder these organizations,” he said. “The volunteers that are directors on these organizations are passionate and they will partner with other organizations or Burns Lake charities to make sure their projects move forward.”
“I do think there will be a transition period for not-for-profits, but there is an abundant of other options for these organizations - other partners in the not-for-profit sector or perhaps obtaining their own charitable registration status for example,” he continued.
“So after all is settled I think in fact we will have an even stronger volunteer sector,” he added.
Although the village’s chief administrative officer suggested preparing a report with more information before councillors voted, councillors moved ahead with the motion anyway. All four councillors voted in favour of the motion.
“Before making a quick decision on this matter, I believe council should have taken time to carefully consider the ramifications of their actions,” said Mayor Beach. “In the very least, those non-profits that dedicate hundreds and thousands of volunteer hours every year towards enriching the quality of life in the Lakes District should have been given an opportunity to voice their concerns.”
Financial statements document “unusual” transaction
Burns Lake councillor Michael Riis-Christianson wrote a letter to Lakes District News weighing in on the controversial motion. Here’s what he had to say:
Last week, council passed a motion directing village staff to draft a policy “on the public transparency of financial matters and the prohibition of handling the funds of others.” I wish to clarify my position.
The Village of Burns Lake’s most recent audited financial statements documented an unusual financial transaction. Subsequent discussions in council suggest the transaction in question involved transferring a significant amount of grant funding to a local non-governmental organization (NGO) in advance of those funds actually being received by the municipality.
I feel transactions of this type may expose the municipality to unacceptable levels of risk. If the municipality advances funds to an NGO for a grant project without receiving adequate surety, and that organization fails to complete the project or does not comply with the terms of its grant agreement with a funding agency, taxpayers could end up footing the bill or a portion thereof.
It is my understanding that the municipality has administered the grant funds of other NGOs in the past, and disbursed funds to third parties on behalf of these organizations, but done so only after grant funding has been received by the municipality. While this practice may not create the same level of risk to taxpayers as ‘in advance’ payments, it nevertheless poses a number of legal and ethical questions, some of which relate to the issue of financial transparency.
The issue becomes even more complex when you consider the fact that until now, we have also allowed citizens to make tax deductible donations to the municipality on the understanding that these donations would be transferred to the NGO of the donor’s choice.
The Canada Revenue Agency has specific rules around (a) how ‘qualified donees’ can use tax-receipted donations, and (b) to whom these funds can be transferred. It also specifically prohibits the issuing of tax receipts for “directed donations” if the project or organization being funded is not under the “direction and control” of the qualified donee.
Has the municipality exercised “direction and control” over the projects and organizations it has funded with tax receipted donations? Are all the organizations for which council has collected donations ‘qualified donees’ under the Income Tax Act? Has the municipality been acting within ethical and legal bounds in its dealings with local volunteer organizations and NGOs?
These are perplexing questions, and to this point, no one answered them to my satisfaction.
As a long-time resident of Burns Lake, I want to see our local volunteer organizations succeed, and I believe the municipality should support them whenever possible. However, it is imperative that the municipality’s actions in this regard are at all times transparent, ethical, and (above all) legal. And they shouldn’t expose taxpayers to unacceptable risk.
At this time, given the uncertainty surrounding this issue, I cannot in good conscience support the municipality’s current policy on the handling the funds of other organizations.
Council is currently seeking clarification from the municipality’s auditor, and may also request a legal opinion on these matters. I welcome both.