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Albert Schultz is pictured in his office at the Young Centre for the Performing Arts on March 20, 2017.Chris Young

The Canada Council for the Arts has rescinded a planned $375,000 raise in its annual grant to Soulpepper, an exceptional increase that would have tripled what the embattled theatre company received from the federal arts funding agency and transformed it into the best-funded not-for-profit theatre in Toronto.

On Thursday, Canada Council's board of directors voted to keep the base grant of the theatre company – currently being sued by four past employees alleging sexual harassment – at its previous level of $184,500 this year and next, instead of the $559,500 a peer-assessment committee had recommended in the fall.

As with all grants over half-a-million dollars, Soulpepper's had to be voted on by Canada Council's board, and the funding agency had put its earlier decision regarding the theatre company under review as soon as four civil lawsuits were filed on Jan. 3 against it and founding artistic director Albert Schultz, alleging that Mr. Schultz was a "serial sexual predator."

"We came to the conclusion that the [peer-assessment] jury did not have the information it needed and that it did not have a clear understanding of the situation at Soulpepper and therefore it would be only fair and normal to recommend a rescind of the raise," Simon Brault, CEO of the Canada Council, told The Globe and Mail, noting that one-third of all applicants to the latest grant competition had their funding maintained at their old level.

The Canada Council bases funding decisions not just on artistic performance, but on the financial and organizational health of arts companies, Mr. Brault said. He emphasized that the decision to maintain Soulpepper's funding was a vote of confidence in it – the agency's positive communications with the company over the past month leading it to "not pull the plug" on its investment.

"[We] are quite convinced that the company has a future without Albert Schultz," Mr. Brault said, pointing to the theatre's recent extended run of Edward Albee's A Delicate Balance. "We can see that there is a board really active, artists are still believing in the company and working … and the audience is there."

Soulpepper's board of directors said it was "very grateful" for the Canada Council's decision in a statement on Thursday. "Soulpepper continues to be in close communication with the Canada Council for the Arts as we demonstrate our commitment to renewal and achieving our artistic mandate, and we are very grateful they have decided to maintain their funding at the same level as last year," it said.

Mr. Brault says it is up to the justice system to decide the lawsuits filed against Soulpepper and Mr. Schultz, but that what has been made public at this point made it clear the theatre company was not "a leading organization that is exemplary on every level" as it had positioned itself in its last application to the Canada Council last year.

In January, following the filing of the civil suits, Soulpepper's board asked Mr. Schultz to resign and "severed" its relationship with Leslie Lester, the company's long-time executive director and Mr. Schultz's wife. Around the same time, the executive committee of the theatre company's board released a statement saying that it understood "why many artists felt that raising concerns about the safety of the Soulpepper workplace was very difficult," and 64 artists signed a statement released by the company acknowledging that there had "been an unhealthy workplace culture for a long time."

Mr. Schultz, who resigned at the board's request last month, has vowed to "vigorously defend" himself against the allegations in the lawsuits, which have not been proven in court. Ms. Lester says that no allegations "of any nature whatsoever" against Mr. Schultz were ever brought to her attention at any point during her employment with Soulpepper.

Since being founded in 1998 by 12 artists including Mr. Schultz, Soulpepper has grown from an initial summer season of two shows to the biggest not-for-profit theatre in Toronto with year-round programming.

The company's Canada Council funding, however, has not increased at the same pace – and at its current level, represents just 2 per cent of its annual $12-million budget.

Two years ago, the federal government announced it would be doubling the Council's funding over over a five-year period, providing a rare opportunity for companies like Soulpepper to catch up with longer-established peers.

While Soulpepper has missed this one, Mr. Brault notes that the next opportunity for arts organizations to apply for core funding comes in October. The theatre company will remain under "concerned status" until their next evaluation then. "For Soulpepper, the next few months are absolutely critical," he said.

The Canada Council is set to publish new guidelines promoting workplaces that are safe and harassment-free in the next months. "We are very aware that this story may not be the only one the next few years – so we need to learn and, all of us, not only the funders, but the artists and the unions," Mr. Brault said. "We take all of this really seriously and we are really committed to change the tide."

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