When Hockey Canada came under fire for using registration fees to settle sexual assault claims without disclosing to parents and players how their money was being used, executives told hearings in Ottawa that its National Equity Fund was also used for health and wellness programs.
Among the items Hockey Canada said it funded were various forms of counselling and treatment for players. But in conducting a review into Hockey Canada’s governance, including oversight of the National Equity Fund (NEF), retired Supreme Court Judge Thomas Cromwell couldn’t find records of these things in the financial statements.
“If such services were indeed provided to potential claimants and funded by the NEF, it is concerning that they were not recorded in a consistent manner. We also have no indication that members would have been advised when such services were offered,” Mr. Cromwell wrote.
That revelation has alarmed a financial watchdog that provides scrutiny of non-profit organizations such as Hockey Canada.
“It means that what Hockey Canada said could not be verified,” wrote Kate Bahen, a financial analyst with Charity Intelligence Canada, in an analysis of the findings Friday. “The expenses for all the good things Hockey Canada claims to have spent NEF money on, its wellness programs and players’ treatment, Cromwell couldn’t find in its financial records.”
Findings from the review, commissioned by Hockey Canada this summer, were made public Thursday. Mr. Cromwell found the National Equity Fund, built by participant fees, lacked proper disclosure, transparency, oversight and control over the money and how it was deployed.
Though Mr. Cromwell noted reserve funds for uninsured liabilities can be a sound risk-management policy for organizations, the National Equity Fund fell well short of acceptable governance standards.
Mr. Cromwell’s findings put into question Hockey Canada’s statements in recent months that the fund was just a contingency reserve, like any other.
“The key questions for this review are whether the NEF was established properly, and whether Hockey Canada governs the maintenance and use of the Fund appropriately,” Mr. Cromwell wrote.
“Merely carving out and labelling a portion of an organization’s net asset balance a ‘reserve’ does not constitute a best practice reserve. Instead, an organization’s reserve fund should be a distinct pool of net assets that an organization manages to achieve a specified set of objectives,” he wrote.
These controls did not exist at Hockey Canada, the report said.
A Globe and Mail investigation in July was first to report that registration fees from the National Equity Fund were used to settle sexual assault claims, without disclosing its use to parents or players. Hockey Canada executives later revealed at parliamentary hearings that the NEF had, in fact, been used to pay out nine settlements worth $7.6-million since 1989.
That figure did not include a settlement reached in May after a young woman filed a lawsuit alleging she was sexually assaulted by several players, including members of the 2018 national junior team. The claim was settled in a matter of weeks, without Hockey Canada completing a full investigation into the allegations, or requiring players to co-operate with the probe. The suit was settled for an undisclosed sum. Lawyers for several players dispute the allegations. MPs have accused Hockey Canada of trying to cover up the incident.
Fearing a backlash, Hockey Canada told sponsors in May that no corporate dollars were used. It offered no similar disclosure to parents and players.
In her analysis of the governance review, Ms. Bahen said Mr. Cromwell’s findings were significant, since he not only had access to Hockey Canada’s audited financial statements, but also its internal general ledger.
“Hockey Canada hired Cromwell to specifically report on how it used its National Equity Fund. Despite the restrictive guidelines to look at a small part of Hockey Canada, Cromwell uncovered multiple red flags,” Ms. Bahen wrote, noting the problems it exposed with the organization’s accounting.
When asked about the National Equity Fund by Mr. Cromwell, executives at Hockey Canada appeared to dispute who was ultimately in charge of it, raising further questions about who was accountable for the millions of dollars amassed from registration fees, and how that was managed.
“We were initially told the CFO was involved in NEF management. Next, Hockey Canada informed us that the director of sport safety played an important role in managing the fund. When asked about the subject, the director of sport safety denied having such a role,” Mr. Cromwell’s report said.
“After obtaining these responses, certain Hockey Canada executives again informed us that the director of sport safety managed the fund, but with the assistance of legal counsel. Most recently, the CFO provided us with a chart according to which all matters involving insurance reserves, renewals and claims, as well as settlements expenses were handled by legal counsel.”
A Globe and Mail investigation last week revealed the existence of a second reserve, known as the Participants Legacy Trust Fund, “for matters including but not limited to sexual abuse,” according to Hockey Canada documents. Mr. Cromwell’s review also raised serious concerns over how that fund was operated, since Hockey Canada had no formal policy governing the trust.
Similar to the National Equity Fund, it lacked proper controls and transparency to meet the threshold of basic governance standards.
The review also pointed to problems with a third sub-fund, known as the Insurance Rate Stabilization Fund, which was used as a reserve for money transferred from the National Equity Fund.
Changes to the way Hockey Canada accounted for liabilities starting in 2016 resulted in higher balances for the National Equity Fund on its financial statements.
The governance review said Hockey Canada became concerned that this change on the financial statements made the NEF balance appear excessive, “which might signal a large pool of funds set aside for potential claimants and thus might increase the likelihood of additional claims,” Mr. Cromwell wrote.
Soon after, Hockey Canada moved roughly $10-million out of the National Equity Fund and into the Insurance Rate Stabilization Fund. In doing so, Hockey Canada effectively created a sub-reserve for potential claims that it could not insure or did not want to claim on its insurance.
“Both the National Equity Fund and the Insurance Rate Stabilization Fund are used for purposes that are not fully disclosed in the financial statements,” Mr. Cromwell wrote.
Ms. Bahen praised the report for highlighting a lack of transparency at Hockey Canada, which does not proactively disclose its audited financials to the public. This lack of financial disclosure is a significant problem with non-profits and charities in Canada, she added.
Hockey Canada said this week it accepted the review’s findings and would use it to better governance at the organization.
“Hockey Canada has heard from many Canadians, including members, players, parents, and corporate partners, that change is necessary to make hockey a safer environment for all participants,” the Hockey Canada statement said. “We remain fully committed to making the changes necessary to regain the trust of Canadians and address systemic issues in and around Canada’s game.”