Members Clamor for an Independent Financial Audit
by Maria CJ De Villa
Many people claim that FCT may well be the wealthiest non-profit Filipino community centre in Canada. Why? Because with the liquidation of its building last January 2017, its coffers swelled to a staggering $5.9 million (gross sale). While it would have been cause for a glorious celebration, it opened up instead a potful of controversies involving
questionable financial and governance practices.
The revelation
It all started on September 7, 2017, at the AGM (Annual General Meeting) eight months after the sale of its building. The FCT Board of Directors (BOD), after proudly announcing the results of the purchase of its office property, casually segued to a flipchart a list of payables amounting to $678,000.
It would have been a non-event as there are, of course, bills to pay. But what raised big and tall red flags were unknown salaries, allowances, and legal bills payable to Board Officers and members of FCT amounting to hundreds of thousands. It was the first time the members saw these expenses. Never was it disclosed in any of its past AGM sessions nor were they reported in any previously approved Financial Statements.
How could $678,000 just suddenly materialize from nowhere? Even worse, BOD told members these payables were retroactive to some ten years back. What an embarrassing, if not an awful situation. Understandably some attendees went ballistic. The optics were horrible. It is loud and clear, and typical in non-profit entities, what the FCT’s Constitution and By-laws states in its Article 6 Section 4 on Remuneration and Reimbursement. It reads ‘Member and Officers of the Board of Directors, Officers of the Executive Council andMembers of the Filipino-Canadian Centre shall receive no remuneration from the organization for acting as such. They shall be reimbursed of reasonable expenses(s) incurred in the performance of duties.’ From that fateful meeting onward, red warning lights have flashed furiously at FCT as a conflict of sorts ensued.
Question period
Rehashed below are events, highlights, and timelines that unfolded after that famous ‘payable bombshell’ dropped on its membership. Note the moves of the FCT Board’s in dealing with its concerned members. Also, take note of the petitioners’ forbearance, determination, and singleness of purpose in seeking to uncover the truth. Date / Event Highlights January 31, 2017 – Asset sale FCT Building @ 595 Parliament sold for $5.9 million September 7, 2017 AGM – Annual General Meeting (AGM): BOD aborted this AGM due to no quorum per the FCT legal counsel present, this despite 63 members in attendance.
- Account payables revealed:
Vicki $ 300,000
RCJ $ 96,000
Felino $ 122,000
CRA $ 122,000
Wendy $ 30,000
S&J Mechanicals $ 8,000
Total: $ 678,000 - Huge numbers on salaries, allowances and legal bills for officers and members. Payables retroactive to 10 years.
- BOD indicated the need to amend the Constitution and Bylaws to allow members
to authorize and approve the payment of salaries, allowances, and legal expense payables with retroactive payments. - A flurry of questions and comments arose. The suggestion to hire an independent auditor came up.
- Media in attendance
- Questions and discussions on payables deferred to the AGM soon-to-be scheduled. Nov 26, 2017 – AGM – AGM scheduled for November 26, 2017, but then
cancelled over the phone. Board claimed no quorum again per their phone survey. - Some media showed up to find an empty meeting hall.
October 5, 2018 -AGM Annual General Meeting (AGM): - Payables topic missing from the AGM agenda
- FCT Accountant did not address the payables questions
- Attendance of 30 adopted as official quorum-
- Members motion to engage a Third Party Independent Auditor approved
- 2016 and 2017 Financial Statements to be subjected to audit before Dec 31, 2018.
- An exclusive Membership Meeting to approve the Audited Financial Statements is to be scheduled.
- Media in attendance December 20, 2018 First Petition Letter to FCT Board –
- Petition letter by 16 concerned members requesting FCT BOD to:
o Hold a Special General Meeting
o Present the Board-approved 2016 and 2017 Financial Statements
o Address questions raised on payables.
o Report on the Status of the Third Party Independent Financial Audit
February 17, 2019 – Second Petition Letter to FCT Board – –
Petition Letter by 26 members following up on the earlier December 20, 2018,
petition for a Third Party Independent Financial Audit.
o Hold a Special General meeting
o Present the Board-approved 2016 and 2017 Financial Statements
o Address questions raised on payables
o Report on the Status of the Third Party Independent Financial Audit
June 6, 2019 – SGM – FCT holds Special General Meeting (SGM) : - Meeting choreographed into a ‘Seminar/Presentation.”
- Meeting rules include – no media, no camera, no recording allowed, no handouts (member to make an appointment @FCT to verify any backup documents). No minutes to be published. Written questions after the presentation, one per member.
- Members sat through an hour-long PowerPoint presentation by a newly minted Board member.
- The narrative offered to justify salaries, benefits, and legal expenses of Officers and members.
- The narrative provided interprets the Constitution and By-laws to allow salary and benefits for individual Officers and members.
- No discussion on outstanding payables.
- No presentation of audited 2016 and 2017 Financial Statements
- No status reporting on the engagement of a third party Independent Audit made.
- No motions. No resolutions. August 26, 2019 – Member Petition to FCT Board
- Petition by 26 concerned members to FCT BOD to engage a Third Party Independent
Financial Audit of FCT for the 2016-2018 calendar years. - It reminded BOD this is a motion already approved in the October 5, 2018, AGM that the BOD should execute. October 2, 2019 – AGM – FCT hired a third party to do a review engagement.
- The third-party reviewer explained their work was not a financial audit but merely
a review of the numbers given to them by FCT BOD to ensure correct posting and
reconciliation. - Their work was underway. The word ‘DRAFT’ clearly labelling each page of the
financial report. Review of 2017 and 2018 Financial Statements is in process. 2016
Financial Statements are yet to be adjusted. - There was no discussion of questions on payables. The reviewers promptly deferred to BOD to address those questions.
- FCT still has no member-approved 2016 Financial Statements
- Outcomes:
o No Third-Party Independent Financial Audit engaged.
o No 2016, 2017 and 2018 member-approved “Final” Financial Statements
o No answers to huge account payables
May/June 2020 Open Letter to FCT Board – Open Letter appeared in recent issues
(May –July) of Atin Ito and Balita newspapers. - Reasons for the importance of the Third Party Independent Audit:
o To assure the members that FCT’s finance is in line with proper and
standard accounting practices.
o To ensure that FCT’s financial operations are complying with its
Constitution and bylaws.
o To confirm that FCT is operating within the spirit and guidelines
governing a non-profit corporation. - Underlying objectives for the Third Party Independent Audit:
o Objectively address lingering questions and effectively put
outstanding concerns to rest.
o Obtain the Auditor’s findings and recommendations and reference them appropriately for financial control improvements, and even for potential constitution and bylaws amendments. - Reach a final closure to outstanding issues relative to its finances and governance.
No resolution
The FCT BOD has been evading the payables issue. The discussion would necessarily lead to basic accounting rules and principles, financial checks and balances, system controls and processes, governance practices, transparency, and more significantly – compliance with the Constitution and bylaws.
It will be three years next month since they surprised the membership with the $678,000 payable list on September 7, 2017.
It took two years and six months to hold a Special General Meeting on this elusive subject. And the Special General Meeting only happened after two formal Petitions from concerned members called for that meeting. And those two Member Petitions had to be done because four earlier meetings – two so-called Information Sessions and two AGMs, failed to address the matter adequately.
The Special General Meeting last June 7, 2019, was even disappointing given how controlled and choreographed the presentation session turned out to be, some likening it to a ‘Lunch and Learn’ course. This Special General Meeting triggered a third formal Member Petition in August 2019 for a Third Party Independent Financial Audit.
Pretend audit Expectations were high in the last AGM of October 2, 2019. FCT was proud to have engaged a third-party reviewer, surprise-surprise NOT an auditor. There is a mile difference between an engagement review and a financial audit. An auditor can express an opinion, a reviewer cannot—another let down on this quest for an independent examination. This travesty and lack of transparency bring us to the Open Letter in May 2020 by concerned members. The community at large has to know their Filipino Community Centre needs a Third Party Independent Financial Audit.
Unfortunately and sad to say, the Open Letter has been ignored by the FCT BOD with no word of acknowledgment. We have a community centre in denial. Bold enough to ask members for approvals they need, but weak and afraid to respond to members for what they ask for – a Third Party Independent Financial Audit. Perhaps FCT is sheltered by the belief or hope that this payable issue will go away, or that their one-sided interpretation and explanations of events will prevail.
Many unanswered questions abound. Only a Third Party Independent Audit can provide unbiased and objective answers. FCT has had many opportunities in the past 3 1⁄2 years to open up and explain. But these opportunities have just gone to waste.
Boards of organizations make mistakes. They admit and own them, and members can forgive and forget. But Boards who deny mistakes and evade admission of mistakes face more trouble and only hasten their demise. Money in the bank is not the real asset of a community centre; integrity is.
What is the truth?
Pertinent to the salaries, allowances, and legal expense payables, are questions among many that an external independent audit can supply answers to:
• Why were members not informed about the earnings of Members of the Board and individual members since the beginning?
• Can the Board approve salaries and allowances of co-Board members and individual members?
• Should the Board not obtain membership approval to amend the bylaws to authorize the compensation of Board members and individual members?
• Regardless of any accounting system employed, should the Board not inform the membership of what the organization owes in terms of salary, allowances, and legal expenses, especially when it solicits the membership’s approval of the financial statements
during AGMs?
• Why did the Board inform its membership of salaries and allowances only after the building got sold? Why not during the prior ten years?
• Are these salary and allowances claimed backed up with proper documentation and timesheets? Do benefits include gas allowances?
• Why did the Board indicate the need to amend the bylaws to authorize the settlement of the salary, allowance and legal expense payables in the AGM’s of 2017 only to go ahead and pay all of them anyway despite having obtained no authorization from the membership?
• Were payments, either partial or full, already made against the $678,000 payables before they were presented to the membership as amounts owing? When were the payments made?
• Related to the $300,000 accounts payable, can the Board list and explain what expenses, in particular, are involved? Do these relate to legal bills payable? If so, who exactly are the plaintiffs and defendants per case so the membership would know if the suits involve FCT as an organization, or are they personal lawsuits?
• During the 2016 AGM, were members not informed ‘that the balance remaining in legal expense payable was around $30,000? If so, how did it balloon to $300,000 right after the sale of the building?
• Should FCT restate past Financial Statements effective the payment of salaries,
allowances, and legal bills to reflect the complete and correct financial picture of FCT?
• If FCT has already been paying salaries, allowances and legal bills in the past, what compelled FCT to seek membership approval for a bylaw amendment (to greenlight the payment of accounts payables) during the 2017 AGM?
• Did FCT ever ask for professional legal and financial advice after the building’s sale to handle the considerable payables in salaries, allowances and legal bills? Were they advised to obtain the necessary membership approval for a bylaw amendment before is-suing any payments? Were they warned that if they proceeded otherwise, BOD could be held personally accountable for the costs?
• Why did it take two and a half years after the Board’s building sale to inform members about the Board approving salaries and allowances for individual Officers and members?
• Who else is receiving salary or allowances other than those named in the payables list?
• Were all members of BOD before the building sale aware of salaries and allowances for individual Board members? What process and controls did FCT follow in the payment of wages and benefits?
The FCT website http://www.filipinocentretoronto.com/financial-state-
ments-2017-2018/ states that the majority of the members approved the 2017 and 2018
Financial Statements on October 2, 2019, AGM.
Can members approve 2017 and 2018 Financial Statements when in draft form – with numbers still not final and with the 2016 Financial Statement still pending for further adjustments? Why a Third-Party Independent Financial Audit? The beauty of an independent audit is the findings and recommendation portion.
It will be devoid of politics and loyalty to personalities or affiliations. Members will get to know without prejudice its areas of strength and weaknesses, gaps to fill, and controls to tighten.
It is but enough of this self-diagnosis by FCT BOD. Let a real doctor, or for this matter, an auditor, tackle the problems. Leaving the disorder untreated only makes things worse and harder to cure, primarily when related to the organization’s culture.
Responsive vs evasive
FCT Board cannot afford to stick its head in the sand for too long. It needs to take responsibility and for starters – be responsive. Besides, transparency begins with responsiveness.
To earn more trust, always keep members informed and with the right information. Only mushrooms of discontent and distrust grow in the dark.
New leadership often makes way for a new culture. As FCT has moved to its new office, it may serve itself and its members well by adopting a new attitude, and a better code of conduct than a fresh coat of paint.
In closing, to execute the member motion of engaging an Independent Third Party Financial Audit is not only compulsory for the FCT Board but the right step towards a fair and impartial closure to this dim episode in its recent history.****
