- What is insolvency?
- Why did the Tatamagouche Centre Board decide to layoff staff?
- What is a layoff notice?
- Is the Tatamagouche Centre closing permanently?
- What will happen with programs and events over the winter?
- Will you keep a “minimal/skeleton crew” over the next few months?
- How much money does the Centre owe?
- How did we get into this situation?
- What have you been doing since you learned about the insolvency?
- What is happening now?
- What is a “Specified Procedures Review”?
- What will happen at the community meeting?
- How can I help?
What is insolvency?
Why did the Tatamagouche Centre Board decide to lay off staff?
The 6 month cash flow analysis conducted by an outside Financial Analyst showed that there was not enough projected revenue for the Centre to continue to be able to pay staff as well as meet other financial obligations. Once the Board learned that the Centre could not reasonably expect to meet its expenses, including payroll, we had to issue lay off notices so that we did not get into a situation where staff do work for which they are not paid and we cannot pay our suppliers, creditors, and taxes.
What is a layoff notice?
Under the Labour Standards Code, employers must tell an employee in writing that they will fire or suspend or lay off that employee. This is called giving notice. “Notice” is the letter telling the employee that they will no longer work for the employer after a given date. It is also the time between when the employee receives the letter and the date the letter says is the employee’s last day of work.
Is the Tatamagouche Centre closing permanently?
We are thinking of this as a time of radical transformation. The Centre as we know it has already changed as a result of our situation. We now need to re-invent ourselves in light of the current realities. There is a lot of uncertainty about what this will look like. No one has all the answers, and together we must figure out a way forward.
We believe Tatamagouche Centre is a special place. The buildings, the land, the people who work here, and the programs we offer have a profound impact on individuals and communities. To maintain and revive this special place, over the next months and years, we are going to have to work very hard together to re-invent ourselves on a footing that is truly sustainable.
What will happen with programs and events over the winter?
At this point, we are still trying to figure out the best way forward. We are planning to run our usual programs until the end September, as well as those for which we have already received funding in October and November. We are also committed to hosted events throughout the fall.
We have not yet worked out how best to staff these events and make sure the Centre’s buildings remain in good condition over the fall and winter. This will depend on the revenue we have available and commitments from partners like the United Church and our community.
While we are still uncertain about what will happen over the fall and winter, we are very clear that we will not ask staff to work for free, or for lower wages, or do the same amount of work with fewer resources. If we recall some staff to help run programs, and events, and operations, we will follow the due process outlined in the NS Labour Standards Code.
Will you keep a “minimal/ skeleton crew” over the next few months?
How much money does the Centre owe?
Our current debt is in the range of $275,000 to $300,000. The debt falls into three categories: our line of credit, deferred revenue and restricted funds.
The Centre’s debt falls into 3 main categories. The first is a line of credit (LOC) with ScotiaBank which is secured against the Stevens House property. The LOC is for a maximum of $150,000 and because we are spending more than we earn, the balance has continued to rise until it is now at close to its maximum most of the time. Therefore, instead of having money in the bank, all the money we receive goes directly towards reducing the balance on the line of credit and every time we write a cheque the balance increases. Every month, we pay interest on our LOC. If we cannot keep the LOC open and pay interest on our debt, the bank is within its rights to take action to freeze our line of credit or even repossess the property with which it is secured.
A second form of debt is “deferred revenue,” funds we receive that are designated for specific projects or programs. Even though these funds are used to pay down our line of credit like other money we receive, their purpose is not to pay operation costs. Until we deliver the programs for which they are intended, these funds are a liability rather than a source of revenue because we either need to use them for delivering the specified programs or give the money back. Because cash flow was so bad this year, money intended for bursaries and program costs have been used for operations. We are now in a situation where we have insufficient funds but are still obligated to deliver somewhere between $75,000 and $90,000 of programs.
Lastly, the Centre holds what are called “restricted funds.” Some, like our To Seek Justice Fund (TSJF) and Anniversary Funds are required to be held separately in our investment accounts. Others, like the money we hold for Breaking the Silence (BTS) have been held with our own general funds (which as explained above, are non-existent), At this time, the investment accounts are not sufficient to cover the TSJF and Anniversary Fund balances and BTS funds, along with deferred revenue, have been used to pay down the LOC. Legally, we are not allowed to use restricted funds to pay expenses other than those specified by the donors. Doing so puts our Charitable status at risk, and as a board we have to make sure these funds are accounted for and repaid.
How did we get into this situation?
Board and staff have been extremely concerned with the financial situation of the Centre for the last few years. We all knew we needed to earn more money to deal with our growing debt load. Over the last few years, despite everyone’s best efforts, we have not made enough to cover our costs and so every day we are going further into debt.
Over the last 12 months Staff and board took the following actions:
- starting a Financial sustainability committee
- a number of new fundraisers
- developing a hosting business plan
- as well as many initiatives like lavender to bring in money and cut costs
Staff and board also proposed a balanced budget for 2015, where while we might not make enough money to repay our debt, we hoped we could break even. We still think that given the time and proper analysis, these ideas have potential for our long-term future sustainability.
However, in April 2015, we received the results of the 2014 audit and realized that we had increased our debt load significantly. The auditor’s letter indicated that we are not a “going concern”. In terms of the 2015 year, we could already see that not enough money was coming in to support operations, so our line of credit was hovering at the edge. We knew that every two weeks, we were struggling and juggling to make pay roll.
By May 2015, Board and ELT started discussing cost-cutting measures to try to keep a balanced budget. At the May 2015 Board meeting, the Board directed the ELT to work with staff to figure out how to reduce costs by at least $50,000 to ensure we did not go further into debt.
We also passed a motion to ask Scotiabank to increase our line of credit (this required Maritime Conference of the United Church permission) and to request some funds from United Church General Council to help us in this difficult time. At the end of May, we learned that the bank refused to increase our line of credit.
This refusal plunged us into crisis mode as we understood our debt load was directly impacting our ability to operate and meet our commitments to donors, staff, and community.
Board and ELT knew we needed to make difficult decisions to cut expenses. We also knew we needed to ask for help from our community. In order to do either, we felt we really needed a better understanding of our current financial situation. We could not in good conscience launch a major “save the Centre” campaign without clarity about what we owe and how much we need.
At the June 21st AGM we told our community of our difficulties. We spoke of our hope for the future, and our commitment to getting solid financial information before we launched a wide scale appeal. We did formally pass a motion about the Big 6-0 campaign, as we know no matter what we do we need extra revenue to meet our operational goals. We also alerted the community to the fact that we as a Board saw no way forward that did not involve lay-offs and restructuring.
With funding from Maritime Conference of the United Church, we hired Angus Bonneyman to do a cash flow analysis. The results were delivered to the Board on July 8th. This work confirmed what we suspected: we are insolvent. We cannot meet our obligations in a timely fashion and our projection for the next few months is that even if everything goes ahead and we do a lot of fundraising it will still not be enough, and in fact by the end of the year our deficit would reach $380,000.
An insolvent organization has many obligations, including the Board taking direct responsibility for the finances. It also involves being legally responsible (and as board members personally liable) for ensuring that our debts are paid in a timely fashion.
What have you been doing since you learned abut the insolvency?
We received the news of our insolvency on July 8th, when we had a board call to discuss the financial findings with Angus Bonneyman, who was hired to do a cash flow analysis and projection for the next months. We met with ELT to discuss the news on July 11th. Since then, we have taken the following actions:
- Sought legal advice (re: HR issues, and debt repayment)
- Reached out to Maritime Conference of the United Church for support and financial assistance
- Received an extraordinary grant of $60,000 from General Council of the United Church
- Have had discussions with BTS (about the money we owe them)
- Assumed control over books and the general ledger and set up system for ensuring pay roll is met and bills are paid
- Talked with the Bank (advised them of our situation, completed the process to change signing authorities)
- Held a July 17th staff meeting to answer what questions we could, and have been sending bi-weekly updates to staff
- Revised the messaging for the Big 6.0, and other fundraising material, the website, and PAR donors,
- Celebrated a generous offer to match funds raised in the Big 6.0 campaign.
- Communicated with donors, partners, facilitators, and responded to community messages
- Provided the July 21st update to community, along with subsequent messages about community meeting
- Revised website text and started a Centre blog to create a space for community updates
- Formed a planning committee for August 29th Community meeting, and worked with committee to organize and publicize the event
- Accepted Maritime Conference of the United Church offer to provide bookkeeping services, made arrangements to pay for a Specified Procedures Review to start with clean slate,
- Arranged for the valuation of our properties
- Delivered lay-off notices and had one-on-one meetings with staff
What is happening now?
A Specified Procedures Review has been underway for the last few weeks (finishing the end of August). We are conducting the Specified Procedures Review so that we have a full and accurate picture of what we have and what we owe as a basis for making plans. A Specified Procedures Review will also allow us to transfer bookkeeping responsibilities to Maritime Conference of the United Church on a “fresh slate”.
What is a Specified Procedures Review?
An Specified Procedures Review is the systematic review of an organization’s books, and accounts in order to determine that they present a true and accurate picture of the organization’s finances. An Specified Procedures Review is usually conducted by an independent third party. Like most non-profits, the Centre is required to arrange for an annual audit of the books at the end of the fiscal year, so that the members of the society can get a full picture of its financial activities. This year, since we need accurate information to make good decisions, we decided to invest in a Specified Procedures Review (similar to an audit) before handing the bookkeeping over to Maritime Conference of the United Church.
What will happen at the community meeting?
We did not get into this situation overnight and we don’t’ expect we will resolve everything in one meeting. During the community meeting, a facilitator will create a space for people to discuss the situation at the Centre and how to go forward. There will be time to present information, and the actions taken to date, as well as time to share emotions and reactions. We hope the bulk of the meeting will be people coming together to discuss their commitment and engagement in helping to support the Centre during this difficult time.
Update: A record of the community meeting can be found HERE (coming soon)
How can I help?
We welcome your help and support. We know the work ahead of us will require commitment and effort from those who care about the Centre. Please contact us if you are interested in volunteering you skills and time to help.
We also really need your financial support; any donation or contribution can help us meet our obligations and reduce our debt load. Click HERE to donate.