Cromwell cited many concerns about how these liability reserve funds were governed.
For example, who is responsible for managing the NEF? Good question. Since last December, “it appears to have been in transition,” the interim report said.
“We were initially told that the CFO (Brian Cairo) was involved in running the NEF. Second, Hockey Canada informed us that the Director of Sport Security played an important role in managing the fund. When questioned, (this person) denied having such a role and clarified that he was only involved in the NEF to the extent that insurance had some level of interaction with the Safe Sport initiative.
“After getting those answers, some Hockey Canada executives again advised that the Director of Sport Security was managing the fund, but with the assistance of legal counsel.”
Among the other key takeaways from Cromwell’s interim report is that the NEF – the “National Equity Fund” – is indeed not a slush fund, and that its existence is not just outrageous, but appropriate. .
It is the way the fund has been used, managed, funded – and the lack of transparency of its very existence and operation – that may well be inappropriate.
In this regard, the report confirms exactly what Postmedia first revealed in a special report last month, regarding the existence and purpose of the National Equity Fund. Until September, the fund had been widely and incorrectly labeled a slush fund, the very existence of which was scandalous.
“Establishing reserve funds to deal with the risk of uninsured and underinsured claims is not only wise, but not doing so would be a serious oversight,” the report said, adding that “it is appropriate” to Hockey Canada to “respond” to such potential claims through its National Equity Fund (NEF).
“Many nonprofits are creating reserve funds as a risk management tool, to ensure they have sufficient resources to respond to risks, if and when they materialize,” the report said. “Hockey Canada’s (NEF) must be understood and assessed within this context.
“The main questions in this review are whether the FEN was established properly and whether Hockey Canada properly governs the maintenance and use of the fund.
The report concluded that proper oversight is lacking at Hockey Canada regarding payments from the NEF, as there is “no written policy governing the NEF.”
“During its existence, the purpose of the NEF has changed,” the report said. “What began as a vehicle to fund the self-insurance program has evolved to fund a wide range of safety, wellness and wellness initiatives across Hockey Canada and its members. It also serves as the primary asset to handle underinsured or uninsured claims.
“The NEF and the IRS fund are used for purposes that are not fully disclosed in the financial statements…Hockey Canada used the NEF to raise funds for participants’ annual insurance premiums, pay those premiums and transfer any funds excess reserve to the IRS fund. from time to time. These latter two uses are not reflected in the description of the purpose of the NEF presented in the financial statements.
“Currently, the NEF balance is significantly depleted, while the IRS fund contains a relatively large balance.
“For its part, the IRS Fund is described as a fund intended to ensure that future increases in insurance rates are buffered, when in fact it is also a large reserve fund for unforeseen claims. insured and underinsured. This is (also) not disclosed in Hockey Canada’s financial statements.
Cromwell sent his interim report to Hockey Canada on Monday, just a day before the other directors and CEO/Chairman Smith announced their departure.
Chance? Probably not.
“My final independent governance review is scheduled for the end of this month,” Cromwell wrote in a cover letter to the board and then-CEO Smith.
“However, I have come to some conclusions…and I believe it is in Hockey Canada’s best interest to share them with you now…due to the current crisis which is getting worse every day. In my view, urgent and decisive action is needed to address the governance issues related to this crisis.
“In my opinion, Hockey Canada needs significant changes to its board composition and recruiting processes which I will outline in my final report due at the end of this month… The need for change (is) urgent.
“For this reason, I recommend that Hockey Canada, within the current election cycle and with the assistance of the Nominating Committee, put in place a Board and Board Chair who agree to serve for one year only. The idea is that these new directors will serve as a transition board.
One of the four main jobs of an interim board, Cromwell suggested, is to address “many public concerns about the organization’s leadership team.” Another main task is to “repair fractured relationships with stakeholders”.
For its part, the organization, in a statement on Thursday, said that “as part of our commitment to transparency, Hockey Canada is releasing (Cromwell’s) interim report in full. The report provides a detailed analysis and interim recommendations regarding (NEF and) Hockey Canada regulations regarding the constitution and operation of the Board of Directors.