Governance Update: Follow up from RCA Annual Meeting
Dear Members,
On September 19th, Rowing Canada Aviron (RCA) held its Annual Meeting virtually where one of the main topics was the presentation of the Audited Financial Statements for the previous fiscal year (2023-2024). Several RCA members raised questions before or during the Annual Meeting related to the Audited Financial Statements. The questions primarily focused on the National Training Centre (NTC) and the transactions related to the acquisition of the land (the Land) where permanent facilities will be built as well as the relationship between RCA and the Quamichan Rowing Foundation (QRF).
RCA committed to providing the membership with further clarification.
Background
The decision to locate the NTC and build the NTC at Quamichan Lake in North Cowichan, BC, was made several years ago, following an extensive review and Request for Proposal (RFP) process. This decision was communicated to the membership in January 2019.
RCA acquired the right to purchase the Land from the Duncan Community Lodge Society (DCLS), in October 2022. The closing of this transaction was scheduled for March 31, 2024. With RCA not able to incur debt under its current by-laws, the only course available to RCA would be to allow another party to acquire the Land, and then lease it from that party.
Three former Directors of RCA, Tom Hawker, John Lehnen and Mike Walker, took the initiative to support RCA by creating a foundation to purchase the land and lease it to RCA to secure the Land for RCA’s programs. As a result, they formed the QRF and subsequently acquired the Land from DCSL. To protect RCA’s interest in the Land, the QRF agreed to RCA retaining an exclusive option to purchase the Land from the QRF.
What is the purpose of the Quamichan Rowing Foundation and who are its representatives?
The QRF is a not-for-profit corporation formed under the Canada Not-for-profit Corporations Act on February 23, 2024. Its purpose is to support the Canadian Amateur Rowing Association (“Rowing Canada Aviron”) by receiving and maintaining a fund or funds and applying all or part of the principal and income therefrom, from time to time, to Rowing Canada Aviron, as well as providing and maintaining a facility (or facilities) to promote the efficiency and effectiveness of Rowing Canada Aviron’s programs. The QRF’s sole interest is in supporting RCA programs.
The QRF was created by Tom Hawker, John Lehnen, and Mike Walker who are also its three directors. They are also former directors of RCA.
Was the transaction between RCA and the QRF a “related party transaction[1] ” which would have required disclosure under accounting rules and why was it not disclosed?
RCA’s legal counsel and Auditor confirmed that RCA and the QRF were not “related parties[2]”.
Was there a Conflict of Interest created as a result of these transactions?
Some questions were raised as to whether there was a conflict of interest in the negotiations of the RCA and the QRF transaction and how RCA protected the interests of RCA.
Concerning the various individuals involved both at RCA and at the QRF, these individuals were not presently in the circumstances by which they, “could be influenced in a decision by personal, family, financial, business or other interests which override the best interests of RCA” as a conflict of interest is defined in the RCA Conflict of Interest Policy.
In addition, all stages of negotiations of the arrangements between RCA and the QRF were overseen by the Board of Directors to ensure that the transaction protected the interests of RCA.
What are the Lease Commitments referred to in Note 11 of the RCA Financial Statements presented at the Annual Meeting?
There are three leases as follows:
- the Land which RCA leases from the QRF;
- the Training Facility which RCA leases from the Duncan Community Lodge; and
- the Fitness Facility which RCA leases from a Business Park.
Lease (1) with the QRF is the one referred to above and it is a pass-through of the costs that the QRF has incurred and is incurring to acquire the Land and lease it to RCA.
One member’s question about this lease was why there were no costs for this lease included in the Audited Statements for the year ended March 31, 2024. Note 11 of the Statements does not show any such costs for the year ending March 31, 2024, because there were no costs under the Lease since the terms of the Lease began in April 2024. Also, Note 11 only refers to projected obligations as of the current financial year ending March 2025 and going forward under all three leases.
Lease (2) is for part of the Lodge building located on land owned by DCLS which it did not sell to the QRF and retained for itself when the land was split into two lots and one was sold to the QRF. This building continues to serve as a temporary on-site training facility for our athletes until such time permanent facilities are established.
Lease (3) is for the off-site, indoor training facility for our athletes, which includes a gymnasium, washrooms and changing rooms, and other meeting and athlete-support facilities. This lease will eventually be terminated when equivalent facilities are available elsewhere.
Moving Forward
We continue to invite questions from members of our rowing community. As this project progresses, we aim to continue addressing inquiries related to the National Training Centre. In the coming months, more information about the progress and plans of the National Training Centre project will be shared with the membership.
Sincerely,
The RCA Board of Directors
[1] A “Related party transaction” is a transfer of economic resources or obligations between related parties, or the provision of services by one party to a related party, regardless of whether any consideration is exchanged. The parties to the transaction are related prior to the transaction. When the relationship arises as a result of the transaction, the transaction is not one between related parties. (Source: CPA Handbook, section 4460)
[2] Under the relevant accounting rules “Related parties” exist when one party has the ability to exercise, directly or indirectly, control, joint control or significant influence over the other. Two or more parties are related when they are subject to common control, joint control or common significant influence. Two not-for-profit organizations are related parties if one has an economic interest in the other. Related parties also include management and immediate family members. .(Source: CPA Handbook, section 4460)