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Thursday, September 01, 2016

The Canadian Museum for Human Rights enters death spiral, fueled by debt

Can supporters of The Canadian Museum for Human Rights handle the truth? 

* $80 million in debt with no hope of paying it off
* begging the federal government to raise its $21.7 million annual allowance by at least 50 percent  to buy more time
a report that seems to indicate the museum's fundraising arm can't collect $24 million, or almost one in four of the $151 million dollars the Friends of the CMHR boasts it has raised.

Last week the CMHR announced what should have been good news ---it settled its tax bill with the City of Winnipeg.  The museum owed $2.7 million  for this year's property taxes, much much less than the $5-to-$8 million they expected their taxes to be.

The federal government, which is ultimately on the hook for what's called "payments in lieu of taxes" for federal institutions like museums, paid the $2.7 million plus arrears of $6.7 million. It then put the total - $9.4M - on the CMHR's tab.

The museum is already $70 million in debt for the emergency funding they needed to open in 2014, two years late. The CMHR was flat broke and didn't have enough money to finish building the facility and paying for exhibits. 

The federal government "advanced" $35 million (interest free) with the alleged expectation that the government could get the money back by eventually reducing the annual funding it gives to the museum until they were even. 

Everybody knows that's camouflage and will never happen but everyone is pretending that's a real plan.

The museum also needed a loan of $35 million to meet its costs. The loan, from sources never identified, went to the Friends of the CMHR which doled it out to the museum while managing to keep secret the donors and terms.  But a loan carries interest cost.

Add the $9.4 million plus $70 million plus interest and you're touching $80 million in the red.  And that's not counting $10 million in operating funds  that the federal government let the museum spend on construction instead. It's never been made clear whether that $10 million has to be repaid or if the federal government just boosted their "contribution" to the cost of the museum by that amount.

The CMHR says it has squirreled away a few million dollars to pay part of the city tax tab. As for the rest, well...

The museum wants---needs---the federal government to swallow most of it. The deal is for the CMHR to have its annual funding reduced starting in 2018 to pay off the federal "advance."  But given that the CMHR is spending every nickel of the $21.7 million its receiving each year, that is impossible.  In fact, the museum wants more money, not less each and every year in the future.

Apart from getting the federal government to forgive the $35 million advance in $7 million increments, the museum wants  the city taxes paid, starting at $3 million  (including frontage fee) and rising per year. Oh, and it needs $3 million or so to replace the entire computer system, which has a useful life expectancy of only three years that's up, uh, next year.

Anyone who still thinks the Friends of the CMHR is supposed to cover these expenses by its fundraising is in for a sick surprise.

Charity Intelligence Canada is a charity watchdog. Its latest report on the Friends of the CMHR has some unsettling details.  

The Friends, which is a registered charity, spends 43 percent of its revenues on administrative costs and 18 percent of donations on fundraising costs.  Given that "revenues" is made up of donations plus interest, which last year was negative one thousand dollars, in reality 61 percent of the money donated to Friends goes to overhead.

And then there's this paragraph in the Ci report:
Note: Ci Charity Intelligence has used the restated 2014 financial statements in the charity‚Äôs F2015 audited financial statements. Ci has adjusted amortization and allowance for doubtful pledges receivable and gifts to the museum affecting expenses by ($4m) in F2016, by ($18.4m) in F2015, and by ($14.1m) in F2014. 
Given that the paragraph is written in a foreign language, auditorese, its hard to say what it really means.

Does it mean the museum has been counting money on its books that can't be collected?

There's been a $24 million writedown involving "doubtful pledges receivable" but it that just an accounting adjustment or a complete breakdown of fundraising?

Nevertheless, it does suggest why the CMHR's corporate reports for the past three years running have not been made public, and why no 2015-2016 annual report is MIA.

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