Catholic Church charity set up to pay residential school survivors spent $6.46-million on expenses

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A Catholic Church organization formed to compensate residential school survivors spent more than a quarter of its funds on expenses, and returned nearly $600,000 to church organizations after a 2015 court settlement, financial records obtained by The Globe and Mail reveal.

The documents detail the finances of the Corporation of Catholic Entities Party to the Indian Residential Schools Settlement (CCEPIRSS), a special charity created to pay the church’s part of the residential schools settlement, a complex legal arrangement involving the federal government, religious institutions and survivors that was reached in 2006.

The audited financial statements, which cover the fiscal years ended 2009 to 2016, were acquired after a request to the Canada Revenue Agency. They were reviewed by The Globe and Charity Intelligence Canada, a charity that provides financial analysis and transparency reporting on Canada’s charitable sector.

Those records show the Catholic entities that were party to the settlement ultimately contributed $24.2-million. From that amount, the corporation deducted $6.46-million for expenses over eight years. Healing initiatives for residential school survivors got $18.6-million.

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The percentage of funds spent on expenses surprised Mike DeGagné, former executive director of the Aboriginal Healing Foundation, a now-defunct Indigenous-led charity that received most of the money from the Catholic group.

“It’s preposterous,” he said.

“It’s not like they had to administer thousands of applications or sit through difficult policy discussions. They were to take in money from Catholic entities and they were to redistribute it.”

Mr. DeGagné said he was frustrated to learn that some funds were eventually returned to Catholic organizations, given that the Catholic Church did not meet its settlement obligations to Indigenous communities.

That money, he said, should have gone to survivors.

Archbishop Gérard Pettipas of the Grouard-McLennan archdiocese in Alberta, who was chairman of the Catholic entities group, declined an interview, but responded to e-mailed questions.

“There were specific cases where CCEPIRSS faced financial shortfalls and made calls to Catholic entities to meet its commitments to the Aboriginal Healing [Foundation],” Archbishop Pettipas said. “These calls were clear that should more funds be raised than were needed, any surplus funds would be returned on a pro rata basis. In every case, the refund provided would have been significantly less than the initial contribution provided.”

He said that surplus was “above and beyond” the church’s financial commitments.

“No funds meant for survivors were returned to Catholic entities,” he added.

Between the late 19th century and 1996, more than 150,000 First Nations, Métis and Inuit children were taken from their homes and sent to residential schools, institutions designed to sever their connections to their languages, traditions and culture. Thousands died or never returned home. The Truth and Reconciliation Commission, a national inquiry into the legacy of the residential schools, said the policy amounted to cultural genocide.

Most residential schools were funded by the federal government and operated by religious organizations. The Catholic Church ran about 60 per cent of them; others were run by the United Church, Anglicans and Presbyterians.

This month, a Globe investigation found the Catholic Church in Canada had collected a combined $886-million in donations in 2019, making it the largest charity in Canada, and had $4.1-billion in net assets. Indigenous leaders have since called for a review of the 2006 settlement agreement.

Under that agreement, the Catholic Church was required to make several forms of restitution, including a $29-million cash payment, at least 80 per cent of which was to go to the Aboriginal Healing Foundation. (The church had a separate commitment in the settlement to collect $25-million in a national fundraising campaign from parishioners, but in the end raised just $3.7-million.)

More than 50 Catholic dioceses, religious orders and congregations that were part of the settlement agreed to pay the $29-million negotiated for healing. According to the financial statements, the federal government reduced that by $8.34-million owing to previous settlements, so church organizations were to provide CCEPIRSS with $20.66-million for the Aboriginal Healing Foundation and other healing initiatives. The foundation’s 80 per cent share would be just more than $16.5-million.

The Catholic entities put in more than was needed to meet the healing commitment – but the corporation racked up millions in expenses.

Over eight years between April 1, 2009, and March 31, 2016, the financial statements show $6.46-million of expenses: $3.74-million on professional fees, $1.33-million on fundraising expenses, $864,999 on board expenses, $306,332 on administrative expenses, and $218,498 on salaries, benefits and consultants. The statements show the corporation received about $860,000 from other outside entities to help with expenses, an amount it put toward the healing payments.

In all, the expenses amount to nearly 27 per cent of the $24.2 million in revenue from Catholic entities during the same period.

Kate Bahen, managing director of Charity Intelligence, said she sees the structure and purpose of CCEPIRSS as similar to the executor of a will or trust – and that expenses should be closer to 5 per cent of revenue. “In this situation, the overhead costs just don’t look reasonable,” she said.

By comparison, Charity Intelligence calculated the Archdiocese of Toronto’s overhead at 7.6 per cent in 2020.

When asked about the percentage of funds for expenses, Archbishop Pettipas told The Globe that “reasonable administrative costs were anticipated and expressly permitted.”

The audited financial statements obtained by The Globe provide further context for a 2014 legal dispute between the Catholic entities and the federal government.

In the Saskatchewan court case, federal lawyers alleged the corporation of Catholic entities improperly paid administrative and legal fees with funds meant for the Aboriginal Healing Foundation, leading to a $1.6-million shortfall for the Indigenous organization.

The Catholic Church offered a deal in which it would pay $1-million, court records show. After negotiations, the government agreed to a $1.2-million final payment – $400,000 less than what was owed. The judge in that case eventually released the Catholic entities from their remaining settlement obligations, including the balance of the commitment to collect $25-million in the national fundraising campaign.

In April, 2016 – nine months after the case ended – the corporation returned $586,382 to Catholic entities, according to a note in its 2016 audited financial statements. The organization was wound up shortly thereafter.

“It’s sad to know that there was actually money left over while the church itself cried poor and didn’t pay its obligations,” Mr. DeGagné said. “And that at the end of the day, they returned the money.”

During the Saskatchewan case, federal lawyers said the corporation of Catholic entities’ expenses included $2.7-million in legal and consulting fees. They further alleged that about 80 per cent of those fees went to the firms of two lawyers – Rod Donlevy and Pierre Baribeau – who represented CCEPIRSS in the court case with the federal government and also sat on its board.

That information was not disclosed in the audited financial statements. (Mr. Donlevy and Mr. Baribeau have since died.)

Ms. Bahen of Charity Intelligence said accountants are required to disclose any payments to related parties, including directors, in audited financial statements. This would include payments from the corporation to the law firm of a director who is doing legal work, even if they weren’t collecting any directors’ fees.

There was a failure to disclose in any year how much money was paid to the directors “who also happened to be the lawyers,” she said. “That’s a conflict of interest.”

When asked about why the financial statements didn’t include this disclosure, Lionel Nolet, the entities group’s auditor at the time, referred questions to the Archbishop.

Archbishop Pettipas said the Catholic corporation “required support from law firms and auditors” to do its work, and that “in some cases, directors, who were volunteers, also worked for law firms” that provided services to organization.

He also said that none of the directors were compensated for their work on the board, and were reimbursed only for out-of-pocket expenses tied to their director positions.

Mr. DeGagné, who has run charities for decades, called the financial statements’ figures “a shock,” adding that the church could have done more to help survivors.

“I’m disappointed,” he said, “and really, really saddened.”

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