Reading the financial statements for Pinehouse Business North Limited Partnership (PBNLP), the operational municipal development corporation that Pinehouse locals know as “PBN” lost $4.9 million dollars in 2018, even though its actual revenue had increased by over $2 million that same year. It is a very worrisome trend when one realizes that, if this deficit continues to grow so rapidly, soon it will be the financial position of the Village itself that could suffer.
According to the 2018 audited financial statements for PBN Limited Partnership (which was obtained through access to information, but is still heavily redacted), the operating loss was $3.6 million (rounded); an additional $1.3 million in cash reserves was drawn down (pages 3-4). This is the same amount reflected in the Northern Village of Pinehouse 2018 financial statement (page 10).
The questions have to be asked: Have PBN’s financial affairs turned around in 2019, or did they continue to slide? The corporation is entirely owned by the Village (i.e. the people) of Pinehouse. The loss of $4.9 million was more than half of the Village’s equity in PBN. Was there anything left of its investment by the end of last year? The 2019 annual financial statements for PBNLP and the Village would tell us; they should have been released to the public on September 1. They need to be shared NOW before the October 7 village election.
The Grant Thornton forensic audit for 2018, done as part of the Vancise Inquiry, keyed in on this serious concern when they raised questions about the long-term viability of PBN Limited Partnership. On pages 40-41 of their audit report, they stated:
. . . Potential areas for concern would include but may not be limited to:
The ability of PBNLP to, in the normal course of its operations, maintain its operations and meet its liabilities from revenues received from sources outside of the government reporting entity [i.e. the Village administration]. Some potential challenges in achieving this characteristic include:
a. Continuing losses from operations in both 2018 and 2017 which may demonstrate that the Partnership cannot maintain operations without assistance from other entities within the government reporting entity; and
b. There is significant reliance on “Other Income” in order to reduce operating losses which appears to be income from various joint ventures which have been consolidated within the accounts of PBNLP using the modified equity method.
The auditors indicated (page 6) that they had a hard time getting a handle on the exact financial status of some of the joint ventures in which PBNLP had been involved (see Appendix A to the Grant Thornton report), in part because its chief financial officer AJ Felix was unable to lay his hands on the pertinent documents within a reasonable amount of time.
Yet, PBN’s management seems not to be overly concerned. While, board travel and remuneration remained quite modest, total management salary and benefits amounted to $485,583, which includes Mayor Mike Natomagan’s contract as chairman of the board amounting to $86,500 (over and above his mayor’s salary of over $61,000) that year. Grant Thornton pointed out (page 15) that the mayor’s contract with PBN in fact violates Section 128 of the Northern Municipalities Act.
Then there is the strange composition of PBN Development Inc. and PBNLP’s board of directors. The deputy mayor, Conrad Misponas, is also on the board, as are several outside representatives, including PBNLP chief financial officer (a contract employee) AJ Felix, a representative of Kineepik Metis Local Inc. Chris Hansen (the mayor and deputy mayor are both also on Kineepik’s board of directors), and the mayor’s half-brother Joey McCallum. Mr. McCallum pointed out his obvious conflict-of-interest because of family ties at PBNLP’s annual shareholders meeting in December 2019, but those concerns were waived and he was reappointed to the board.
Another major concern is the complete lack of transparency and accountability on the part of the Village administration and PBN’s management team. Until recently the Village office flatly refused any access to any information from applicants under the Local Authority Freedom of Information and Protection of Privacy Act (LA FOIP). And even now, the financial status of the village-owned development corporation is carefully redacted before releasing any documents to the public. We are glad to acknowledge the role of Saskatchewan’s Information and Privacy Commissioner in this partial change of attitude.
This is quite a contrast to the policy on openness and accountability laid out in the Pinehouse Business Charter, approved by Village Council in 2010. In that visionary document, it says (page 6),
Pinehouse recognizes that despite the separation of its economic development from its other functions as envisioned by this Business Charter, it remains accountable to its citizens. Accordingly, it is the expectation that the Corporation shall report to, and shall be accountable to, the citizens of Pinehouse.
It goes on to explain in great detail how Pinehouse Business North and the Village administration will demonstrate that accountability on a regular and frequent basis. Sadly, the Pinehouse Business Charter remains largely neglected to this day. We can only hope a future Village Council will take up its mission statement in full vigour.
A history of the corporate restructuring of PBN Development Inc. and PBN Limited Partnership since 2012 can be found here.
See also: “Media release: Lack of due process in Pinehouse village admin leads to precarious financials” ADDED: APR 21, 2020