Prominent charity serving Black business community paid $1.5M to 2 board members’ companies, records show
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Some members of a prominent charity for the Canadian Black business community are calling for its board of directors to resign and for a third-party audit after discovering the non-profit paid two former board members’ companies at least $1.5 million for services while they were on the board or CEO of the charity.
CBC Toronto obtained dozens of pages of internal records concerning the Black Business and Professional Association (BBPA) — including invoices and transaction records — which show the non-profit did not disclose more than $800,000 of that spending as related party transactions to the Canada Revenue Agency (CRA).
Any payments made to directors, staff or others who are not at arm’s length from a charity (other than salary) are considered related party transactions, and must be disclosed to an auditor and also the CRA, according to a charity watchdog.
“We demand an immediate independent audit of the awarding and use of government, sponsorship, and all other funds,” said Chandran Fernando, one of the BBPA members raising concerns, in a statement.
“The BBPA was established to empower Black entrepreneurs and professionals, and it must return to that vital mission through principled leadership and sound governance.”
Fernando and a group of other members hired a lawyer to send their demands to the current board of directors in March. The group’s lawyer, Kate Genest, sent a second letter last month alleging the BBPA submitted inaccurate financial filings to the CRA.
Denham Jolly founded the BBPA more than 40 years ago. He told CBC Toronto in a statement he supports the call for an independent audit and for the current board to step down.
“It is a critical first step to restoring transparency and accountability within the BBPA,” said Jolly.
“Moving forward with good governance, leadership and service to the Black community a special election must happen immediately following the above process.”
BBPA commits to independent review
In response to questions from CBC Toronto last week, a lawyer for the BBPA said the board has recently become aware of these allegations and is taking them seriously.
“[The board] has launched an independent review, which is aligned with the BBPA’s commitment to transparency, accountability and good governance,” said lawyer Mariam Moktar in an emailed letter on behalf of her client.
“The independent review will be completed by a forensic auditor and an independent third-party firm with expertise in charity and non-profit law and governance.”
In a second statement to CBC Toronto last Thursday, the BBPA board said board chair Ross Cadastre and director Rustum Southwell are temporarily stepping down while the external review and forensic audit take place to prevent any potential conflict of interest. The statement said both directors were on the board “at the time in question.” In the meantime, the statement said the board will be led by an interim chair.
CBC Toronto previously reported on how the group’s allegations of financial mismanagement led the daughter of renowned Canadian sprinter Harry Jerome to demand the BBPA stop using her father’s name for its annual awards until the charity was cleared of the allegations.
More than $1M to former CEO’s company
The transactions flagged by the group of BBPA members involve payments to former BBPA president, and then CEO, Nadine Spencer’s marketing company Brand EQ, and to former board member Roderick Brereton’s company Urban Rez Solutions.
The companies were paid for services marketing and administrating charity programs and events like the Black African and Caribbean Entrepreneurship Leadership Training Program and the BBPA’s annual Harry Jerome Awards celebrating Black excellence.
Spencer served as president of the BBPA from October 2017 until November 2021, when she was named the charity’s first CEO. She remained CEO until she left the non-profit at the end of November 2023. Over the course of those six years, internal records show Spencer’s company was paid more than $1.1 million (including tax) by the BBPA for its services. Almost all of the payments were made from May 2020 onward.
Spencer was also paid $23,541.66 a month (including tax) to a numbered company in her name for her work as CEO of the BBPA for two years, according to invoices and transaction records. All together that amounts to more than $250,000 a year, during her two years as CEO.
Since leaving the charity, Spencer has returned to her role as CEO of BrandEQ and currently sits on the Toronto Police Services Board.
In a written statement to CBC Toronto, Spencer said she’s proud of the work she did at the BBPA to lift up others in her community and “any suggestion I did so to benefit myself is false, and frankly, absurd.”
Former CEO says ‘strict conflict wall’ for decisions about her company
“I was a volunteer and financial supporter of the BBPA, long before I received even a cent for my role as CEO. This included providing more than two years of pro-bono marketing support, both personally, and through my company,” said Spencer in her statement.
“Throughout my time with the BBPA, I always maintained the highest levels of integrity and transparency. From day one, I put in place a strict conflict wall between me and any decision involving my company, because I knew it was the right thing to do. In fact, I even went a step further, and recused myself from all marketing decisions.”
While Spencer said she was not involved in any decisions involving BrandEQ contracts while she was the BBPA, she said she “hopes those involved were ensuring fairness and equal opportunity.”
In a March 21 email to BBPA membership addressing concerns about these payments, then board chair Ross Cadastre wrote that the charity faced financial difficulties from 2017 to 2019, and Spencer provided “vital pro-bono marketing services.”
“With increased funding to Black agencies beginning in 2020, Ms. Spencer and BrandEQ played key roles in driving program development, implementation, and reporting,” wrote Cadastre.
“Ms. Spencer and BrandEQ were compensated at fair market value for their program related contributions and the immense amount of marketing work product delivered.”
Charity revenue jumps by millions
As Cadastre referenced in his email to members, the BBPA’s annual revenue from donations rose dramatically in the wake of the 2020 murder of George Floyd by a police officer and the global Black Lives Matter protests sparked by his death.
Before its 2021 charity information return, the non-profit had averaged roughly $572,000 in revenue a year since 2003, according to its filings. But in 2021, its total revenue jumped to nearly $3.3 million, then more than $3.5 million in 2022 and $4.6 million in 2023. The majority of that increase came from federal, provincial and municipal government grants and corporate donations and sponsorships.
In the email to members, Cadastre writes that the board engaged BrandEQ without a request for proposal (RFP) process due to urgent needs at the time. The email also says that Spencer recused herself from decisions concerning her own compensation, that of Brand EQ, and she told the board she had placed BrandEQ in a blind trust managed by others when she assumed the role of CEO of the BBPA.
Brereton’s company Urban Rez Solutions was paid roughly $392,000 by the BBPA for its services while he served on the board of directors between 2017 and 2022, according to transaction records.
In a statement, Brereton confirmed to CBC Toronto that all payments made to his company were approved by the BBPA board of directors and said compliance was followed.
He also pointed out that directors of a charitable corporation can receive “reasonable remuneration” for any services to the corporation they perform in any other capacity, as long as the by-laws and the conflict of interest provisions of Ontario’s Not-for-Profit Corporations Act allow it.
Small businesses could have benefited from contracts
The volume of contracts for services awarded to those companies is concerning to Angelina Williams, a BBPA member, who sat on the board of directors just over a decade ago.
“The fact that these contracts were allegedly awarded to people that are already tapped in and have access is really disappointing,” she said.
“The majority of the [BBPA] members are small businesses and if they could just get one contract with a government-funded charity like the BBPA, that goes a long way.”
Williams, an entrepreneur and business owner, hopes the concerns raised about BBPA payments can be resolved so the charity’s legacy is protected and it can continue to do important work in the community.
“There are not enough organizations like this within the Black community,” Williams told CBC Toronto.
“So to see an organization with 40 years of community work going through this unfortunate event, I really hope that people would understand that the organization is bigger than any one person and everyone will do what they need to do to make sure that it stays on top.”
Related party transactions not fully disclosed
Part of the concerns from the BBPA members group involve transparency with members, the CRA and donors.
Invoices and BBPA transaction records involving BrandEQ, Urban Rez Solutions and payment of Spencer’s services as CEO reviewed by CBC Toronto don’t appear to match up with what the BBPA claimed for related party transactions and staff compensation on its annual charity information return and audited financial statements to the CRA for fiscal years ending in 2022 and 2023.
“Every charity is required to disclose to its auditor, and also to the CRA, if any money was paid to directors or staff outside of salaries,” said Kate Bahen, managing director of Charity Intelligence, a non-profit that researches and reports on how transparent Canadian charities are for donors.
“In the case of giving contracts to the board of directors, giving contracts to staff members, that’s material information, that would be information donors would be interested in — and it needs to be disclosed in related party transactions.”
In the fiscal year ending in March 2022, the BBPA claimed $108,271 in related party transactions on its audited financial statements, but BBPA transaction records obtained by CBC Toronto show payments to Spencer’s BrandEQ during that same period totalling $632,150.39 (including tax) and $33,000 to Brereton’s company Urban Rez Solutions.
The following year, the BBPA claimed $175,881 in related party transactions on a copy of the 2023 financial statements it submitted to the CRA and also to its membership for approval at the charity’s annual general meeting in early March. But transaction records show it paid $292,037.90 (including tax) to BrandEQ for services rendered and $196,246.00 (including tax) to Urban Rez Solutions in that fiscal year.
Based on those transaction records, the BBPA didn’t disclose roughly $869,000 in related party transactions on financial statements submitted to the CRA for 2022 and 2023.
New version of audited financials posted
Just last week, after CBC Toronto contacted the board about its financial filings, the BBPA’s audited financial statements for 2023 were posted on the charity’s website.
The version of the financial statements posted is almost identical to the version filed with the CRA and approved by the charity’s membership. However, the section reporting related party transactions claims a higher amount, with the majority of the increase attributed to “a company connected to a senior officer.”
In the new version, the financials claim $334,406.00 in related party transactions for 2023 and refer back to $640,012.00 in related party transactions for 2022. The new total for 2022 is closer in line with the BBPA transaction records reviewed for this investigation.
CBC Toronto asked the BBPA board through its lawyer, Moktar, why it had changed how much in related party transactions it claimed on its audited financial statements for 2023 and for what it already reported in 2022.
In an emailed statement, the board said it “will not be commenting on anything that may be subject to the external review and forensic audit.”
The BBPA also answered “no” to a yes or no question about whether the charity compensated any of its directors or other non-arm’s-length people from the charity for services provided in its charity information return to the CRA for the last four years — despite claiming related party transactions on its corresponding financial statements.
“I think one of the issues here is it wasn’t just one year, it wasn’t just a typo one year,” said Bahen, about those responses.
“It’s consistently misreporting, or inaccurately reporting, material transactions for years.”
It’s also unclear how the BBPA claimed Spencer’s pay for services as CEO on its annual charity returns to the CRA. The roughly $23,000 a month Spencer earned from November 2021 through November 2023 amounts to about $117,700 for the fiscal year ending in March 2022.
That total doesn’t fit within what the BBPA claimed for professional and consulting fees or into what was claimed for staff compensation once salaries for the other two employees listed are factored in.
For the following year, the nearly $282,500 the BBPA paid for Spencer’s services as CEO is more than what the charity claimed its highest paid employee made, but would fit within the total it claimed for professional and consulting services.
The BBPA board did not address questions from CBC Toronto about those discrepancies.