Advocis ends 2023 with working capital deficiency but a brighter outlook

“Please understand, we’ve had so many issues to deal with in day-to-day operations,” said board chairman Eric Lidemark. “A board of our nature is supposed to be strategic … and because of the situation we found ourselves in, we became much more operational this last year than we would ever have wanted to be.”

The immediate plan is “to get out of the operations business,” Lidemark said. “I think we’re there, thanks to [interim CEO] Harris [Jones] and staff and everybody on the board.”

Lidemark also expressed regret for not communicating earlier in the crisis.

“Our lack of communication led to much more member angst than was necessary,” he said. “For that, I apologize and take full responsibility.”

Lidemark said the board recognizes that regaining trust is an important task, and “a new vision will be forthcoming from our incoming chair and new CEO when he or she arrives in the next few months.”

He also thanked members for their ongoing support. “Chapter leaders and chapters, you never stopped caring or asking the hard questions,” Lidemark said. “Thank you for standing with us and reminding us of what is important.”

John Hamilton, board vice-chairman and treasurer, presented the financial report. Monthly operational costs are at or below monthly operational revenue, he said, in remarks reminiscent of a letter sent to members in June.

“While there is still much to do, we now have a sustainable base to work from,” Hamilton said.

He also lauded members for establishing the Century Initiative, and the fund’s stewards for making cash available when critically needed. The Century Initiative, funded with premium membership fees to ensure the association’s capitalization, stood at $3.3 million at year-end.*

Further, he offered some good news: the 2024 budget is planning for a “small” surplus, Hamilton said.

For 2023, taking the Century Initiative out of the equation, Advocis’ fund balances were in a deficit at year-end, according to the association’s 2023 consolidated financial statements.

Interfund transfers during the year came from internally restricted assets ($3.2 million), which were collapsed, and the Century Initiative ($614,216), for a total of $3.8 million in transfers.

Accounting for those transfers, fund balances were $1.2 million at year-end 2023, compared to $2.3 million in 2022. (The 2022 figures were restated, to align revenue with periods when professional development courses are completed, rather than times when fees are paid.)

Liquidity issues persisted. Working capital was in a deficit of $679,048 at year-end, notes to the financial statements say. The Century Initiative’s group of independent stewards will make funds available as necessary to support Advocis’ working capital needs.

There was $1.8 million in cash at year-end, compared to $912,925 in 2022.

Expenses exceeded revenue by $766,426 — a significant improvement from 2022, when restated expenses exceeded revenue by $2.7 million.

“Operating results have improved over the previous year but continued to be in a deficiency of revenue over expenses,” notes to the financial statements say.

Advocis implemented “several changes” to improve operations and its financial position, the notes add. “The continuing effects of these changes are expected to be experienced after year-end and improve the liquidity position and result in an excess of revenue over expenses.”

Revenue from membership fees was relatively flat, and membership currently stands at about 4,300 “full-paying” members, interim CEO Harris Jones said during the AGM. There are about 7,500 members overall.

Expenses were $10.2 million (excluding the cost of services), down from $10.6 million in 2022. Compensation and benefits totalled $6.3 million, compared to $7.1 million in 2022.

No funds were drawn from the association’s $500,000 line of credit or its credit cards as of Dec. 31, the notes to the financial statements say. However, financing totalled $774,558, including advances of $664,628 on insurance cash surrender values.

The lives of “certain key personnel” are insured, the notes say. When asked at the AGM who the key personnel are, Lidemark said they were “a lot of old executives, who are still around because the life insurance policies are still in force.” The policies are a couple decades old, he said, and used as investments. He added that he didn’t know the original reasoning for obtaining them.

Contingencies referred to in the financial statements include legal claims of $2.6 million against Advocis. The amount refers to a $2.5-million wrongful dismissal claim filed in December by former president and CEO Greg Pollock, and a $208,000 constructive and wrongful dismissal claim filed in March by former chief operating officer Julie Martini.

These legal claims “are at an early stage, and as litigation is subject to many uncertainties, management has determined that the expected cost to resolve the remaining matters is not determinable,” the notes say. “No provision has been made at year end in the financial statements.”

The association also recognized “an estimated cost” to resolve a claim of $100,000, the notes say. Earlier this year, Advocis settled with SeeWhy Financial Learning Inc. for nearly $100,000 for non-payment of SeeWhy’s learning materials.

Joining the board of directors, and announced during the AGM, is longtime member and former board chairman Al Jones, who said advocacy will continue to be part of the association’s vision, even though some advocacy has been outsourced while the group was in crisis mode.

Advocis’ annual report should be available online on Thursday.

*This figure was updated on Aug. 2 with information from Advocis’ 2023 annual report. Return to the updated sentence.