Hockey Canada moved cash from fund used for sexual assault claims to avoid encouraging more claims: report

A controversial reserve fund that Hockey Canada publicly vowed it would stop using to settle sexual assault allegations is significantly depleted after the organization transferred millions of dollars in past years to another account, a new interim report reveals.

Former Supreme Court justice Thomas Cromwell's interim report on Hockey Canada's governance, released last week, contains damning details about the organization's management of its National Equity Fund — a fund Cromwell said is projected be in deficit by 2023.

Hockey Canada commissioned Cromwell's review in response to hockey parents' outrage after learning that the National Equity Fund — made up in part of players' registration fees — was being used to pay out millions of dollars for sexual assault allegations without their knowledge.

Cromwell learned of the existence of a third fund to which Hockey Canada's board of directors approved the transfer of $10.25 million in reserve funds from the National Equity Fund (NEF) in 2016. Another financial analysis has found that at least another $7 million has been transferred from the NEF to the third fund since then.

The money was moved after Hockey Canada's auditors recommended a change to the organization's disclosure on its audited financial statements that "increased the reported balance of the National Equity Fund by several million dollars," Cromwell found. 

Cromwell concluded that the organization's board of directors feared that an account with more money would attract more claims.

"Hockey Canada became concerned that this change on the financial statements inflated the NEF balance artificially, which might signal a large pool of funds set aside for potential claimants and thus might increase the likelihood of additional claims," Cromwell wrote in his report.

In November 2016, Hockey Canada's board of directors transferred the money from the NEF to another fund called the Insurance Rate Stabilization (IRS) Fund, which was created years earlier to "act as a buffer against future increases in insurance rates," the report said. The Athletic was the first to report on the new fund and the money transfers.

The board justified the transfer, saying it was a way to expand the scope of the IRS Fund "for the purpose of providing financial support against potential future non-insured claims," Cromwell's report said.

Cromwell said Hockey Canada also broadly expressed that changes to its transparency were "not well suited for their organization, such as making financial statements and minutes of Member meetings available to the public."

"Although Hockey Canada has achieved considerable financial success over the years, Hockey Canada is concerned that being seen as an organization with 'deep pockets' could create some negative implications," Cromwell's report said. 

"For example, this could have an effect on their bargaining power with respect to the settlement of lawsuits, and this could also influence the amount of money that sponsors would be willing to offer in the future."

Kate Bahen, managing director of Charity Intelligence Canada said Cromwell's report showed her "there was an intent to hide funds."

By examining Hockey Canada's audited financial statements, Bahen found the NEF's "true balance" was $15.7 million in 2016 before the organization ended up transferring $9.5 million to the other fund. (Cromwell's report said the board approved a $10.25 million transfer, but the statements show $9.5 million was moved, according to Bahen.) That transfer brought the NEF down closer to its $5.2 million level in the previous year, before the accounting changes, she said.