Debt, loss of funding, labour chaos pushed Catholic Family Services of Hamilton to the brink

Fivel Flavour knows he is the last. The 75-year-long chain of service by the Catholic Family Services of Hamilton ends in April along with his short term as its final executive director.

And there is no saving it, he says.

It is crushed under debt it cannot pay and is without funding from its own church. It can't find staff and has no workable plan for the future.

The leadership of the agency has to shutter CFS now, Flavour says, on their own terms, before circumstances do it for them.

Even if that means he is also terminating his own job.

The truth is, CFS has been struggling for quite some time and it's worsened significantly since the pandemic," said Flavour, speaking publicly for the first time since CFS announced it would begin winding down its operations.By acting now, when CFS is still financially capable of covering its debts, it can perform an orderly wind-down over a number of months, rather than an end that would be more abrupt and would expose clients to greater service disruption."

On Jan. 29, Flavour issued a memo saying CFS was no longer viable and would work with the provincial ministries funding it to transfer its services to other agencies. The memo made no mention of the fate of the agency's 55 employees.

The memo did not reveal the chaos underpinning the move that could disrupt the lives of thousands of clients that rely on CFS services, from child care to financial advice.

A Spectator investigation has found CFS has been carrying more than a million dollars in historic financial liabilities it does not have the means to pay off. At the same time, administrative issues during the pandemic resulted in the loss of a critical batch of funding from the Catholic Diocese of Hamilton.

Its financial limitations meant it cannot afford the kind of salaries needed to attract social workers and therapists. Qualified candidates have been taking high-paying jobs elsewhere. Some 40 per cent of job vacancies at CFS have gone unfilled, leaving the agency unable to operate some programs.

We've had really significant recruitment challenges, especially since the pandemic," said Flavour, who was promoted to executive director in late December. We had large rates of resignations and we've experienced a real challenge recruiting people to fill those positions."

Against the backdrop of recruiting problems are ongoing labour issues. CFS staff unionized in October 2020, joining the Canadian Union of Public Employees. The union started bargaining in early 2021, but two years later a contract has yet to be signed.

The loss of CFS could result in distress for the more than 2,323 families that rely on it, said Aubrey Gonsalves, chair of CUPE Ontario social services workers' co-ordinating committee, who said what is happening in Hamilton can be found across the province.

This is an epidemic raging across Ontario," said Gonsalves. There are few and far between availabilities for these kinds of social service programs. This one is closing, but many of them, before they closed, shut their programs, reduced their capacity and increased waiting levels."

Follow the money

The primary rationale cited by Flavour for closing CFS is its precarious financial situation. However, funding from its primary source - the Ontario provincial government - has not only been stable for years but increased since 2020, rising from $3.10 million to $3.19 million last year.

Funding from the City of Hamilton has also increased in the last five years, reaching $836,000 in 2022, while funding from the United Way has remained stable at around $163,000.

At the same time, money spent on staff salaries - which make up the bulk of the more than $3 million in CFS's expenses - have decreased as employees have left and the agency has been unable to replace them.

But even before the current staffing crisis, CFS spent years operating in the red. Annual financial data reviewed by The Spectator shows the agency spent more money than it had 11 times between 2003 and 2022. In 2009, for instance, CFS ran a deficit of more than a million dollars.

Flavour says while CFS's base funding" has been stable, we have been losing revenue overall for a number of years."

However, data on CFS's finances on the federal government registered charity database, shows that while the agency's revenues have fluctuated somewhat in the last five years - from a high of $5.1 million in 2022 to a low of $4.5 million in 2021 - CFS actually gained revenue last year thanks to increased funding from the province and the city.

That data also show that CFS has little in the way of savings or surpluses. While it had a surplus of more than $216,000 in 2018, by 2021 it has shrunk to only $47,000.

That was the same year the local Catholic diocese stopped funding the agency.

The money lenders

Hamilton's Catholic diocese has played an important role in CFS's finances, The Spectator has learned, helping the agency stay afloat and contributing to its heavy debt load.

According to Jim Long, the diocese chancellor of temporal affairs which oversees the organization's non-pastoral activities, the church has given CFS more than $2 million in donations and loans since at least 2016.

Part of the agency's debt load is a loan it received from the diocese to cover the costs of a failed CFS effort to partner with Rygiel Supports for Community Living.

The idea was to purchase and renovate a school, which would act as a new administrative and program facility for the agencies. But the project ran into problems after the Cranbrook Drive school was purchased.

Flavour and Long did not say what happened, but multiple sources from CFS told The Spectator it left CFS carrying a significant debt.

Rygiel kept the school as its offices and Long said the diocese loaned CFS the money to pay its creditors. It was an unsecured, zero per cent loan, he said, with no due date.

For a while they were paying it back at around $1,000 a month, but then they just stopped," said Long, who added the dioceses has not pressured CFS to repay the loan, which remains outstanding. Long expects the diocese will reclaim its money once CFS assets are sold and secured creditors are paid.

The diocese had also entered into a five-year funding agreement with CFS in 2015, which supported two CFS programs, said Long. At its peak in 2018, that agreement saw the church giving the agency nearly $180,000. The last payment of $126,000 was paid in 2020, ending the church's financial support.

Long said CFS requested an extension of that funding, but the church wanted a meeting to discuss the matter first. The COVID-19 pandemic meant that meeting did not happen, and Long said CFS did not make any further requests for funding.

Flavour said the loss of annual funding from the church is not a contributing factor to the agency's financial situation. He also said CFS's historic debt - which contributes the majority of nearly $1.4 million in annual liabilities - was caused by a past issue when the agency encountered difficulties," but did not know what that issue was.

Debt and assets

While CFS is carrying significant liabilities. which include more than $770,000 in debt, it also has assets. Property records show CFS owns St. Martin's Manor, the hub for much of its core programming. Federal records show that the property is worth nearly $2 million.

Flavour said the CFS board judged the only option was to shut the agency down, rather than sell the building or restructure or reduce programming.

Flavour said CFS also has no significant investments, and records show the agency does not generate much in the way of fundraising revenue save for the money provided by the United Way and, until 2020, the diocese.

It's hard. In a sense that I'm also losing my job," said Flavour. He said he was not made executive director specifically to wind down the agency, but he knew it was a possibility when he got the job.

So I feel for the other employees that we're in the same boat in that regard. I'm saying goodbye to a lot of great staff. People I worked with for a long time, I developed relationships with. And they're excellent employees."

Meanwhile, Gonsalves from CUPE said the union is actively reaching out to several groups - including the provincial government, the diocese and other service agencies - to try and find funding that will keep CFS alive or acquire the entire agency to preserve its services and jobs.

Is there anything that can be salvageable? Is there a way we can connect with the government to get additional funding, bring in the ministry to see what type of supports can be offered," said Gonsalves. If there is none and ends up looking like closure, the first thing we're going to be looking at is where do the clients and service users go?"

Grant LaFleche is an investigative reporter with The Spectator. Reach him via email: glafleche@torstar.ca