Tuesday, September 14, 2004

PEI Council of the Arts Special Meeting

A message from the PEI Council of the Arts… Please respond to the Council of the Arts.

August 27, 2004

Dear Members,

In an ongoing effort to ensure the long-term health of the Prince Edward Island Council of the Arts, it has come to our attention that an outstanding GST Liability must be addressed. To that end, please read, thoroughly, the proposal below. Note the importance of addressing this liability as quickly as possible, and please reply promptly.


Darrin White
Executive Director
Prince Edward Island Council of the Arts

Proposal to Eliminate the GST Liability through the Dissolution and subsequent re-establishment of the Prince Edward Island Council of the Arts Endowment Fund.


The Arts Guild, a wholly owned subsidiary, and for-profit company, of the Prince Edward Island Council of the Arts (the Council) had been collecting commercial rents for years without corresponding payments (or refunds) of GST to Revenue Canada. Approximately two years ago, auditors recommended a voluntary disclosure to Revenue Canada. The Board/Staff at the time did so, and an outstanding amount was determined of approximately $15,325.00. At this time, an additional (approximately ) $7000 in interest and penalties was forgiven.

Due to a shortage of funds, no payments were made against this liability other then $50.00 per month. During this time the debt was accumulating interest and penalties, however, GST credits earned by the Arts Guild were applied reducing the outstanding balance to approximately $14,000 as of August 18, 2004.  Note, now that the Arts Guild has effectively ceased transactions with the impending start of ARS LONGA (see below), there will be no further credits to apply to this debt.

As the interest and penalties rates are quite high, anything less than a substantial monthly payment will see the principal relatively untouched. The Council will remain liable for this amount, as we are the owners of the Arts Guild Inc.  Tripling the payment and making a monthly payment of $150.00 will not address the interest and penalties accumulated for that month (approx $180.00 per month ). At $200.00 per month the amount will be paid off in 17 years having paid a total of $41,000.00.

Current Balance: $15,588.42 less $1700.00 credit

Rate of Interest: 2.387% Quarterly (approx 9.8% Annually)

Rate for Penalty: 6% Annually

Aggregate interest: Approx 16% Annually

Under the Memorandum of Understanding (MOU) between the Prince Edward Island Council of the Arts, the City of Charlottetown, and the Province of PEI to create the non-profit entity,  ARS LONGA, Inc. that will assume the management of the building, the Council agreed to take on the GST Liability.  As above, this is a liability that could easily become a dangerous threat to the Council. The Board of Directors unanimously approved a proposal to eliminate the GST liability at the Board of Directors Meeting August 19th, 2004.

Proposed Solution:

The Council has a substantial endowment fund (approximately $15,000.00) that has never been used. There are enough funds in that account that the liability could be eliminated, at the ultimate savings of tens of thousands of dollars to the Council. The Endowment Fund was created to assist in awards and special projects, using the funds made available through accumulated interest.

This proposal can be summarized into the following steps:

1. Gain the approval of 50% of the membership to dissolve the Endowment Fund.

2. Renegotiate with Revenue Canada a one-time payment to eliminate the liability with the goal of having some or all of the interest and penalties reversed - ie. essentially paying the principal outstanding amount if possible.

3. Make the payment to Revenue Canada.

4. Reestablish an Endowment Fund under the same conditions as the original fund.

5. Deposit the remaining funds from the Endowment Fund into a new account.

6. Continue to deposit the $50.00 per month earmarked under the MOU to the new Endowment fund.

The beneficial outcomes to this arrangement are that:

A The GST Liability is gone –– ensuring the financial safety of the Council.

B The Endowment Fund is not lost.

C The $50.00 per month payment originally going to Federal Government against interest and penalties, now works for the Council and the arts as an interest EARNING contribution to the Endowment Fund.

A side benefit to the Council of undertaking this action, also under the ““best efforts”” section of the MOU, would be to show initiative in addressing the outstanding debts of the Arts Guild, all of which we are ultimately responsible. This could provide some impetus for the other signatories of the MOU to work on the outstanding amounts owed on Property taxes (in excess of $100,000).

This proposal requires the approval of 50% of the membership. To that end, a Special Meeting of the membership has been slated for September 16th, 2004 at 7:00PM at the Arts Guild Hall.

The motion is as follows:

That the Prince Edward Island Council of the Arts dissolve the Endowment fund and use the funds to pay the outstanding GST Liability owed to Revenue Canada. Immediately following this payment, a new Endowment Fund will be reestablished. The remaining funds, if any, shall be deposited into this endowment fund. Further, the Prince Edward Island Council of the Arts shall make a monthly contribution to the Endowment Fund of $50.00 per month until such time as the balance of the original fund at its dissolution is repaid.

Motion made by Marie MacCormack, Seconded by Jessica Dent

Votes may be cast in advance by email a replying to this message or by writing a message to .(JavaScript must be enabled to view this email address) Please clearly indicate your approval/disapproval for this motion in the reply message.

The final tally of votes, both those cast in advance and those cast at the meeting will be counted after the vote at the Special Meeting.

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