February 2013

Financials Get Even Friendlier
Another of Our Own is Honoured
Revised Accounting Standards for Canada and What They Mean for Your Co-op
Ontario Alert: New WSIB Rule for Boards and Managers

Financials Get Even Friendlier

Early in 2012 we enriched the Plain-Language Financials with a few new features. Then we collected comments from clients and the Agency relationship managers who work with them. In response, we’ve tweaked our easy-reading financials a little more.

Imagine that your AIR, with all documents, was filed about four weeks ago and you’re rushing to our client website to see your results in plain language and pie charts. What will be different?

First, your financials now start with the small picture and move toward the big picture. The first page talks about how your co-op did in its most recent year of operation. Page two is the financial story of your co-op over time. Page three sums up your financial position (where you stand as of your year end) and could be the most important page of all. Why this change? We decided it would be more dramatic to save the climax for the end. We also know that most readers find the income statement the easiest to read.

We made a second change because there seemed to be some confusion between funds available to spend and lifetime earnings. As of now, we first give the amount of a co-op’s earnings so far, after operating expenses. Next, where a co-op has invested part of what it has earned to date in its buildings, we say so. Then we point out that $XX of its earnings—the amount spent on the property—can’t be used to meet operating expenses.

Just to remind you, two key items, and some smaller ones, changed in 2012. Here are the ones we think are most important.

A statement about how much vacant units have cost your co-op now appears at the bottom of each of “How did we do this year?” and “How have we done over time?” This makes it easier to see how much better you could have done if all units had been full.

There was also a major change for those B.C. and Alberta co-ops that account for their property in their financial statements more or less according to Generally Accepted Accounting Principles (GAAP). The misleading annual surpluses and deficits in operations that plagued the original version are gone. Since we’ve changed some of the calculations, the Plain-Language Financials give a more reliable answer to the questions, “How did we do this year?” and “How have we done over time?”

Another of Our Own is Honoured

People familiar with co-op housing in Canada will be pleased, but not surprised, that a Diamond Jubilee medal has been awarded to Tom Clement, executive director of the Co-operative Housing Federation of Toronto. CHFT is a federation of about 165 housing co-operatives in Toronto and York Region.

In charge of member services in the early 1980s, Tom pioneered the use of plain language in CHFT communications, training manuals and reference materials for housing co-operatives. As executive director of the federation since 1993, Tom has introduced many innovations including the Here to Stay Fund to help co-ops avoid eviction for responsible members with a short-term financial problem, the CHFT Charitable Fund, and the Diversity Scholarships, which help young co-operators attend university. Under his leadership, CHFT presents a variety of awards and honours that celebrate co-ops’ strengths and achievements. With support from social services and health-care agencies, Tom encourages the federation’s Aging in Place Committee in measures that enable elderly co-op members to remain in their homes for as long as possible.

Tom helps the co-op housing movement in Toronto and beyond to live the vision of mutual self-help in healthy communities. We owe him our congratulations and thanks.

Revised Accounting Standards for Canada and What They Mean for Your Co-op

The word is out that the Canadian Institute of Chartered Accountants (CICA) has overhauled Canada’s accounting rules for non-profit organizations as of fiscal years beginning after December 31, 2011. For housing co-operatives asking if the new regime applies to them, the answer is yes. As non-profit organizations, they do come under the new standards.

However, more than 95 per cent of the Agency’s clients are largely sheltered from these changes for now, because most auditors follow what is called a Special Purpose Framework when preparing co-op clients’ audited financial statements. Under this framework, which CMHC encourages co-ops to use, several things are accounted for differently than for other organizations.

For one thing, these co-ops write off the cost of their property at the same rate they pay back their mortgage. For another, they treat the money they put into their capital replacement reserve as an operating expense, allowing them to build this annual contribution into their housing charges. A third feature of the Special Purpose Framework is that what is spent from a co operative’s capital replacement reserve is not added to its capital cost. Following the change in Canada’s accounting rules, co-ops whose accounting has been based on the framework can continue to use it and will see no more than a few minor changes in their audited financial statements. The Agency is preparing a document for their auditors that will confirm, on the authority of the CICA, that these co-ops continue to qualify for financial reporting under the Special Purpose Framework.

However, once their operating agreements have come to an end, all co-operatives will have to account for their operations according to Accounting Standards for Non-Profit Organizations (ASNPO), a variation of GAAP. These accounting rules include certain transitional provisions. One such is called the fair-value option for accounting for a co-op’s assets. By the time their mortgage is repaid, most housing co-operatives will have entirely written off their capital assets, which typically consist of land and buildings. Under the fair-value option, a co-operative may choose—once only—to restate the value of its property on the financial statements at current value, as supported by a professional appraisal.

As of today, about 30 Agency clients in western Canada do not follow CMHC’s recommended accounting policies, preferring to use a version of GAAP. The Agency will be in touch with their accountants with more specific advice about how to present the audited statements.

If you are unsure whether or not your co-op follows a Special Purpose Framework or have other questions or concerns, you can contact our AIR Help Desk Officer, Ken Lawson.

Ontario Alert: New WSIB Rule for Boards and Managers

As of January 1, 2013, boards and managers in Ontario have a new step to take when hiring a contractor. Penalties for failing to do so strike not at the co-op, but at directors and staff as individuals.

A recent change in regulations means that Workplace Safety and Insurance Board (WSIB) coverage is required for all contractors, including independent contractors, business owners, and everyone in the construction industry that a co-op will likely deal with. WSIB delivers no-fault workplace insurance for employers and their workers, including disability benefits and helping injured workers return to work, once they have recovered.

In the past, co-ops were able to hire self-employed trades who did not need to have this coverage. Unfortunately, some so-called independent operators used their exemption as a loophole to avoid paying premiums for people working for them. By hiring other independent operators to do the actual work, people claiming to be sole proprietors got around the rules. As a result, if the workers were injured, they found themselves without any insurance or other protection.

The new regulation states that managers and boards of directors face fines and penalties if they hire any contractor without WSIB coverage. Responsibility for getting proof of insurance lies with the manager or board, who must ask the contractor for proof of insurance in the form of a clearance certificate. (A clearance certificate confirms that a contractor or subcontractor is registered with the board and has an account in good standing, with all reporting and premiums taken care of.) As the WSIB website puts it, “No clearance means no work.” Fortunately, a grace period for compliance of one year (expiring January 1, 2014) will give co-op boards and staff time to adjust to this new rule and make sure their preferred contractors are ready.

As a result of this change, the cost of hiring independent contractors will increase. However, co-ops should enjoy some peace of mind from knowing that anyone injured doing construction work on their property will be protected by no-fault insurance. More information is available on the WSIB website.

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December 2012

Coverage for Loss of Housing Charges
Co-op Housing and International Good Governance
The Queen’s Medal
Where’s the Market? How are we Doing?
Saving Time for Agency Clients with Financial Workouts

Coverage for Loss of Housing Charges

Over the past few weeks, housing co-operatives have been reviewing premium notices for their 2013 insurance. The Agency takes a strong interest in this matter, because being under-insured puts a co-op at risk. Insurance protects against a misfortune that strikes without warning. In a housing co-op anything can happen, from a fire – several major fires have occurred over the past few years – to a staff person or president gone missing, along with the entire capital replacement reserve.

When you get your premium notice, you should make sure that your co-op is fully covered for loss of housing charges. This term is not exactly clear. It does not refer to money lost through arrears or vacancies, but to the loss your co-op would suffer if a fire or another disaster kept you from having paying members in all your units. Because your housing charges probably rise every year, your co-op will need to increase its protection annually to reflect your current charges. So please take action to be certain you’re fully insured.

Co-op Housing and International Good Governance

The Housing Committee of the International Co-operative Alliance (ICA) has recently approved a Good Governance Charter, one of the ICA’s projects in honour of the International Year of Co-operatives. The charter was created under the oversight of Nicholas Gazzard, Executive Director of CHF Canada.

The new charter is intended for housing co-ops. It lays out in general terms what boards should strive for in governing their co-operatives. As part of acquainting the board with its role, the document is well worth a thoughtful reading at an early meeting soon after your co-op’s AGM.

CHF Canada has sent a hard copy to the official address of each member and associate and written about the charter in its eNEWS. To allow other interested people to read the charter, we have included a link here. We think very highly of it, and we’re sure you will too.

The Queen’s Medal

At a recent reception, Maril Bélanger, M.P., presented Alexandra Wilson, the Agency’s CEO, with a medal struck in honour of Queen Elizabeth’s Diamond Jubilee. Among the guests were representatives from the Canadian Co-operative Association, CHF Canada, CHRA, The Co-operators and CMHC. The MP and other speakers emphasized Alexandra’s lifetime of devoted service to the cause of co-operatives. After thanking many people and stressing that achievements in the co-operative world are always owing to the work of many people, Alexandra spoke about the importance of renewed development of mixed-income co-op housing.

We understand that our movement includes other medal recipients, such as Mark Goldblatt, of Ottawa, who began his career as the co-founder of the Co-operative Housing Federation of Toronto in the 1970s. Mark has worked with many kinds of co-operative since, including the new Ottawa funeral co-op. We are delighted to announce that a similar honour has gone to Kathy Dimassi, formidable organizer and currently treasurer of the Golden Horseshoe’s board; and Eleanor McDonald, community and co-op activist, and sector member for more than three decades. If readers know of other medal recipients associated with co-op housing, please send us a message through info@agency.coop. It will be our pleasure to report on the honour in a future issue of the Agency’s e-bulletin.

Where’s the Market? How are we Doing?

As of October 2012, the average vacancy rate for rental apartments in Canada’s 35 major centres had risen to 2.6 per cent from 2.2 per cent the year before, according to the fall Rental Market Survey released recently by CMHC.

Once a year, most co-ops can find out how they did in relation to the market by checking the comparison in their Co-op Data Report. The Agency sends this report annually to every client co-op within about five months of its year end. If you don’t know about the Co-op Data Report, you’re missing something good. Ask your board or staff for a copy of your co-op’s latest report.

CMHC’s fall Rental Market Survey also noted that, overall, the average rent for two-bedroom apartments in existing structures increased 2.2 per cent between October 2011 and October 2012 in Canada’s major centres. This same pace of rent increase was recorded between October 2010 and October 2011. You can view highlights and reports from larger markets here.

Saving Time for Agency Clients with Financial Workouts

Most Agency clients with a financial workout have to file a report with the Agency every month, or every quarter, depending on their agreement with CMHC. The report updates the Agency on important indicators of the co-op’s operating performance, such as arrears and vacancies.

Completing this report can be time-consuming, but the Agency has plans to speed up the process. Early next year we will invite co-ops to file the report on line, instead of in an Excel workbook. Video tutorials will guide co-ops through the process of filling in the information. Several co-ops are piloting the new report right now and we’ve been hearing some good things from them.

Once the report moves into general use, we think that co-ops will find it relatively painless to complete. You may even find that filing it is fun, provided you don’t get out much.

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November 2012

Co-ops with Workouts: Splitting Up Reserve and Maintenance Expenditures
Five Action Plans to Save the World and your Co-op’s Cash

Co-ops with Workouts: Splitting Up Reserve and Maintenance Spending

The Agency has been reluctant to ask for changes in the way co-ops keep their books or present their audited financial statements. However, the operating agreements do allow the Agency, on CMHC’s behalf, to ask you to report your information in a particular way.

We are now asking co-ops with financial workouts to make a change, if they are expensing capital repairs to operations instead of the capital replacement reserve. From now on, please report capital repairs separately from your ongoing maintenance costs on your income statement. This will help us validate your AIR and get our reports to you more quickly. Please check with your relationship manager if you’d like more information.

Five Action Plans to Save the World and your Co-op’s Cash

In reverse order of importance…

5. Heating and Cooling

• Replace old thermostats with the programmable kind and program them to bring down the temperature at night and during the workday (payback: less than three years).
• Help members remove air-conditioning window units in the fall.
• Use programmable thermostats to reduce heat in common areas three to five degrees every night.

4. Light and Power

• Turn off lights when you leave the room. Put outdoor lights on timers or sensors.
• Avoid using power during peak periods. (Check with your electricity utility for local times.)
• Plug equipment into a power bar and switch it off when not in use.
• Use qualified compact fluorescent light bulbs in place of incandescents (payback: less than one year).
• Upgrade old fluorescent lighting fixtures.

3. Water

• Remind members to report dripping taps, and fix them right away.
• Use low-flow shower heads, and replace kitchen and bathroom faucet aerators with low-flow models (payback: less than one year).
• Replace old toilets with low-flow models or install a water-saving flush kit (payback: two to four years).

2. Appliances

• Replace major appliances with Energy Star products.
• Be kind to the environment when you dispose of old fridges.
• Wash clothes in cold water (with cold-water detergent).

1. Building Envelope

• See that exterior doors are not left open.
• Test bathroom and kitchen fans annually and maintain them.
• Foam-seal outside window and door frames.
• Caulk the interior trim and any cracks.
• Replace failing window units or install storm windows annually over single-glazed windows.
• Replace weather-stripping on balcony or other exterior doors (Payback: less than two years).

For more information, print out our guide, Top Five Energy-Saving Measures, or view it under Agency Resources, along with other resources of interest on our public website.

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July 2012

A World of Websites
Against Walk-Aways
Worse than Arrears
Less Pain for Ontario Co-op

A World of Websites

This is the age of on-line information and also a time when many Canadians change cities for work or personal reasons. These two facts together suggest that a housing co-op should make itself accessible from any location by building and maintaining a good website.

Your website can be a great marketing tool for filling vacant units with members who get what your co-op is about. Of course, you want people to know what units they can apply for and whether they’ll move in soon or go on a waiting list. However, a well-made website does more. It uses images and text to express the look and feel of your community and make a viewer want to be part of it. Many co-op websites include floor plans, a photograph or drawing of a typical unit or the front entrance of the building and a city map that shows the location of the co-op. It’s also good to give some information about the co-op principles and the movement.

Once you’ve drawn someone’s interest, why not make it easy for them to apply by including an application form that they can download? This is especially important for someone in another city. While co-ops distribute applications in different ways, if you have any vacancy issues, you’ll want to remove all the barriers you can. Don’t forget to include information on where to e‑mail or phone with any questions.

Some co-ops do very well advertising through the website of their federation, and we recommend that all co-ops do so. However, the information available is usually limited. Without your own website, your co-op looks less professional as a housing option. Given the choice between a co-op that just lists its name, address and phone number and one with a website like this one, which would you apply to?

If your co-op can’t afford a web designer, why not see if the talented youth in your co-op have the skills to create a website over the summer? (Remember that you will need to put a contract in place, supervise the work, approve the result and arrange to keep the website current in future.)

Against Walk-Aways

Auditors often advise co-ops with arrears to write them off as bad debts once the member has moved out. Not all co-ops realize that, even afterwards, they can still go after their money. As provincial laws vary, hiring a collection agency may or may not be the best option. There are other possibilities, but using this service means that the co-op generally gets back some of what it is owed.

Advising members in arrears before move-out that they will be reported to the credit bureau may make some think twice before damaging their credit rating. Others may be surprised to learn that collection agencies can be quite successful at tracking down walk-aways and collecting from them. Of course it’s better to take action early before the arrears have walked out the door, but getting even half your money is better than none.

Worse than Arrears

Vacancy losses can be harder on a co-op than arrears. If your office acts fast and the Board is firm, you can usually collect most or all of any arrears you’re owed, but vacancy losses are gone forever. If the local market is tight, you have little reason for vacancies, unless you need to keep a unit empty to refurbish it. Even in neighbourhoods with many empty rental units, the Agency sees some co-ops that do better than the private market.

How is this possible? Curb appeal is one answer. Your co-op may be short of money but some cosmetic changes don’t cost much. Make sure that the path to your co-op office looks good. Pick up litter every day, if that’s a problem. Fix the steps and paint the door. Move the smelly garbage. Plant some ground cover in place of the dying grass. Is there a spot for some annuals or a hanging basket of geraniums? Ask yourself if it’s time to replace your weatherworn old sign. (Yes.)

Once you’ve got your co-op making a good first impression, there are other things you should be thinking about. Is it easy to get an application and an interview? How smooth is your approval process? Your relationship manager knows some tricks that they’d be happy to share with you, like working with a commercial rental agency. The Agency is here for you, so why not draw on our expertise?

Less Pain for Ontario Co-ops

Resolving serious disputes between members and their housing co-ops in Ontario should be less painful as a result of new provincial legislation making its way into law.

Governed by the Co-operative Corporations Act, Ontario co-ops have to follow a long process when they believe a member has fallen into arrears or otherwise breached the by-laws. There are appearances in front of the board and often the membership before the household is told that their relationship with the co-op must end. Currently, if the member doesn’t leave on their own, disputes then go through the courts in a costly and time-consuming process.

Under the proposed legislation, co-ops would be able to apply to specially trained members of the Landlord and Tenant Board to resolve tenure disputes about matters, such as arrears, that are covered for other landlords by the Residential Tenancies Act (RTA). This process will be more cost effective, transparent and efficient for members facing eviction, as well as for co-ops. Because co-ops and their members will now have access to mediation services, it may be possible to agree on collection arrangements and avoid eviction altogether.

The legislation has been introduced but has not yet become law, so Ontario co-ops may want to monitor the process through the Ontario section of the CHF Canada website. Once the new law is in place, training should be available through local federations or CHF Canada.

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June 2012

There for You
Where We Fell Down

There for You

What was going on with your co-op's board of directors in 2011? The Agency thought this question belonged at the centre of our annual report, so we asked our frontline staff what they thought.

Our relationship managers saw many co-ops where board members were looking to the future with great concern. Even with fear. They worried about their own future, their co-op's future and the future of the low-income members.

Fortunately, relationship managers had ideas about how to help co-ops address their fears and move forward. Why not check out our annual report, either the PDF or the animated version? Whether or not you agree with everything we say, you'll recognize the passion for co-op housing that inspires everything we do.

You can also check out our board of directors, our client profile and our financial-statement highlights. Our CEO wraps it all up with comments on the International Year of Co-operatives and our plans for 2012.

Where We Fell Down

We try to be perfect, but we just can't pull it off.

When we started our work with co-ops in 2006, the Agency adopted a set of standards for service to our clients. (Most of them have to do with not keeping co-ops waiting around for our response.) We went public with these standards by putting them on our website.

Every year we report on how close we came to meeting them 100 per cent of the time. In 2011 some of our performance was good, but not all of it. We could make excuses, but, in the end, the result is all that really matter. So this is how we did. We're trying for a perfect score in 2012.

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March 2012

Two-Tier Housing Charges
Embarrassment, Loyalty and Interest
Accessibility for Ontarians with Disabilities Act: Emergency Response

Two-Tier Housing Charges

A recent message to the Agency asked whether two-tier housing charges are a bad thing. The question dealt with a co-op that had some renovated and some unrenovated units.

In the Agency’s view, it is fair to charge more for renovated units, which are worth more out in the market. The key is transparency. Make higher charges for renovated units part of your co-op’s plan. Include the higher charges in your budget and put the case clearly at the budget meeting so that the members will support the higher charges.

Co-op boards sometimes have to deal with a household arguing that the condition of their unit means they should pay less. Why not turn this debate around and charge a better price for a premium unit? Your capital replacement reserve will thank you.

Embarrassment, Loyalty and Interest

Our thanks to the kind friends who took the trouble to point out an error in our November E-bulletin. We were embarrassed, but hearing about it has allowed us to make a correction.

What we should have said is that a conflict of interest or loyalty occurs if a member of the board puts their own interest before their co-op’s interest. Unfortunately, our silly mistake may have caused some people to make light of a very serious issue.

Our relationship managers often see co-ops where the members believe that the board is taking decisions for its own benefit, rather than for the co-op as a whole. When members lose trust in the motives of the people they have elected, they often become cynical about the co-op movement’s vision and values. They may withdraw from the life of the co-op and act more like tenants.

To repeat some of what we said before,

When you are open about an issue, you may not get what you want, but the co-op as a whole will benefit and your honesty will earn people’s respect. In the long run, that may make you happier than having your kitchen renovated before anyone else.

Accessibility for Ontarians with Disabilities Act: Emergency Response

The Agency’s November 2011 E-bulletin reminded Ontario housing co-operatives about the recent Regulation 429/07 on customer service for people with disabilities. These new rules now apply to all Ontario co-ops with one or more employees.

We should have pointed out a second change. This new provision applies to fewer co-ops, but is very important for those affected. It deals with the security of employees with disabilities. Under the new rules, co-ops and any staff with disabilities have to work out an individual plan to secure the safety of those staff members in a workplace emergency. If the plan assumes that a person with ordinary abilities will assist, the co-op must get the employee’s permission before explaining the nature of their disability to that person. Be sure, as well, that the assistant knows just what is expected of them. 

Even where staff seem well enough, we suggest that, without compromising their privacy, boards should ask their employees whether they would need help in an emergency. (Keep a written record of the answer, just in case.) Never forget that some disabilities are invisible and others are temporary. A broken leg, for example, could leave an employee struggling on even a short flight of stairs.

If you missed our earlier E-bulletin about these matters, you can read it on our website. Free training on the regulations is available on line from the Ontario Ministry of Community and Social Services and you’ll find other resources there, including “Tip Sheet:  Helping Employees with Disabilities Stay Safe.” CHF Canada on offers on-line training targeted especially for housing co-ops. Training is also available for a fee from On Co-op.

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November 2011

Exit and Entrance
Another Fire
Early Notice of Rule Change for Section 26/27 and 61 Co-ops
Loyalty and Interest
We’re Here for You
New Accessibility Training: It’s the Law!
Don’t Waste the Warranty
How to Budget

Exit and Entrance

Gail Church, the Agency’s Director, Corporate Services, retired at the end of October. Few of our clients have met Gail, but she’s been with the Agency since our start-up more than five years ago. At that time, the Agency had little more than a vision, a business plan and a contract with CMHC.  Gail was responsible for building the infrastructure that enables relationship managers to serve our co-op clients. She always went the extra mile, and we are deeply grateful.

In her place, the Agency has hired Colin MacDougall of La Siembra Co-operative, a worker co‑op that sources and supplies fair-trade and organic food products. (Chocolate? Yes!)

 Fluently bilingual, Colin has a Bachelor’s degree in international business, as well as an MBA. During his nine years with La Siembra, he played roles ranging from business analysis and development manager to chair of La Siembra’s board of directors. He oversaw La Siembra’s information technology, as well as all aspects of the co-op’s finances.

Colin’s sound understanding of co-operative values and his belief in the co-op business model will serve him well at the Agency. We are excited to have him on the Agency team.

Another Fire

The Agency is distressed to report that yet another client has had a fire. The unit was heavily damaged and the kitchen destroyed. A member was hospitalized with non-life-threatening burns.

In the past we’ve mentioned guidance on CHF Canada’s website about reducing the risk of fire. There is good advice there, but co-ops can take another step to protect themselves and their members.

If you don’t already do this, think about asking all members to have up-to-date contents and liability insurance. If they are insured, they will receive the funds they need to replace their household goods after a fire. And they will not be liable for a moment’s carelessness that could have harmed other members, made one or more units unliveable and cost the co-op dear.

CHF Canada’s MemberGuard insurance program with The Co-operators is affordable and tailored for co-op households, but of course members can choose their own insurer.

Early Notice of Rule Change for Section 26/27 and 61 Co-ops

CMHC has recently asked the Agency to remind our S26/27and S61 clients about a rule change that takes place in the last five years of your operating agreement. It is not a new rule, but because the end of operating agreements was so far off, few co-ops were aware of it. We want to call it to your attention now, because it could be important to you in future.

Starting in the 46^th year of the agreement, you will no longer have to apply ingoing income limits or surcharge members with higher incomes. Your co-op will be allowed to fill units with any household approved by your board of directors.

Loyalty and Interest

Relationship managers tell us that, from time to time, they see a co-op struggling with conflict of interest or loyalty. By this, we mean a situation where someone in the co-op, or their friend, relative or business, got an improper financial gain or another benefit. A conflict also occurs if a member of the board is putting the co-op’s interest before their own, as their duty requires.

Sometimes conflict of interest happens innocently. A board member may be so sure his employer offers the best deal that no bidding process takes place. A board may honestly believe that, since the directors give so much to the co-op, they should get work done on their units before anyone else.

Any real or perceived conflict of interest leads to bad feelings and makes members cynical about their co-op and its volunteers. Yet sometimes conflict of interest or loyalty is unavoidable.

The best way to deal with a situation where a director or someone close to them stands to benefit more than other members is to declare it. When you air out an issue by naming it, people can more easily see and do what is fair and in the co-op’s best interest.

After declaring a conflict, the person in question should remove themselves from the discussion and the vote, perhaps even leaving the room. (This should be noted in the minutes.) Going public and being open will help to shut down the gossip mill!

There are good points made about conflict of interest on page 13 of CHF Canada’s Getting Governance Right. The Agency also recommends the publication Conflict of Interest, which you can get from the Co-op Housing Bookstore.

We’re Here for You

The Agency was surprised to learn why some co-ops are putting off seeking approval for a capital replacement reserve plan. There seems to be fear that, with a plan in place, we will no longer discuss their capital needs with them.

This rumour is not true! Your co-op’s relationship manager would be delighted to talk about your capital replacements and give you their help and guidance—plan or no plan. Of course, with an approved plan in place, you won’t need to ask for approval before spending on items listed in plan, but we’ll be there for you if you have doubts or questions.

New Accessibility Training for Ontario Co-ops: It’s the Law!

Ontario housing co-operatives with one or more employees have only until January 1, 2012 to comply with a new law on customer service for people with disabilities.

The Accessibility for Ontarians with Disabilities Act dates from 2005, but Regulation 429/07 is recent. The regulation applies to all co-ops with full-time, part-time, seasonal and contract employees. It does not apply to co-ops staffed only by volunteers or independent contractors, such as management companies. However, co-ops should get written confirmation that the management company has arranged for disability-service training for staff dealing with residents and applicants.

Here is a summary of the rules for Ontario housing co-operatives with one to 19 employees:

1. Co-ops must establish fair and respectful policies, practices and procedures for their contacts with people who have disabilities. These policies should deal with the use of assistive devices, service animals and support persons.
2. If building elements giving access to the housing (such as an elevator or an automatic door opener) are not working, notice must be posted giving the reason, your best guess at when the problem will be corrected and a description of any other options.
3. Training on the provision of services for persons with disabilities must be given as soon as possible to

• employees and volunteers (including membership committees) who deal with the public
• anyone who has a role in developing policies, practices and procedures about how the co-op deals with its members and applicants (such as the board of directors).

Co-ops must have a publicized process for receiving and responding to all feedback on how they serve persons with disabilities. (And bear in mind that feedback can come in the form of a letter, an e-mail, a phone call or a face-to-face meeting. The form doesn’t matter.)

4. The process must say how the co-op will respond to a complaint.
5. Co-ops must post information about their feedback process and tell applicants where they can find it.

Free training is available on line from the Ontario Ministry of Community and Social Services. CHF Canada offers on-line training targeted especially for housing co-ops. Training is also available for a fee from On Co-op.

Don’t Waste the Warranty

In the past few years CMHC’s Social Housing Renovation and Retrofit Initiative helped many housing co-operatives replace major building components. It is important to remember that these items must be maintained according to the manufacturer’s specifications. Otherwise, the warranty will not stand.

If your co-op has completed major work in the last year or two, check the timing and maintenance required and make sure to budget for the cost of upkeep. Then take care to schedule visits from the appropriate trade or inspector. Keep a good record of the visits, just in case. Most co-ops say it was hard enough to get the work done. You don’t want to pay to do it a second time.

How to Budget

Co-ops sometimes do their budgets the way members handle their household money. (“Here’s my paycheque and that’s all I’ve got to spend!”) This is better than plunging into debt, but there is an even better way.

The Agency suggests that co-ops start the budget process by looking at their expenses in the past year and working out what they will need to spend money on in the year to come. Step two is deciding how to raise the money you will need from housing charges and other sources.

This approach will give your co-op an honest picture of what it really costs to run a community-based housing business. At first, the picture may not be pretty, but, in the end, truth is beauty, and truth makes for successful operations.

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August 2011

Small Project, Big Difference
Your Home is on Fire
No Service
The First Pair of Shoes
Operating Agreements and Endings
Agreement Breach? What Agreement Breach?
Small is Beautiful Again
Better Off than You Thought

Small Project, Big Difference

Does your co-op have an idea for a project that would make your property more accessible and life easier for members with disabilities? For a short time, grants of up to $50,000 are available to help.

Human Resources and Skills Development Canada is calling for proposals for “renovation, construction and retrofitting of buildings...” that will enable Canadians with disabilities to participate in and contribute to their communities. Proposals are due before September 24, 2011, but you should apply as soon as you can because the money may run out. Your co-op will have to pay 25 per cent of the cost of the work from its own funds, which could include your capital reserve fund. (Be sure to check first with your relationship manager at the Agency.)

Details and application forms are available on the Human Resources and Skills Development Canada website. There are rules about process, estimates, environmental impact and how soon and how late the work can start. Please read all the information carefully.

Your Home is on Fire

So far this year, three of our clients have reported serious fires that did heavy damage to their property and, for one co-op, resulted in loss of life. Member households appear to have been responsible for at least two of the fires; in the third case, the cause has yet to be determined.

Our first concern must always be for people’s safety, but fires also endanger the co-op and the membership as a whole. If the co-op has too little insurance, a fire can result in a significant unplanned expense or revenue loss. And it usually leads to higher insurance premiums.

How can a co-op protect itself and its members? Information is available on CHF Canada’s website about a program to help co-ops reduce their risks, including risk of fire.

If your co-op should experience a disaster that makes units unliveable, some tax relief may be available. Rules vary, but most cities will reduce the property taxes on a housing unit that cannot be occupied because it has been destroyed by fire or is undergoing major renovations. If disaster strikes, ask your city councillor about this.

No Service

Every year, when filing the annual information return (AIR), auditors fill in the co-operative’s answers to a set of representations. One newer addition to this section is 108 (b), which reads, “The Co-operative’s by-laws or rules prohibit members in arrears from serving on the board of directors. (Please give details.)”

Answers to date suggest that some co-ops may not quite understand what the Agency wants to know. If your co-op allows a member in arrears to join or stay on the board, provided they have signed and are following a repayment agreement, then the response to this statement should be “no.”

If the by-laws or rules state that a director must be “in good standing” to run or serve, the auditor needs to clarify what the co-op means by this. If it refers to a serving director having a repayment agreement, then, again, the answer to representation 108 (b) is “no.”

Experience tells us that a co-op is putting itself at risk by letting members who owe it money serve as directors, whether or not those members are catching up with their arrears. As a group, co-ops with indebted directors report much higher member arrears than co-ops where all the directors pay their housing charges on time. That’s why we encourage you to look at adopting stricter rules on who can serve.

The First Pair of Shoes

When you’re buying shoes, do you try on more than one pair? We hope so. If you buy the first pair you see in the first store you walk into, you may be ruining your feet while paying more than you need to.

The same principle applies when a co-op has a project in mind. Sometimes our staff are asked why a co-op would ever need more than one quote. Our answer is that it’s a best practice to get at least three (and for work over $100,000, more than that). This may seem like a lot of trouble, but your co-op will have to live with the results for a long time. Certainly for longer than you’ll be wearing that new pair of shoes you chose so carefully.

Operating Agreements and Endings

Why does the Agency tell co-ops they have to do certain things? Most co-ops are well aware that their by-laws or rules bind the membership, the board and the co-op as a whole. Beyond that, boards are usually aware that a provincial co-op act trumps their internal rules, if the two disagree.

The Agency has found, though, that not all directors know that each federal co-op started out by signing an operating agreement with Canada Mortgage and Housing Corporation (CMHC). In return for funding that allowed the co-op to come into being, the co-op agreed to do certain things, which are set out in the operating agreement. CMHC also made some promises.

Operating agreements last for 30 to 50 years, depending on the program, and many are nearing their end. When the agreement is up, a co-op will no longer have obligations to CMHC or the Agency, but CMHC will no longer be giving it money for housing-charge subsidies. Co-ops should start preparing now for life after their operating agreements. Talk to your relationship manager or your co-op housing federation about what you should be doing to get ready. Like objects in a car’s side mirror, the future is always nearer than you think.

Agreement Breach? What Agreement Breach?

Some auditors—especially those with few federal co-ops among their clients—may not be aware that, over the life of a housing program, CMHC’s thinking sometimes changes.

One such change has to do with the way co-ops manage their capital replacement reserve fund. At one time, money put aside for capital projects had to be kept in an account or term deposit separate from the co-op’s operating and other funds. Today, in their financial statements, co-ops must still separately and accurately track money set aside for capital purposes. However, in spite of the language in the operating agreement, CMHC long ago agreed that a co-op may comingle all of the funds set aside for special purposes. A capital reserve fund is considered fully funded if the total amount of commingled cash and investments a co-op holds is equal to or greater than the amount required to back its reserves. Note, however, that the right to combine different reserve funds and operating cash doesn’t mean that you can spend reserved money for other than its intended purpose.

For the long-term benefit of your co-op, the Agency encourages our clients to put most of their cash not needed immediately into an interest-bearing account or into one more certificates of deposit. If you haven’t done so already, we encourage you to join your local federation’s CHIP program, where you’ll earn interest on your current account and more interest (usually) on your term deposits.   

Small is Beautiful Again

Housing co-ops of no more than three storeys and 20 units have been pleased to learn that the federal government is extending its popular ecoENERGY retrofit program, which is not available to larger developments.

Co-ops can apply for a grant to retrofit heating, cooling or ventilation systems, water-heating or conservation equipment, or for air sealing and other measures and technologies. The application deadline is March 31, 2012 but, as always, the watchword is to apply early or risk disappointment if the money runs out.

For more information, check out the Natural Resources Canada website.

Better Off than You Thought

Scott Wylie, one of our relationship managers, drew our attention recently to an article in Canadian Business Magazine arguing that, in today’s economic climate, renting is better than buying. (And co-op living has all the advantages of renting and few of the disadvantages.)

In a culture that glorifies the single-family home, renting is not always seen as respectable among people who can afford to buy. But the article makes many excellent points about its benefits. You might want to cite some of them the next time your funny uncle teases you because you’re not a home owner.

In particular, the author argues that rent is not money thrown away, as opposed to the “investment” of mortgage payments. Instead, a home owner with a mortgage is renting money from a bank or credit union, just as a tenant (or co-op member) rents space. While at some time, if all goes well, the owner will not need to rent money any longer, he or she will still have maintenance costs and taxes and at some point may have to remortgage to pay for necessary capital work. Meanwhile, the money tied up in the house may return less when the house is one day sold than the same amount invested elsewhere. At the present time, according to the International Monetary Fund, in Canada renting your home is the better financial deal. By a long shot.

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June 2011

Have You Been Served?
The Agency Gets Press
Payback Time
Early AIRs
Living on their Neighbours’ Money
Fuel in the Tank
More Money in Capital Replacement Reserves

Have You Been Served?

When the Agency started up, we made a commitment to ask co-ops with the Agency about our client service every three years. Administered by the professional survey firm PRA Inc., our survey goes to each co-op client and should now be in your in-box or on your desk. Fifteen minutes should give you enough time to answer a range of questions about our service. We will compare the results with those collected in our last survey to learn where we are meeting your expectations or where we need to try harder. We’ll share what we’ve learned through our website.

Because the survey is being conducted by an outside organization, your confidentiality is guaranteed. Please help us do better by taking the time to complete it. We do listen!

The Agency Gets Press

The spring issue of CHF Canada’s National Newsbriefs includes a long article about the Agency. (See “Risky Business” on page 6.) The hard-hitting piece lays great stress on what the Agency has to say about the importance of planning and saving for capital replacements.

Highlighting the impressive turnaround of Connaught in Vancouver and Catalpa in Ottawa, the article notes that both co-operatives benefited from CMHC grants under the Social Housing Renovation and Retrofit Initiative. Intended to support an economy in crisis, these funds are no longer available. In future, co-ops at risk will have the advice and support of the Agency and their regional and national federations, but will need to rely on their own or borrowed money and on boards and members who make the right decisions.

Payback Time

At one time, the mortgage-burning party was a happy fantasy for co-op boards. Now, the end of operating agreements is not so far off. As the dream draws closer, co-ops can see that it has a dark side. The ending of government rent-geared-to-income subsidies is not something to rejoice over.

On the subsidy front, Section 95 co-ops have a special concern. CMHC advises that everything left in the subsidy surplus fund at the end of the operating agreement—not just the portion beyond the maximum permitted reserve—belongs to CMHC. Some co-ops spend all they get from CMHC, and more, on keeping a good income mix. Others like a nice financial cushion beneath them, in case another household runs into trouble and needs help. As you decide on your own co-op’s policy, bear in mind how soon your CMHC agreement ends. If you choose, you can plan to give qualified members the assistance they need, rather than sending money back.

Earlier AIRs

Every year, more co-ops work with their auditor to get their AIR in to us on time or even a little early. A client who files by the due date makes for a happy relationship manager, and, as we say around the Agency, “If the RM ain’t happy, ain’t nobody happy.”

If timely filing still eludes you, we can help. Last year we drew up a document we call the Pre-audit AIR Checklist. This guide sets out all the steps we think you need to take to get ready for your AIR filing. Ideally, co-op staff should start preparing as soon as the new fiscal year begins—well before the auditor arrives.

We’ve sent the checklist out with the E-bulletin and given it to auditors, but staff change and things get forgotten. So we thought a reminder would be good. Ask your relationship manager for a copy or download it from our password-protected client website where it appears under Agency Resources. (Please check with your relationship manager if you can’t find your username or password.) Follow the steps faithfully and we guarantee you’ll file earlier. In the near future, we plan to attach the checklist to our routine AIR reminder through the magic of automation.

Living on their Neighbour’s Money

At the Agency we think the first step toward change is finding out and sharing the facts. So here’s what co-ops are telling us about directors who owe them money.

Of our 537 client co-ops, 51 have a by-law that disallows directors in arrears from serving on the board. Another 231 say either that a director must be in good standing or else that that they must have a repayment plan on file. Twenty more co-ops tell us they have a by-law in place, but give no details.

So what does this say about directors in arrears? It suggests to us that too many Agency clients could possibly have someone on their board considering the eviction of a household in pretty much their own situation. Directors set an example for other members. A repayment agreement is a useful tool for collecting arrears, but it doesn’t change the facts: a board member who fails to pay their charges in full and on time sets a poor example for their neighbours.

As the Agency’s CEO pointed out in her guest editorial in Scoop, CHF BC’s magazine,

As at their latest report to the Agency, one in four co-ops had at least one indebted director. The arrears and bad-debts rate for the membership of these co-ops was four times the rate seen in co-ops without director arrears.

We don’t know which comes first, the director in arrears or the co-op full of members who owe it money, but the place to start the reform is at the top. We urge co-ops to look at their by-laws and think about how to say that a director in arrears may not stay on the board, with or without a repayment plan. Your relationship manager can help.

Fuel in the Tank

The Agency has long spoken of a service that we can’t yet deliver: Benchmarking and Best Practices. The idea seems so simple. Many co-ops have systems and tricks that help to make them successful. So why not get them to tell other co-ops how they do what they do best? Even good co-ops would be able to pick up an idea or two that could move them from good to great.

Our problem is that developing a new service takes money. Recently we learned that we have been approved for a grant of more than $100,000 over two years under the federal government’s Co-operative Development Initiative. This money will get us started on a pilot project. Results won’t happen over night, but we’re on our way.

More Money in Capital Replacement Reserves

Congratulations, Agency clients! It’s clear that many of you are putting more money aside for the future. Over the course of their 2010 fiscal years, Agency clients as a group increased their contributions to capital replacement reserves by more than ten per cent.

It’s great to see our clients moving in the right direction as a group, but each co‑op needs to study its own situation closely and work out what it needs to set aside. Your Agency relationship manager can help walk you through the steps towards ensuring that your future is secure.

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March 2011

"Co-operative Enterprises Build a Better World."
B.C. and Ontario: Money Back on Big Construction Contracts
Ontario—Secure with your Contractor

"Co-operative Enterprises Build a Better World."

By now most Agency clients have heard that 2012 will be the United Nations’ International Year of Co-operatives. The slogan for the year appears above.

We hope that the Agency’s clients will find this language appealing. The co-operative housing movement has many idealists who see the values and practices of mutual self-help leading to a better world. And who believes more strongly in the importance of building than the members of housing co‑ops?

The word “enterprise,” however, may be unexpected. “Enterprise” implies many good things: energy, fresh thinking and productive work. But here it also means “business.”

Sometimes we, who live and work in and for housing co-operatives, need to remember that—although non-profit—housing co-operatives are indeed businesses. When operating as intended, they provide a valuable service, create jobs and strengthen the communities in which they are based. Initially, the government of Canada, and then their members, built them up through financial investment and sweat equity. Their assets need continued nurturing through attentive management and careful stewardship, just like any other business.

We hope that in 2012 all co-ops will support a project, large or small, that celebrates the full meeting of the slogan. A bold statement about our unique organizational model, it draws together all co-operatives, both equity-based and non-profit, in a single sentence. So let’s start building. What are we waiting for?

B.C. and Ontario: Money Back on Big Construction Contracts

Did your co-op sign a large construction contract before or soon after July 2010 for a big capital project? If so, you may be able to claim a tax rebate.

Prior to that date, contractors included provincial sales tax (PST) in their bid and contract, as part of the cost of materials. But after the HST was introduced, PST was no longer charged on materials, because it was bundled up into the HST.

If materials were bought after July 2010 for capital work bid on or contracted before that date, your co-op has probably paid twice the province’s share of the tax. (In a few cases, a contractor may have made a downward adjustment to the contract to remove the PST originally priced into the materials cost.)

If there was no such change to your construction contract, you will need the contractor to confirm the purchase date for the materials (before or after July 1/10) in writing. Give the information to your auditor and ask the firm to apply to Revenue Canada for a refund of this double payment.

Information from Revenue Canada is available here. It’s very public-spirited of your co-op to pay its taxes twice, but not even the hungry tax departments of B.C and Ontario would ask this.

Ontario—Secure with your Contractor

In Ontario, contractors are required to make payments to the Workplace Safety and Insurance Board (WSIB) for their workers. If the contractor hired by your co-op is not current with these premiums, the co-op could be financially liable.

When a contractor’s payments are up to date, the WSIB issues a clearance certificate that is public information and available for review. Co-ops should make sure their contractors have acted to protect themselves, their workers and their clients.

Checking the company’s clearance is now much easier, with clearance numbers available through eClearance, once you’ve signed up and logged in. Clearances are good for up to 90 days.

For more information about clearance certificates, you can telephone the WSIB department at (416) 344-6851 or read about them on the website above at Employer Accounts. 

 
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December 2010

A New Commitment to Your Co-op
Mutual Self-Help: The Seed of the Co-op Idea
Plain-Language Financials: the Friendliest Option for Co-op Members
Big Federal Grant to Increase Accessibility: Last Chance?

A New Commitment to Your Co-op

December 2010 marks the launch of a new Agency initiative to increase co-ops’ contributions to their capital replacement reserve. As buildings age, it becomes ever more clear that co-ops will have to put more money aside for capital repairs and replacements, starting as soon as possible.

Ideally, the amount of money contributed in each year would be set out in an approved capital-reserve fund plan, drawn up following a building condition assessment. But since many co-ops have no plan, Agency relationship managers will need to talk to them individually about what their co‑op should be putting away.

Some co-ops have seen the need and have been raising their budgeted contributions for some years. These co-ops are candidates for a formal commitment to continue putting a larger amount into their capital reserve fund than their operating agreement requires.

Does a formal commitment matter? We’ve all seen how changes in the board and management can result in a good co-op’s losing its way for a few years. The Agency believes that a formal reset of the contribution will help to ensure that the financial leadership of responsible boards, managers and members will not easily be forgotten, either by the co-operative or the Agency.

Mutual Self-Help: The Seed of the Co-op Idea

Anthropologists tell us that people have co-operated for as long as human beings have existed, so the co-op idea has deep roots. Mutual self-help is the seed the idea grew from.

Returning to the source is part of the answer for co-operatives starting into a financial workout. By taking ownership of the problem and tackling it together, co-op directors and members not only move toward a solution, but strengthen the human side of their organization. Doing so is good preparation for the day when operating agreements have ended and housing co-ops are on their own. By demanding housing charges high enough to meet their co-op’s real business and property needs, co-op members are being true to the past of the movement when people with very little put their pennies together so that crumbs could gather into loaves of bread.

While new money is an important part of a workout, it is not in itself the solution. Workouts succeed only when members give up hoping for a co-operative that is the same as the one they have known, but with better buildings. A successful workout can take housing co-ops through pain to transfiguration, provided the members embrace the concept of mutual self-help. At its best, a workout can mean a revitalized organization devoted to the stewardship of a cluster of homes that the membership intends to leave to the next generation.

Plain-Language Financials: the Friendliest Option for Co-op Members

The Agency will soon start to collect feedback from co-operatives that have consulted their Plain-Language Financials (60, so far). These restatements of their co-op’s audited financial statements in plain English or plain French are intended to help members who aren’t financial experts get a clearer picture of what the co-op earned and spent, owns and owes.

Those co-ops that haven’t viewed their Plain-Language Financials can find them on our secure client website, under Agency Reports. (You can reach the client website from www.agency.coop. Click on “Client login” and fill in your co-op’s username and password. Or ask your relationship manager for help.) If you haven’t had a year end since we launched the report, it’s still worth logging on. Our system generates a set of statements for every AIR you’ve filed to date.

These financials will be most useful to the co-op that files its AIR and other documents before it holds its annual meeting. (Remember that the members don’t need to approve the audited statements before you submit them.)As soon as we validate your return, your plain-language financials will be ready. If your members get a copy before, or even at your annual meeting, you can be sure they’ll understand your co‑op’s finances better than ever before.

Special thanks to Alex Ferguson of Oak Street Housing Co-operative, who, unprompted, volunteered his comments on what he called the friendly financials.

Big Federal Grant to Increase Accessibility: Last Chance?

Over the next month, larger housing co-ops concerned about accessibility should plan to work on an application to Human Resources & Skills Development Canada for a grant of between $500,000 and three million dollars. These grants are for bigger projects that will improve the integration of people with disabilities through retrofits, renovations or construction of new facilities. The deadline is January 13, 2010.

More information is available on the government website under Mid-sized Project Component of the Enabling Accessibility Fund. 

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October 2010

A Tool for Money Tracking
Financial Management according to Shakespeare
“Failure to Pay in Full and On Time”: Fieldstone vs. Rodriguez

A Tool for Money Tracking

Co-operatives are now starting to consult their Plain Language Financials, which they can find posted on the Agency’s secure client website. Windmill Line Co-operative Housing in the St. Lawrence area of Toronto has the distinction of being the first of the early adopters.

For anyone who has just come back from a very long vacation and missed our postcard mailing, the Plain Language Financials are a restatement of your co-op’s audited financial statements in plain English or plain French. This three-page document is a new tool prepared for you by the Agency to help you show the clearest possible picture of your finances to your members.

Special features: on page one, if two numbers are highlighted in the same colour, those numbers are related. On page two, a pie chart shows where your money came from (housing charges are the biggest wedge) and how you spent it (most went for mortgage payments and taxes).On page three, you can see what you charged and spent in each of the past five years. This will make it easy to spot any trends, such as a mysterious drop in laundry and parking revenue.

Agency staff will soon be touching base with co-operatives that have already accessed their Plain Language Financials. We’ll want to know if the process was easy and how you used the document. The E-bulletin promises to print any good stories that come our way. We hope they will inspire the not-as-early to take up this new tool and place it in their members’ hands.

Financial Management according to Shakespeare

When should a co-op take financial advice from one of Shakespeare’s worst villains? When the advice is better than the source.

Many people have heard the story of the military hero Othello, who is tricked into murdering his loving wife. The trickster Iago knows very well how the world works and recommends: “Put money in thy purse.” This is advice that every co-op should take.

But where do you get more money to put away? Wherever you can. Raise your housing charges? Check. Use a collection agency for bad debts? Check. Change your membership procedures to fill units faster? Check. Advertise vacancies before they happen? Check. Water-saving toilets and showers? Check. Be tougher with members in arrears? Check. Then put the money into your capital replacement reserve.

Not everyone will love you for it, but getting your co-op to build a bigger reserve is the right thing to do. The Agency will think you’re a hero, and your co-op will have the money to solve its problems.

“Failure to Pay in Full and On Time”: Fieldstone vs. Rodriguez (September 23, 2010)

An excellent written decision from the Ontario Superior Court last week offers hope for co‑operatives with members who repeatedly pay late, fall further and further into arrears and then clear their debt at the last possible moment.

Citing other decisions, the judge found for Fieldstone Co-operative, in Toronto, in spite of the members' plea of financial hardship and their argument that they were no longer in arrears. Fieldstone was awarded costs, although not in the full amount requested.

The court mentioned the co-op’s difficult financial situation and its need, shared with other co-ops, to run its business according to the board’s best judgement, within its by-laws. This tipped the scales in Fieldstone’s favour against the members' claim that they could not afford to move or find other housing.

The phrase, "Failure to pay in full and on time," was repeated by the judge and should replace "repeated late payment" in Ontario eviction documents. Co-ops in other provinces might also consider this.

Congratulations to Fieldstone for sending a clear message that co-op living means paying your fair share on time. This is a Co-op Principle, and an Ontario court has shown that it agrees.

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