TLC would like to provide some clarification regarding the recent news coverage about our Fort Shepherd Endowment Fund. There is more than one perspective to every story and we want our members, donors and supporters to understand the whole picture.
About five years ago, when we were negotiating the donation of the Fort Shepherd lands from Teck to TLC, we also discussed the issue of the ongoing costs of management and conservation activity for the site. We estimated that those costs would amount to about $15-20,000 per year. Teck generously offered to provide TLC with an endowment of $400,000 which, if invested at 5% (the going rate for term deposits at that time), would provide $20,000 per year to allow us to properly care for the site.
The property was donated to TLC in 2006, and the endowment donation was provided to us in 2009.
We received the funds on October 29 last year. At that time the funds were placed in the bank and a specific account was established within the TLC accounting system. We investigated the options for investing this money as an endowment, and the best rate we could obtain at that time was 1.5%. This would provide annual revenue of only $6,000 – not enough to cover the annual costs of conservation work on the site.
However, last October TLC was still climbing out of the significant financial problems caused by the troubles of last summer and was very tight for funds. So we decided to set up an internal loan and borrow these funds for a short period. For this internal loan we set an interest rate of 5%. This internal loan enabled us to avoid any need to borrow externally, on the commercial market, which would have cost us about 6%. This strategy allowed us to provide the full amount of funds needed for the Fort Shepherd conservation work($20,000) as well as lowering our overhead costs marginally.
Since receiving these funds from Teck, TLC has spent about $12,000 on Fort Shepherd conservation work, and we anticipate the full year spending will be in the range of $16-17,000 (as estimated). The internal borrowing was used, among other things, to support on an interim basis, the purchase of Madrona Farm (which was finalized in mid June of this year).
We did neglect to inform Teck of this strategy when we put it in place last fall, and we regret this oversight, but we have informed them as part of annual audit process. As requested by Teck, we are also providing them with a full accounting of all the funds earned by their donation and expended on the project, as we will do every year.
In addition, TLC is now in the process of repaying the internal loan and moving those funds into an external endowment fund. While this is appropriate to do at this time, under the terms of the gift from Teck, it is still not financially beneficial for the site. Currently $50,000 has been transferred into the endowment account and will earn only 0.55%. The remaining balance of $350,000 will be transferred over the next few weeks, and the interest rate will increase to 1.5%. This will therefore return only about $6,000 next year for our conservation work on the Fort Shepherd lands, requiring TLC to find another $10,000 or so from other sources (which, of course, we will do).
We want to be very clear that TLC remains – and always will remain – fully committed to providing the highest quality care and management for the Fort Shepherd site, as for all our sites. We will continue to provide an annual budget of about $20,000 for this site and will subsidize the project from our general funds until such time as the endowment interest rates rise, or a better return on the investment can be found elsewhere. And finally, we want to thank Teck once again for their generosity and for the ongoing partnership we have developed at Fort Shepherd and in the Wycliffe area to meet our conservation objectives.