The federal and provincial government seized $18,000 in unpaid taxes this May from an Arts Undergraduate Society (AUS) account at the Royal Bank of Canada.
AUS President Dave Marshall confirmed that AUS has not filed a complete tax return in several years. Sources inside AUS claim that tax woes began with the 2003-2004 executive, and that over the years incomplete exit reports and accounting errors had compounded the problem.
The current executive was unaware of the government seizure until September, Marshall said, when they received a duplicate of an original notice sent by the Quebec government this spring.
“We were very much under the impression that we had inherited a clean house, in the sense that we know we had these issues in the past, but believed that they had all been resolved in the past,” Marshall said.
Shehreyar Jamshed, last year’s VP Finance, said he did not know about the unpaid taxes when he took on his position last year. “I didn’t know about the situation but suspected it because we couldn’t find tax records from before,” he wrote in an email to The Daily. “The tax issue appears to be a very old issue.”
However, as the year progressed, Jamshed said the AUS executive became aware of the back taxes. “During my term in office I tried to collect data on when the last time we paid taxes was and how much we owed,” he wrote.
“AUS council was also aware we could not find tax records, and were trying for months to find enough information to pay them,” continued Jamshed.
Marshall suggested that government notices about AUS’s unpaid taxes might have been lost in McGill’s internal mail, or might have been overlooked during the transition from the 2009-2010 executive to the current one this spring.
Marshall was concerned with the timing of the news that AUS had bungled its finances, as AUS currently supports the re-opening of another student-run service, the Architecture Café.
“The fact we didn’t pay taxes in the past few years does suggest a great amount of negligence on our part, and [on the] part of the AUS as a whole,” Marshall explained. “I would be remiss to suggest of our executive that we cannot function, in a time like this, when the ability of students to run organizations is brought into question.”
AUS Council was informed of the situation during a confidential session on September 22.
Though AUS is similar to a non-profit organization under Quebec law, it is still required to pay taxes on income earned from events, the sale of alcohol, and SNAX profits, as well as capital gains taxes on its investments, endowment, and interest earned from its assets.
Marshall and a source within AUS, who spoke anonymously due to confidentiality requirements, said that the amount seized by the government was artificially high because it was based on the assumption that the AUS would make a profit every year, based on projections on the last annual declaration of assets, submitted in 2007.
However, it was recently discovered that last year’s executive ran a deficit of $51,000 – though they initially reported a surplus – after they misallocated funds for the Arts Student Employment Fund.
“I have spoken to last year’s executive: many of them don’t understand how that could have happened. It appears there was a misunderstanding with how those funds were allocated or distributed. It’s been a little frustrating for this year’s executive because it seems we’ve spent a large amount of time fixing problems left by previous executives,” Marshall said.
This meant any government assessment would have been inflated.
The AUS is currently attempting to appeal the assessment, but sources within the AUS say their chances are “slim to none,” as the 90-day deadline to submit an appeal to Revenu Québec has likely run out.
Marshall and a source within AUS said steps have already been made to correct accounting mistakes, which they saw as the product of systemic miscommunication and accounting errors in payroll and inventory.
“Our major task this year is to rebuild not our student services, because they are fantastic, but rebuild the infrastructure that surrounds those services,” Marshall said. “A permanent office administrator is coming in, [to improve] the way we do our departmental bank accounts, things as simple as payroll.”
Marshall does not think the seized back taxes will significantly affect the AUS operating budget this year.
The AUS has also externalized its payroll services to the same firm as McGill, and is currently working with four former McGill students, who have offered their services pro bono, to improve the way the executive handles taxes.