Grimsby CAO Harry Schlange with Former Treasurer, Steven Gruninger

It was a very special evening on Monday night, with a Special Council meeting that largely focused around the special subject of “Banking Signing Authorities”. Interestingly enough, “authority” or a lack thereof seems to have been the essence of the lively discussion.

Background
On March 30, 2021, the Town’s CAO, Mr. Harry Schlange dismissed the Treasurer and two other members of the Finance team without Council support or authorization. These three employees were key to the operation of the Town, as outside of the Mayor, they were the only ones authorized to sign cheques, make payments and conduct banking related actions for the Town.

To fill the empty Director of Finance/Treasurer position, Mr. Schlange recruited Ms. Melanie Steele and she was appointed Treasurer by Council at the April 6th, 2021 meeting. It should be noted Ms. Steele previously worked under Mr. Schlange at the Region of Niagara, where he was CAO between 2013-2016.

At the last Council meeting on April 19th, 2021, a report and motion to designate new banking signing authorities was defeated. Many concerns and questions were raised at that meeting over the retroactive nature of the proposed By-law.

Banking Signing Authorities Report – Take 2
At Monday night’s meeting the Treasurer presented a new report that attempted to address questions raised at the previous meeting. Judging by the Council discussion that followed, the report lacked some crucial details.

You can read the following Town documents that were provided in the agenda:

FIN 21-08 Banking Signing Authorities Report
By-law 21-31 – Banking Signing Authorities
History of Bank Signing Authorities
By-law 16-37 – Original Bank Signing Authorities
Legal Opinion on Bank Signing Authorities By-law

From Team Huddle to TD
It was learned in the meeting in the days after the vacuum had been created in the Finance Department that the CAO gathered staff and “met as a team to eliminate all operational risk and look at the most logical two people to be the signatories at that time at the bank”.

Out of that, the CAO decided to send the Town Clerk and the Manager of Procurement to the TD Canada Trust branch, home to the Town’s bank accounts, to sign and swear new “corporate resolutions” and signature cards. Based on the discussion at the meeting, there was one big problem… there was no legal authority to do this.

Corporate bank accounts often contain millions of dollars, and based on recent financial statements, the Town is no exception, and for that reason the banks have rather stringent measures on altering who can access those accounts. Changing this information requires a resolution passed by the Board of Directors, or in this case, Town Council.

As can be seen from the sample form below, the TD bank requires a resolution “duly passed by the Board of Directors” to effect any change in bank signing.

Despite there being no resolution passed by Council, it appears that the employees were directed to sign the documents despite the very real and severe legal risks both to themselves and the Town.

Actions “Inconsistent” with By-law
At the onset of the discussion at Monday night’s meeting, Ms. Steele stated that:

actions of Staff on March 31st to update those signing authorities with the bank and ensure that staff members could sign cheques and release electronic fund transfers, while they were inconsistent with your By-law, they were reasonable and did ensure that the Town could continue to make payments for goods and services during this transitional period”

Clearly without the requisite blessing from Council in the form of a By-law or passed resolution, using the term “inconsistent” to describe actions that are not authorized under law, is a bit of an understatement.

Councillor Bothwell was first out of the gate with expertly articulated questions about the matter.


April 6th or April 7th?

Councillor Bothwell subsequently recommended against the retrospective nature of the proposed new signing authorities By-law and suggested that it only be effective as of the date of the meeting, April 26th, 2021.

Was The Mayor The More Logical Choice for the CAO?
CAO Schlange admitted he selected the two Staff members to be signing officers and gave direction to these staff members and is “totally responsible” for the actions. Mayor Jordan contested whether this was the most logical choice by asking the Town’s lawyer, Mr. John Mascarin if it would have been better that the CAO contact him.

As the Mayor spoke the words “more open, transparent and cleaner” it appears that Councillor Ritchie may have wished to interject, unmuting his microphone and moving forward, but muted himself and resumed a sedentary position. Mr. Mascarin agreed with the Mayor’s assessment:


Statements & Questions From Members of Councils
Councillor Freake stated he was worried backdating would be creating a precedence and that false statements were given at the bank. He supported Councillor Bothwell’s suggestion that the By-law should not be retroactive and have effect as of April 26, 2021.

Councillor Kadwell first read from a prepared statement for his contribution to the discussion. He commented later in the discussion that he voted against the April 19th motion to get more information, and that he was in support of the report and wanted to move forward.

The topic of a “logical chance” was also raised by Councillor Vardy, who put the question to the CAO. She further supported the By-law with no retroactive application to actions taken.

Councillor Ritchie posed questions to the Treasurer on her report, findings and observations in reviewing actions and payments being made. He stated he was supporting the By-law as-is, with the retroactive application.

An interesting exchange occurred when Councillor Sharpe offered his comments on the matter. He wanted to get to voting and was in support of the By-law with the retroactive component intact and stated that Town employees had done their best to keep things moving. The mention of a “witch-hunt” and that some are “just trying to throw mud around” caused Councillor Vardy to take exception.


A Point of Order On A Point of Order
An interesting “point of order” in that segment was where Councillor Ritchie stated the Mayor should not be participating in the discussion unless he stepped down from the Mayor’s chair. Councillor Ritchie stated to the Mayor:

“You have the right to rule, but you did join in the debate and made statements which is also inappropriate. If you would like to join in the debate you can leave the chair and ask the deputy to take over”

While this statement is factual, it is not complete. To inform the procedural knowledge of Members of Council, they may find this section of the Procedural By-law informative:

There is also some merit in the argument, but one that is beyond the scope of this post, that this was not simply a political discussion but also a corporate one. Under the Municipal Act, the Mayor is also the CEO of the municipal corporation that the Town operates as. In corporate governance, to suggest that a CEO should not speak on matters, especially significant ones, would be ill-advised.

Was the By-law Proposed on April 19th Faulty?
Questions about position titles in the April 19th By-law, which was defeated, were brought up by Councillor and asked of the Treasurer by Councillor Bothwell. She “respectfully disagreed” with the Treasurer’s answers (more on this later). She also asked Mr. Mascarin if there was an issue of “authority” in the Town taking the previous actions. Mr. Mascarin agreed as there was no resolution of Council.


CAO’s Response to Councillor Comments
The CAO wanted to make a statement that he “some Councillors stop attacking personally” staff members. It appears to be a difference of opinion as the Mayor did not agree.


After some confusion as to which motion was on the floor, the motion to remove the retroactive portion of the By-law was defeated. The motion to approve the Bank Signing Authorities By-law recommended by Town Staff with retroactive approval of “actions” taken was then voted on.

So after reading and watching all of this post, you might be wondering “How They Voted”?

YEAS TO RETROACTIVE BY-LAW 

Councillor
Ritchie
Ward 1

Councillor
Kadwell
Ward 2

Councillor
Dunstall
Ward 3

Councillor
Vaine
Ward 3

Councillor
Sharpe
Ward 4
NAYS TO RETROACTIVE BY-LAW 

Mayor
Jordan

Councillor
Freake
Ward 1

Councillor
Vardy
Ward 2

Councillor
Bothwell
Ward 4

Want To See More?
If this rather longish post and accompanying video clips has not satiated your thirst for knowledge on Bank Signing Authorities, you can always view the entire discussion unabridged in the embedded YouTube video below.

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