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The Toronto Humane Society failed to pay off its hydro bill last year, but spent nearly half-a-million dollars on legal fees, a report compiled by an independent financial monitor found.

The balance on the THS's hydro account peaked in September at more than $71,000, while more than $423,000 went to lawyers. That figure doesn't include an additional $400,000 transferred to a lawyer to be held in trust shortly after five members of the shelter's senior management were charged with animal cruelty in late November.

The findings raise questions about the THS's spending priorities, but fall short of confirming the portrait of imminent financial collapse painted by the Ontario Society for the Prevention of Cruelty to Animals in earlier proceedings.

At a judge's request, both charities will be meeting with a mediator in the coming weeks in an effort to settle their differences over the THS's operations outside of court.

"The OSPCA is looking forward to the mediation process, but a resolution must involve the transition of the THS to an entirely new board," said a lawyer for the provincial body, Brian Shiller.

Frank Addario, a lawyer for the board of directors, expressed disappointment in the OSPCA's decision to discuss its position publicly.

The OSPCA charged the THS's board of directors with animal cruelty in November. Former president Tim Trow, who also faces criminal charges of animal cruelty and obstruction of justice, is the only board member who has resigned since the charges were laid.

The report on the charity's finances and the mediations were ordered by Mr. Justice David Brown of the Ontario Superior Court. In the spring, the judge will be hearing an application brought forward by the OSPCA and some THS members to have the charity's board of directors removed and have the Office of the Public Guardian and Trustee conduct a formal investigation.

Judge Brown noted that the lawyers arguing both sides of the case had been hired by charities funded by public donations intended to go toward the care of animals, "not into the pockets of lawyers."

"That very practical concern has been weighing on me," he said.

In an affidavit filed yesterday, the lawyer who received the $400,000 in trust, Pellegrino Capone, said that the funds were transferred to his firm to pay for the legal fees if the charity's insurance didn't cover the costs of the accused. He said that he received confirmation that the insurance would cover the fees in January, but didn't return the funds when he had intended, earlier this month, because he was out of the country.

"... The funds will be returned, with interest, to the THS when the investment matures on March 5, 2010," the affidavit reads.

Projected cash flows drafted by the financial monitor, a chartered accountant from Deloitte & Touche, suggested that the charity's revenue would fall about $370,000 short of funding its operations over the next five months, and that it would have to turn to its line of credit or redeem some of its investments.

"This organization is cash poor and land rich," said William McDowell, a lawyer for the OSPCA.

Mr. Addario blamed any financial tensions at the shelter on the OSPCA's raid and arrests.

"The steady drumbeat of bad publicity in December hurt the revenues of the society," he said.