Thursday, March 20, 2014


Portland Hotel Society audit finds hundreds of thousands of dollars in questionable expenses


Health Minister Terry Lake discusses the financial reviews by the Province and Vancouver Coastal Health of the Portland Hotel Society, in Vancouver, March 20, 2014.

Photograph by: Nick Procaylo, PNG

VICTORIA – The Portland Hotel Society has spent hundreds of thousands of dollars in questionable expenses for vacations, limos and overseas trips, with little financial oversight, poor documentation and a host of other financial irregularities, government auditors announced Thursday.

Two audits, conducted by the Vancouver Coastal Health Authority and B.C. Housing, paint a picture of lavish expenses for Portland Hotel Society managers and directors, at a time when the society — charged with operating many services for the Downtown Eastside’s at-risk population — is teetering on the verge of financial trouble and potentially unable to pay its debts.

The society received $28.6 million from the health authority, government and other public sources in 2013, to operate services including the supervised injection site and low-income supportive housing for more than 1,000 people.

But auditors say money was being spent without proper oversight or financial controls.

The leadership team of the Portland Hotel Society — Mark Townsend, his wife Liz Evans, Dan Small and Kirsten Stuerzbecher — chose to resign after the government gave the team an ultimatum earlier this week. Townsend said they were given “a stark choice” to either step down or fight a legal battle that would the society into receivership.

Managers and directors expensed more than $69,000 over three years on restaurants, and more than $300,000 on travel to Vienna, Paris, Istanbul, New York City, Los Angeles, Banff and Ottawa, among other locations.

Other expenses included:

- $678 for limo service for 11 people from the Fairmont Pacific Rim to Grouse Mountain and then to a PHS director’s house. Auditors said a PHS executive charged $8,658 to the limo company in 2013.

- $2,695 for two adults and two children to visit Disneyland in Anaheim, including hotel rooms. Auditors say a director of PHS took the trip.

- $1,600 a month for office space inside executive director Mark Townsend’s home, charged to PHS, as well as upgrades to the space.

- $5,832 for a cruise by a PHS manager, made on a personal credit card and expensed back to PHS as a gift with a handwritten note.

- $917 for a staff baby shower.

- $7,025 for a celebration of life for a deceased employee.

There were also hotel rooms expensed of up to $880 per night on trips to the United Kingdom and Austria, including flowers, alcohol and spa services billed.

“The nature of expenditures incurred by PHS are a serious concern as they are not reasonably in line with providing programs and services,” read the Vancouver Coastal Health Audit. “There is a significant lack of supporting documentation for expenses, particularly on credit card expenses.”

Overall, the PHS is in a “weak financial condition” in 2013 and could have trouble paying its obligations if they came due, auditors found.

Speaking in Vancouver on Thursday, Minister of Health Terry Lake said an interim board has been put in place made up of senior staff from Vancouver Coastal Health, including Dr. Patricia Daly. The board will oversee restructuring and will recruit a new management team “as soon as possible” he said.
Lake said he did not believe the problem to be systemic, but could not say for sure whether audits would show similar misuse of spending at any of the other services contracted out by the province.

“There are a lot of service providers out there. BC Housing works with over 700 projects throughout the province and I can tell you the vast majority do excellent work and are highly accountable and this just has not been a problem across the system,” he said. “This is an exception that we feel compelled to correct.”

Lake said the government was aware that there were spending concerns among management at the PHS over many years, but he said it took time before the government could take action.

He assured taxpayers that the 700 other organizations are being well run.

“We do look at all the financial statements of all the projects with BC Housing and when problems are identified you do more work. And this is a process we have followed. Certainly the vast majority are exemplary,” he said.

Sometimes it’s just a misunderstanding. So we work with them and try to clarify their roles and responsibilities and when that behaviour doesn’t change, based on more information a deeper financial audit. When those concerns are validated and the concerns are even higher than thought you have to take action. Again I think this is an exception to the rule rather than something that is systemic.”

Lake did not know whether a criminal investigation would be launched by RCMP into any of the “questionable” misuse of public funds, and said the government has no immediate plans to recoup the financial loss.

“Our main concern is to make sure we can provide services to the vulnerable sector of our society, and in terms of recovering money that would be secondary at this point. We want to put all our efforts into this transition.”

Among the expenses listed in the audit, the $1,600 a month for office space inside Townsend’s home is particularly concerning, given that someone is spending money on something that is not required, said Lake.

He characterized that spending as “inappropriate” and “unethical,” adding that the money should have been used to help people.

Although the society’s books show a $3.9 million surplus in the last fiscal year, that was only possible because of a one-time $6 million sell-off of an investment, said auditors.

The society would have run a $2.07 million deficit in the last fiscal year if not for that one-time cash infusion, according to the audit, and it was in overdraft for $113,843 and had drawn $1.2 million in operating lines of credit and a business loan.

The B.C. Housing audit also found “significant differences” between the salaries some employees were supposed to be receiving as in their offers of employment and what they actually received according to their T4 income tax records.

Housing Minister Rich Coleman said the dismissal of the board and executives “will allow us to avoid the costs involved with court action and move quickly to address the financial and operational issues that threaten the programs and services delivered by the society.”

The society operates several buildings owned by BC Housing, including the Washington Hotel, the Ranier Hotel, the Roosevelt Hotel, the Beacon Hotel and the Sunrise Hotel. But it lso runs several social services includinga Downtown Eastside bank, a food service that feeds people in single room occupancy hotels and a pest control service.

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