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.
rshaw@vancouversun.com
