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Editorial: More inquiries needed for PHS

Revelations continue to emerge about extravagant expenditures of public funds at the Portland Hotel Society. The society manages subsidized housing in the Downtown Eastside of Vancouver.

Revelations continue to emerge about extravagant expenditures of public funds at the Portland Hotel Society. The society manages subsidized housing in the Downtown Eastside of Vancouver. Its clients are among the most impoverished citizens of our province.

Last week, the accounting firm KPMG released a partial audit of the society. Although the audit team was hindered by the refusal of society staff to hand over some pertinent records, their report is one of the most damning critiques of a public body ever seen in this province.

To date, most attention has focused on inappropriate expenditures. Some examples: Over a three-year period, $12,000 was spent on limousines; $8,400 on spa services; $2,230 for a stay at Beachside Vacations in Hawaii; $5,800 for hotels in Paris and Istanbul; $5,300 in liquor purchases; $5,800 for a cruise down the Danube.

Then there was $25,000 for a trip to Vienna. NDP MLA Jenny Kwan and her children were guests on this jaunt. They were also guests on a trip to Disneyland. Kwan has apologized and refunded her family’s share of the costs.

It is worth pausing to consider whether the clients of this society ever rode in a limousine or cruised the Danube. Numerous other expenditures reveal a detachment from reality that would have made Marie Antoinette blush.

But closer reading of the audit reveals something far more disturbing. It is the duty of any public body to put in place management controls through which staff are held accountable. There are well-established methods for doing this.

Yet not only were these safeguards ignored in some cases, procedures were adopted that effectively voided them.

The society created a byzantine system of interlocking entities that defied meaningful oversight and invited conflicts of interest. Eight “affiliates” were set up, and the society purchased services from them, including janitorial work and maintenance.

But seven of the affiliates were owned by staff or society members. After staff declined to give KPMG records detailing some of these transactions, the audit team concluded: “There is a risk of a mismatch between the maintenance services funded … and the work actually done.”

Senior executives were allowed to use personal credit cards to buy goods and services on the society’s behalf.

When KPMG asked for receipts and invoices to clarify the nature of these transactions, staff again declined. The audit team notes that made it difficult or impossible to verify cardholder explanations of the purchases.

KPMG were also told there was no monitoring or authorizing of executive expenses. It recommended installing a monitoring system to protect the society from “misappropriation or possible reputational damage.”

It is important to note that KPMG did not allege fraud. What the audit team did find was an utterly chaotic organization, lacking some of the basic oversight tools and handling large sums of money in ways that left the society at risk of abuse.

The question is, what comes next? The society’s board and four senior managers have been dismissed. The minister responsible, Rich Coleman, must be held accountable.

Then there is the matter of further inquiries. The NDP has been effectively muzzled by Kwan’s involvement, when its MLAs should be pursuing the government.

Given that staff withheld their co-operation at various points, a full-scale investigation is required. That could be carried out by KPMG. Or the RCMP could be asked to step in.

Then there is the role of B.C. Housing — the Crown corporation that oversees the society. The agency can say in its defence that it called for the audit.

But the misuse of funds revealed by KPMG went on for years and in plain sight. An independent investigation of B.C. Housing is also required.