Markham Stouffville Hospital paid invoices without purchase orders or contracts, secretly awarded work to friends and family members of an employee, and created paper trails to document transactions after the fact, says forensic accounting firm Deloitte in a report.
The report, posted on the hospital’s website on Friday, found lax policies governing everything from procurement to hiring staff and conflicts of interest.
Markham Stouffville hired Deloitte in September, after The Globe and Mail reported on internal investigations at St. Michael’s Hospital and St. Joseph’s Health Centre in Toronto.
Markham Stouffville is the latest hospital in Ontario to become embroiled in controversy over procurement practices. The Ottawa Hospital accused two former executives in charge of construction projects of defrauding the hospital in a statement of claim filed in January. In November, St. Michael’s fired the senior executive overseeing its redevelopment after a Globe investigation found that he had commercial ties to the president of the construction company awarded the contract.
Vas Georgiou has denied any wrongdoing and has launched a wrongful dismissal suit against St. Michael’s.
Markham Stouffville hired Deloitte to investigate activities related to the hospital’s $400-million redevelopment, as well as an employee who is not identified in the portion of the report made public. During the firm’s probe, the contents of an employee’s hospital iPhone were remotely deleted, “possibly destroying evidence relevant to an ongoing investigation,” Deloitte says.
The 14-page report documents a litany of problems: Internal controls designed to prevent and detect errors or fraud were weak; reference checks for two employees were not done; the last time the hospital reviewed its rules governing conflicts of interest and ethical practices was in January, 1998 – 18 years ago.
The hospital responded to Deloitte’s findings by pledging to strengthen its procurement practices and financial controls, and adopt a “zero-tolerance attitude” against those who violate conflict-of-interest policies.
“It is important that we all learn from this report and take the opportunity to further enhance our systems and processes to ensure we are using wisely the public resources with which we have been entrusted,” Markham Stouffville chief executive officer Jo-anne Marr said in a message to all employees on Friday.
In an update to employees on the Deloitte audit last fall, Ms. Marr said the hospital received an anonymous complaint from a whistleblower after The Globe’s first story on St. Michael’s and Mr. Georgiou.
Mr. Georgiou’s lawyer, Gavin Tighe, has said his client had no involvement in the matters investigated by Deloitte or in any decision regarding the employment of Suman Bahl, the senior executive who oversaw Markham Stouffville’s redevelopment, completed in 2014.
Markham Stouffville terminated Ms. Bahl’s employment in October. Prior to joining the hospital in 2007, she spent nine years at St. Joseph’s Health Centre as director of redevelopment.
Ms. Bahl told The Globe in an e-mail on Sunday that it is difficult for her to comment without seeing “the original investigation report that is being referenced” by Deloitte.
The Deloitte report outlines numerous ways in which management flouted the hospital’s procurement rules.
In one scheme, the procurement department was bypassed altogether. Management approved paying invoices from suppliers without quotes from competing vendors, purchase orders or contracts, the report says.
In response to questions from The Globe, hospital spokeswoman Lisa Joyce said on Sunday that Ms. Bahl purchased goods in this manner.
The Globe has reported that among the matters Deloitte examined were allegations that a flooring contract was awarded to companies linked to Ms. Bahl’s husband. Ms. Joyce confirmed on Sunday that Ms. Bahl’s husband invoiced the hospital for work through “pre-existing vendors.”
While the Deloitte report does not name names, it says a number of suppliers sent invoices to Markham Stouffville through other suppliers that did business with the hospital. There were no written agreements or disclosures documenting such arrangements.
In some cases, the report says, suppliers were hired through another supplier to “circumvent” the hospital’s procurement policies. In other cases, the report adds, “friends and family members of a hospital employee were procured in this manner.”
Without competitive bids, the services may have resulted in higher costs for the hospital, the report says, adding that the auditors found instances of price markups.
The Deloitte auditors also found that hospital employees procured goods without purchase orders or with paperwork signed by staff who were not authorized to approve purchases.
“A procurement representative informed Deloitte during interviews that purchase orders were frequently created after the fact as a ‘paper trail’ to document a procurement,” the report says.
Ms. Joyce told The Globe that the procurement department created the purchase orders after Ms. Bahl and her staff purchased goods and services.Report Typo/Error
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