PHS spent thousands on questionable expenses, Health Minister says

A non-profit that serves people in the Downtown Eastside spent tens of thousands of dollars on travel around the world, restaurant meals, limousines, spa treatments and more, according to provincial reviews.

PHS Community Services also paid its top executives twice for their vacations, adding $20,000 apiece to their $100,000 salaries as vacation payouts to compensate them for the fact that they were never allowed to be totally off duty.

Those expenses and much more were outlined in 126 pages of financial documents the province released Thursday to show why it was compelled to force PHS's senior managers to resign.

"We are talking about millions of dollars that are questionable or unsubstantiated. This is about inappropriate use of taxpayers' money," said Health Minister Terry Lake in a news conference where he detailed the case against PHS, a 20-year-old organization that runs a host of housing, health, and other services for thousands of people. "I don't think anyone expects this … when you're dealing with a vulnerable population."

Mr. Lake, along with representatives from BC Housing and Vancouver Coastal Health, said that PHS, led by husband and wife Mark Townsend and Liz Evans, had delivered the $17-million in provincial services it was paid for.

And the group had made a difference.

PHS "has made a major contribution," said Dr. Patricia Daly, a vice-president of Coastal Health.

But the provincial officials said that PHS's spending practices elsewhere were unacceptable.

In the audit and financial-review documents, it's clear that Mr. Townsend and others from PHS tried to make the argument that the province had no right to scrutinize how PHS spent its administration fees (a government standard of 10 per cent of any contracts it got) or money from private donations.

In page after page where the accounting firm KPMG lists expenses for trips to Paris, Istanbul, England, Hawaii, Wales, Germany, and elsewhere, Mr. Townsend frequently responded that the trips were for a "PHS social initiative" unrelated to BC Housing.

PHS's administration costs accounted for $4.5-million in the three years from 2010 to 2012. It spent almost $300,000 on legal fees, $250,000 on travel, and $75,000 on "community support" from that. KPMG noted the organization spent $69,000 on restaurant meals in that time.

The financial reviews also highlighted the fact that PHS has eight different affiliated companies doing work, including janitorial, maintenance, bedbug-removal, and other services, most of them run by PHS employees or board members.

Mr. Lake described what was going on at PHS as a "misuse of corporate credit cards" and "unusual payments to companies set up and managed by PHS staff."

He said the province is not looking at any criminal charges or lawsuits to recover money but is just focusing on a smooth transition to new managers and a new board.

Mr. Townsend, whose paid employment with PHS will end on March 31 along with that of three other executives, continues to defend PHS operations.

"The audit is kind of a mishmash. It doesn't explain we have both private and government funding. And it saddens me that there are only a couple of lines about the 91 per cent of the work we do."

He said the organization gets a lot of private donations that allow it to host visitors from countries around the world, putting them up at hotels and driving them around town.

And, in response to the auditor's concerns about the $1,400 a month in rent that PHS pays to use the basement in Mr. Townsend and Ms. Evans's home as an office, Mr. Townsend said they did it to save the organization some money. The organization was run from their kitchen table for many years. It only moved into the basement recently to provide a little more room and privacy and it charged the organization the same rent that it got from a previous residential tenant.

Special to The Globe and Mail