B.C. orders review of its own housing agency amid scrutiny over funding of non-profit partners

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The B.C. government has ordered an internal review of its own housing agency, The Globe and Mail has learned, while the province’s Auditor-General is conducting two separate audits – all as BC Housing’s budget has exploded and the way it funds its non-profit partners has come under increased scrutiny.

Ernst & Young auditors are reviewing whether BC Housing has the capacity for an increased mandate, the Ministry of the Attorney-General, which is responsible for housing, confirmed in a statement. The decision to review the agency has not been made public, and non-profit groups it funds were unaware of it. The review is to be completed this spring.

“BC Housing’s breadth and scope of activities has increased substantially since 2018,” the unattributed statement said. “The purpose of this review is to support BC Housing by identifying potential opportunities to improve its organizational effectiveness. If any concerns were to be identified as part of this review, government would take it into consideration in any subsequent actions or recommendations.”

Separately, the Auditor-General is conducting his own audits, but Michael Pickup’s office would not say what triggered the investigations. The first “audit will examine whether BC Housing’s purchases of nine properties in Vancouver and Victoria to house vulnerable groups (primarily people experiencing or at risk of homelessness) during the COVID-19 pandemic followed relevant approvals, policies and procedures,” a statement on the Auditor-General’s website says.

The second audit “will determine whether BC Housing effectively managed its provision of additional safe spaces for women and children leaving violent or unstable situations during the COVID-19 pandemic.”

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BC Housing oversees social housing, shelters, rent-assistance programs and more. It serves about 120,000 people.

It saw its budget increased by $600-million in 2020-21 to almost $2-billion as it scrambled to meet the government’s promise to build 114,000 affordable homes in 10 years, with much of that dedicated to increasing the supply of rentals.

It has awarded dozens of contracts to non-profit groups in recent years in order to build 2,000 to 4,000 new social-housing units each year for the foreseeable future. In the past three years, it has approved 150 different projects that will see the construction of more than 8,000 apartments.

The agency moved into high gear during the pandemic, with additional money for shelters and an aggressive program to buy hotels and other buildings that could be quickly converted to housing. That generated some controversy after it paid high prices for some hotels – $64-million for Vancouver’s Patricia Hotel alone – and angered some residents by moving homeless people into their neighbourhoods.

A 2018 external audit of one of BC Housing’s main partners, Atira Women’s Resource Society, found that Atira and the provincial agency lacked an “effective and efficient budget development and approval process” and demonstrated “lack of clarity on allowable and disallowable expenses and what constitutes controllable and non-controllable costs.” But the government nonetheless concluded Atira was underfunded and compensated the non-profit.

(The final report was never made public but was obtained by The Globe.)

BC Housing has been led for more than 20 years by chief executive officer Shayne Ramsay and has operated over that time with much more autonomy than many other Crown corporations. Both Liberal and NDP governments have relied on it to take on ambitious projects, such as buying up and renovating many old residential hotels in Vancouver’s Downtown Eastside prior to the 2010 Winter Olympics and negotiating the 2007 sale of the Little Mountain social-housing site in Vancouver to the Holborn Group.

The Little Mountain deal proved to be a disaster for the previous Liberal government, with then-housing minister Rich Coleman taking most of the blame after Holborn left the land almost vacant. Documents later revealed the company had only paid the $30-million down payment on the $334-million purchase price.

BC Housing does not disclose how much each of its non-profit housing partners has received over the years, even though other government agencies must do so with contracts of more than $25,000. A spokesperson for BC Housing said that’s for a number of reasons, including the fact some non-profits may be receiving funding from multiple sources while others get money solely from the province, so disclosing funding figures “could lead to comparisons without full context.”

However, Canada Revenue Agency reports and the annual reports of some agencies offer a window into some of that funding. According to the CRA, the Portland Hotel Society received a total of $44-million from the province, RainCity Housing and Support Society got $35-million, and Lookout Housing and Health Society got $25-million.

A 2021 CRA report for Atira indicates it received a total of $53-million. B.C.’s public accounts list the amount of money Atira got from each of seven different ministries – but doesn’t have any information on the bulk of its funding, which comes from BC Housing.

The agency routinely conducts internal reviews and, at times, audits of the non-profits it funds, but those are never provided to the public.

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It is relatively rare for the agency to bring in an outside consultant for a financial review, according to many who work in the province’s non-profit housing field.

However, The Globe has obtained interim and final copies of a previously undisclosed 2018 financial review of Atira by an external company. The interim 29-page report by accounting and financial services firm BDO noted concerns about poor financial management at Atira. It was the second time it had run into financial difficulties in the past decade; in 2013, BC Housing provided Atira with an additional $840,000 to cover shortfalls.

Atira currently operates 23 residential hotels, seven of which are privately owned and unrenovated, along with the recently assigned Patricia and Llugat (formerly Howard Johnson) hotels. It also has a separate arm that manages almost 1,500 housing units. The 2018 draft review found it seemed to have continuing financial planning and management problems and had at one point run short of money to meet a $300,000 payroll.

The BDO report noted that Atira was running deficits every year, that a number of its housing projects had accumulated deficits of as much as $200,000 and that it exhibited a pattern of late financial reporting and continuing issues with cash flow. There were also instances of money designated for one building or expense being used for other buildings or expenses.

Atira’s management made the case in the review that it has higher operating expenses than other non-profits because it manages so much old residential-hotel stock, but the report noted that “if buildings are in worse condition than peers and need additional maintenance costs, this has not been supported by appropriate evidence.”

The report also noted that Atira’s managers did not seem to believe approved annual budgets were final, contending instead that they were always open to negotiation, with more money available at some point.

As a result, the draft report noted, “the critical difference in interpretation … has resulted in assumptions that BC Housing will cover any overages.”

In an e-mailed statement to The Globe, BC Housing representatives said the BDO review did not fairly represent the situation at Atira and that a subsequent assessment determined Atira should get more money.

“The initial report produced by BDO, including the draft report dated Nov. 7, 2018, did not adequately substantiate the adjustments needed to fund Atira for the years under review. As a result, a decision was made for BC Housing’s Internal Audit team to work with Atira and BDO to finalize the review. The review found that Atira had been underfunded for several years,” the statement said. “As a result, an adjustment in the amount of $686,264 was recommended to ensure Atira was funded for all the prior years covered under this review. BC Housing and Atira agreed to this final adjustment amount.”

The statement added that “the BC Housing CEO was not involved in this matter, as per the conflict-of-interest protocol.”

Mr. Ramsay is married to Atira CEO Janice Abbott. He has always maintained that he recuses himself from any decisions involving his wife.

Ms. Abbott has attracted an outsize amount of both praise and criticism over the years for her experiments with different kinds of housing – such as a shipping-container project on Vancouver’s Alexander Street and the combination of social housing and market rentals in the Olivia Skye building on East Hastings, which was done in conjunction with private partners – and for problems in the many projects her organization runs, including violence and complaints from tenants about the conditions in the buildings. Ms. Abbott has been on the board of Canada Mortgage and Housing Corp. since 2017.

She has frequently said she is hobbled in her dealings with BC Housing because she doesn’t want to do anything that would put her or Mr. Ramsay into a conflict of interest. That has made it hard to negotiate with the agency regarding what she says are exceptional difficulties for an organization such as hers, which is managing some of the most rundown housing in the city. Atira manages at least a dozen older residential hotels that the province has acquired over the years, including many purchased during the run-up to the Olympics.

“We have had since 2007-ish a bunch of unrenovated buildings, and there’s been a complete lack of understanding of what it took to keep those buildings in reasonable shape,” she said.

“It’s clear BC Housing did not fully understand the cost of maintaining [single-room occupancy units] or the cost of supporting tenants with complex needs,” she added. “They kept comparing our maintenance costs to their other buildings and questioning our maintenance expenses.

“The 2018 review took close to a year. Our maintenance costs were all vouched and the auditor looked at how we were resourced, especially with respect to certain functions like accounting and administration. The result of the review is that our budget was righted in 2019. Like all non-profits, we continue to advocate for what we believe are more appropriate resources for expenses like maintenance costs and staffing, but at least we are on an even keel.”

Other major non-profit providers declined to comment on the BC Housing review or any of the other issues.

BC Liberal politicians, who were unaware of the review until contacted by The Globe, were circumspect in their criticism of the agency itself.

“With no realistic plan to achieve their campaign promises, the NDP government has overloaded BC Housing with responsibilities without the resources or strategy to achieve what British Columbians expect of them,” Opposition Leader Shirley Bond said in an e-mailed statement. “With the NDP’s abysmal failure when it comes to doing anything about skyrocketing housing costs, even if there is a review of BC Housing, which may indeed shed light on some internal structural issues, in the end it will be this government’s lack of a serious plan to make life more affordable for British Columbians that has led to the problems people are facing throughout this province.”

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