An accountant at an Abbotsford, B.C., treatment facility is under investigation and the charity has had to do an in-depth review of its books after about $1-million could not be accounted for over a nine-month period, an internal investigation by the Fraser Health Authority has found.
The “investigation memorandum,” dated May 21, 2021, and obtained through an access-to-information request, describes a period between April, 2020, and December, 2020. The investigation concludes $170,000 was fraudulently taken and the remainder is “in question,” the document says.
A firm conclusion on the total could not be reached because the facility’s books were in such disarray, the document adds.
Kinghaven Treatment Centre, founded in 1971, is a 70-day intensive residential treatment program for clients with substance-use issues. It is contracted by the authority, and the authority and other levels of government provided almost all of its $5-million budget during the time audited.
“While some of FHA [Fraser Health Authority] funding would have likely been a part of the defrauded funds, Kinghaven was not aware and was the victim of this fraud,” the investigation found.
“No review of prior years’ transactions was conducted in view of the lack of records and documentation and, since, Kinghaven [has] engaged an external auditor to conduct a forensic audit from 2017 up December, 2020,” the report notes.
In addition to the $171,000 missing because of fraud, another $130,000 is in question, the Fraser Health investigation says, adding, ”there are over $700,000 in transactions lacking sufficient documentation that remain questionable.”
The name of the accountant wasn’t visible in the memorandum as provided.
Sergeant Paul Walker of Abbotsford Police said in an e-mailed interview that police have been conducting a fraud investigation for two years after being alerted by Kinghaven, but the case has not concluded.
“Kinghaven is fully co-operating with our investigation and has been working with us to provide us with the necessary documentation we require,” he said.
Sgt. Walker said he could provide no further information and no charges have been filed. Search warrants linked to the case were filed in the fall of 2020, but they are sealed because of the investigation.
Kinghaven’s executive director Daniel Marks said the charity is working to ensure frauds “never happen again,” but he started his position just over a year ago and is not familiar with the case.
He conceded that mistakes were made, but added that accounting revisions had begun even before his arrival.
“I did a thorough review myself. Our whole policy was reviewed, so now we have double authentication – that is, two sets of eyes when paying bills.”
Mr. Marks said the organization subsequently had a more in-depth audit conducted by KPMG and no evidence of theft beyond the $171,000 identified by the Fraser Health Authority was confirmed.
His predecessor Tsitsi Watt said only: “The investigation is still ongoing with the authorities, so I can’t comment further at this point.”
All levels of government granted a total of $6.1-million to Kinghaven in 2020-21, amounting to about 95 per cent of its funding. In just that nine-month period under investigation, the charity had received $2.9-million from the Fraser Health Authority, $1.1-million from the B.C. government, $520,310 from Ottawa and $238,277 from BC Housing.
A spokesperson for Fraser Health said Kinghaven and its associated Peardonville House Society are contracted by the authority to operate 102 recovery beds across four programs. Clients are referred to the facility by Fraser Health.
Dixon Tam said the authority’s contracts with its providers require the organizations to submit audited financial statements to Fraser Health. The authority has the ability to trigger a more in-depth audit, and recently Fraser Health expanded its reporting requirements with its contractors “to increase the scope of financial information required for submission to Fraser Health each year.”
The health authority said in a further statement the responsibility of a further audit was Kinghaven’s.
“Fraser Health’s role was limited to conducting its own audit to ensure Kinghaven was able to continue to meet its contractual obligations to Fraser Health,” said the statement.
The authority said further changes to reporting requirements for its contractors were under way in 2021 and they weren’t prompted by the Kinghaven situation.
The investigation memorandum listed 10 weaknesses that enabled fraud, such as “no formal recordkeeping system, and many missing files/documents/invoices.”
The report said Kinghaven was not able to prevent fraud from occurring, or detect it, “due to inadequate governance, including lack of internal controls, segregation of duties, and verification/approval of financial transactions and records, operational bank deposits accounts, credit card and expenditures.”
In another Fraser Health internal report of August, 2021, the authors noted a “high-priority” problem in that the charity, contrary to its contract requirements, “does not currently have formal business [a] continuity plan and emergency plan for the society,” and has no disaster recovery procedures to continue functioning in case of any eventuality.
Patients admitted to the facility sometimes had to wait for treatment, with delays ranging from one to 29 days. The average was six days. The facility did not have clear requirements for when treatment cycles needed to be extended and the audit highlighted concerns around protection of personal information.
Since the fall of 2020, the report notes, the charity has taken some corrective steps. These included hiring a new finance manager, and engaging an external auditor to conduct a forensic audit of its records dating back to 2017. It also held monthly meetings with service providers to address the audit’s recommendations.