More than a year ago, the president of Vancouver Coastal Health threatened to cut off all contracts with the Downtown Eastside's activist non-profit organization, PHS Community Services.
It was not over how PHS was spending the $8.5-million it got for running Insite, the country's only legal supervised-injection site, and other services. VCH president David Ostrow was concerned about daily protests that Mark Townsend, the director of PHS, was staging at the health authority's offices against changes to funding for one of its women's programs.
"The protest activities have become increasingly disruptive, invasive, and aggressive to the extent that VCH must re-evaluate being associated with such an organization," Dr. Ostrow wrote in a letter to the PHS board obtained by The Globe and Mail through a Freedom of Information request.
"The manner in which this is occurring is unacceptable and undermines the credibility and suitability of PHS as a service delivery partner to VCH."
Dr. Ostrow, who said the organization would no longer deal with Mr. Townsend as the primary contact, was not the only one at loggerheads with the PHS. The agency's other major funder, BC Housing, also sparred with PHS over funding to keep a shelter open or to hire more staff, sources said.
The province is poised – as early as Monday – to push PHS into receivership or put it under strict supervision because of alleged financial irregularities.
A financial review by BC Housing and an audit by the health authority have led the province to conclude it has to step in to oversee how PHS is spending the money, $17-million in all, that the housing agency and VCH provide, according to multiple sources who are familiar with the review.
If a takeover happens, it will be a stunning reversal of fortune for an unconventional organization that built an empire of non-profit housing, health programs, social enterprises and real estate in 20 years. It would also mean a huge shift in the balance of power, the types of services provided, and media attention in the Downtown Eastside.
Mr. Townsend has repeatedly said during the past few months that PHS continues serving a challenging group of residents and that there are no problems with debt or inappropriate spending.
He, like others, says he is waiting to see what is in documents the province will make public shortly.
"It has terrible ramifications if all of this is true," said Philip Owen, who was mayor of Vancouver during the decade when PHS, which started in 1993 as the Portland Hotel Society, began making its mark. "It will be very hard on the Downtown Eastside and very hard on the city. They grew very quickly and they did a lot of good."
PHS never took standard approaches. The housing had a no-eviction policy, it hired people in rock bands or artists rather than social workers, and staff would go drinking with residents of the subsidized housing, take them camping, or give them hockey tickets.
"The Portland has always been on the edge. They were dealing with a lot of people who don't fit into the normal curve, so the normal policies and procedures didn't fit," said Jim O'Dea, a former board member who was chair of the BC Housing board when the NDP was in power. Mr. Owen and Mr. O'Dea said they never heard of any inappropriate spending.
PHS now manages almost 1,000 housing units over 16 sites, including a new social-housing complex designed by Arthur Erickson in the late 1990s. PHS worked with Vancity credit union to set up a small branch – a key service for people often turned down or charged high fees elsewhere. It opened up social enterprises – cafés, laundry services, chocolate making, beekeeping – to help employ some of its residents.
And the group, whose top management team included Dan Small, husband of NDP MLA Jenny Kwan, was very activist. It staged public events and rallies to get the supervised-injection site it now runs.
But its financial ventures and some spending were always an issue. PHS bought real estate separate from its housing operations and has $58-million in holdings. It has passed four different borrowing resolutions in the past six years, its corporate records show.
Its most recent filing with the Canada Revenue Agency's charity-tracking branch indicated six people were paid $120,000 to $160,000, and another four $80,000 to $120,000.
PHS also always had its critics in the Downtown Eastside, where many non-profit and activist groups do overlapping work.
"The Portland is a zoo," said Ann Livingston, who worked for years with the Vancouver Area Network of Drug Users, which lost contracts for needle exchanges and peer counselling to PHS. "A lot of other people like them, but they've never had to work with them.