A new report by Nova Scotia’s auditor general slams the lack of oversight and financial management by the board of the IWK Health Centre in Halifax.
Michael Pickup says he was shocked to see the “extent and severity of weakness in basic financial management controls” at the largest children’s hospital in Atlantic Canada.
Pickup’s report says the IWK’s board of directors did not create a culture that promoted accountability for the functioning of internal controls.
“The lack of adequate oversight by the board and management significantly increases the risk of fraud, theft, unauthorized transactions, inefficient spending and wasted money which the IWK Health Centre could have used for other organizational priorities,” states the report, released Tuesday.
It found the board and management “did not create an expectation to report and investigate fraud” and didn’t have a fraud policy in place.
The report also found 78 per cent of board and executive travel and other expenses paid did not comply with policies, including 32 instances where expenses were inappropriately approved. As well, 12 of 14 board expenses were approved by management but not the board and nine of the expenses had no receipts.
The report came after Pickup said he would conduct the audit in the summer of 2017. An expense scandal eventually claimed the jobs of two executives; CEO Tracy Kitch and chief financial officer Stephen D’Arcy.
In October, police charged the two former executives with fraud and breach of trust.
Kitch faces charges of fraud over $5,000 and breach of trust, while D’Arcy faces charges of breach of trust, unauthorized use of computer and mischief to data. Both are scheduled to appear in Halifax provincial court on Dec. 20.
The report found the former chief financial officer submitted an $11,500 travel claim that included expenses outside the 60-day timeframe required by IWK Health Centre policy and that one of the expenses had been incurred 173 days before the claim was submitted.
It also found that in January 2016 the former chief financial officer submitted and inappropriately authorized two expense claims from 2014 for another member of the executive team totalling $2,000 with neither claim having receipts to confirm or support the expenses.
The report blamed business policies that were outdated and said appropriate policy guidelines were not developed.
As an example the report said management had not updated the corporate signing authority policy since 2012 and there were “no policies to guide staff on hospitality expenses, internal meeting expenses, staff social events, or gifts of appreciation.”
WATCH: Two former IWK Health Centre executives charged
And although management established a whistleblower process in May 2018 and completed a fraud risk assessment in June, the measures were not in place during Pickup’s audit period.
“Without policies that provide clear guidance and create clear expectations there is an increased risk the IWK Health Centre will use public funds inefficiently or inappropriately, or staff will not appropriately safeguard assets,” says the report.
Procurement controls were also lacking and allowed individuals to either make unapproved purchases or override processes altogether. Pickup said his team was unable to find eight of the 10 procurement contracts it looked for and there was no evidence of quotes.
The report said 16 of 25 transactions were not “signed or stamped to show goods or services were received before payment was made.”
Pickup makes 10 recommendations aimed at improving financial controls and risk oversight.
In its response to the report, the IWK Health Centre said Tuesday it is committed to addressing the recommendations, adding that “significant progress has been made.”
“The IWK board is confident that new executive leadership will continue to drive momentum and results around this important work, including broadened reporting and disclosure to the board on a regular basis.