Yesterday, Jason Luan, the associate minister of mental health and addictions for Alberta, announced that the provincial government was ending its funding agreement with ARCHES Lethbridge.
The funding agreement allowed ARCHES to run its supervised consumption site—the busiest, most comprehensive site in Canada, and possibly the busiest in the world–and its I’taamohkanoohsin programme.
The justification they cited was a recently released report from the Corporate Internal Audit Services of the Alberta Treasury Board and Finance, which found significant evidence of financial mismanagement within ARCHES.
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I won’t be reporting on the details of the audit, as such details are contained in both links above and in various other news stories published by mainstream media outlets.
However, there are a few points that I think are getting missed in the government announcement and in the media coverage and attached public discourse.
Based on rhetoric I’ve seen, some people seem ecstatic with the government’s decision or they feel betrayed by board and management of ARCHES.
Ultimately, any financial irregularities are the responsibility of senior management and the board, and they should be held accountable. However, I think it’s misguided—and even dangerous—to shut down the entire operation because of insufficient financial oversight.
I’ve had some people argue with me that the province isn’t shutting down ARCHES’ supervised consumption services. However, given that they’re eliminating 71% of ARCHES’ operating revenue and bringing in a “temporary mobile overdose prevention site” with only a 2-person capacity, I don’t see how anyone can see this as anything but a shutdown.
Even so, after having read the 22-page report, I have to say that I don’t see any of this as maliciousness or ill-intent. I’m no forensic accountant, but I think this quote from the audit sums up the situation for me:
Weak internal controls, inadequate operational procedure documentation, a board lacking financial acumen, and potentially overbearing management based upon interviews held, have resulted in ARCHES having inadequate maintenance of its accounting records.
Based on my reading of the report, it seems to me that pretty much everything falls under this characterization of the situation.
For example, according to the government announcement, “$1,617,094 [of the funding was] unaccounted for due to missing documentation for expenditures from 2017 to 2018.”
I see people characterizing this as theft. And while it’s possible it was theft, it seems to me that the audit’s saying these expenses were missing their receipts. Framing it as theft is saying something that the report doesn’t claim. Again, it could be theft, but it could be poor recordkeeping.
Here’s another example: “$13,000 of interest off ARCHES bank accounts was used to fund parties, staff retreats, entertainment and gift cards.”
This in itself isn’t really an issue. Non-profits often hold staff retreats, Christmas parties, and what not. The problem for the audit was that there was no way to be able to determine which funding source paid for those expenses. While it might have been the provincial funding, it might not have been. That’s what the audit was pointing out.
Another one: “The number of ARCHES employees is greater than allowed by the grant agreement.”
Well, kind of. This assumes all employees were full-time. The auditors indicated that if some of the positions were part-time, it’s possible for the number to fall within the grant agreement limits. The issue was that it wasn’t possible to verify which ones were full-time and which ones weren’t.
One final one: “$4,301 spent on European travel for management to attend a conference in Portugal.”
I’m not sure what the issue is here. Portugal has decriminalized personal drug possession. They have significant harm reduction practices in place. Having staff from a harm reduction organization attend a harm reduction conference in a country leading the world in harm reduction makes sense.
There’s no doubt from the results of this audit that finances were mismanaged at ARCHES. That’s abundantly clear.
However, what isn’t clear is why that means all provincial funding must be yanked. Why not simply fix the problem? If staff have poor financial management practices, help them implement improved practices. If the board isn’t overseeing budgetary issues properly, help them improve their budgetary oversight.
In fact, ARCHES was already on track to doing this very thing. This past March, around the same time the audit began, they initiated an organizational review.
While implementation of the review is still underway, the review identified several actions that ARCHES has already implemented or will implement and that seem directly related to the issues highlighted by the audit:
- A new, streamlined organizational structure with extensive operational oversight
- New board recruitment strategies and policies
- Ensuring a consistent and responsible compensation policy in line with similar organizations
- Enhanced financial oversight
If the audit highlights several financial and governance issues and the organizational review implements changes to address those same issues, it seems to me that yanking funding might be premature.
Perhaps a better solution would be to extend funding for a short period and see if the new changes improve the intended metrics.
Regardless, if there was something nefarious in the financial operation of the site—and I’m not convinced that there was—why not directly deal with those who were nefarious? Certainly the nurses responding to overdoses had nothing to do with the finances, so why not let them continue doing their important work?
Back in 2006, when I was still working at the University of Lethbridge, my boss was caught defrauding the university. The university’s response wasn’t to shut down our entire department; they simply removed my boss. Then we implemented policies and procedures to prevent something like that from happening again.
When the province discovered last year that the former CEO of the Alberta Energy Regulator mismanaged public funds, public assets, and public services, did they defund the AER? Of course not.
Has the provincial government shut down AIMCo after it was found to be mismanaging public deferred wages in order to invest in oil and gas companies? Nope.
If the administration of a hospital had mismanaged funds, would the government just shut down the hospital? Or would they replace the administrator(s) and improve polices?
Hmmm. Actually, on second thought, maybe I shouldn’t give them any ideas.