Lethbridge supervised consumption site loses government funding after audit finds $1.6M shortfall

The Alberta government has halted grant funding to Lethbridge's only supervised consumption site after a government-ordered audit found $1.6 million of public money unaccounted for.

A Deloitte report, released by government Thursday, found that some of the money charitable organization ARCHES received to help clients was instead used to pay for travel in Portugal, unauthorized overtime pay and to buy thousands of dollars worth of gift cards.

"The degree of misappropriation, misspending public money, violation to their contractual obligation, and the poor governance of the organization displayed is deeply, deeply troubling," Jason Luan, associate minister of mental health and addictions, said Wednesday in an interview.

He said he is disgusted that public money meant to help vulnerable people in life-and-death situations was allegedly misused or went missing.

"Stuff like that, there's zero tolerance. How can you do that?" he said.

In the report, the consultants said they can't comment on the legality of how the money was handled. Luan plans to send the audit results to police.

The minister has told Alberta Health to immediately cease provincial grant funding to ARCHES. Their funding was to end in September, and the board was hoping for it to continue thereafter.

Luan has also asked Alberta Health Services to set up a mobile supervised consumption site in Lethbridge until the government can find a longer-term solution.

Organization grew rapidly after grants received

In March, Luan said an anonymous tip about financial mismanagement at ARCHES prompted the government to ask a contractor to audit how the organization was managing provincial funds. ARCHES also receives funding from the City of Lethbridge and the federal government.

The report said ARCHES received $14.5 million in provincial funding between October 2017 and March 2020 to offer supervised consumption services (SCS) and an Indigenous cultural program called I'taamohkanooshin, or Everyone Comes Together (ECT).

ARCHES, initially founded in 1986 as the Lethbridge HIV Connection, renovated an old nightclub building and opened a supervised consumption site in February 2018.

As its programs and budget expanded rapidly, so did the organization. By this winter, ARCHES was reporting as many as 800 visits per day from people to inject, snort, inhale or ingest drugs.

ARCHES' filings with the Canada Revenue Agency show that in 2015 the organization had nine employees and a budget of $260,000. By 2019, that had grown to 177 employees and a $7-million budget.

The site has been controversial, facing allegations it leads to disorder and discarded needles near its location in the centre of the city. Last year, a Lethbridge city councillor's motion to ask the province to halt its funding failed.

• Alberta premier says province may close or relocate some drug consumption sites
• 'A system of chaos': Supervised Consumption Services Review Committee releases findings

After government-funded auditors arrived to search ARCHES' books on March 4, the organization's board called upon another consultant to do their own audit of all the organization's spending, board chair Aaron Fitchett told CBC last week.

The board also hired a Lethbridge business consultant to help with organizational and cultural changes.

Fitchett said last week he hadn't yet seen the results of either audit. He said the board and employees at ARCHES are motivated to improve the organization.

"Sometimes the truth stings," he said. "If you have to face a tough reality, then you have to face it, and you have to make a decision."

The organization is heavily dependent on provincial funding, which made up about three-quarters of its revenue in 2018-19, the government audit said.

With supervised consumption services under the microscope by the government, Fitchett said employees have been worried about the future of provincial funding.

Losing the roughly $6 million annually would mean a "dramatic change in scope of service," Fitchett said last week.

"It would mean restructuring, obviously, but we're already working on that," he said. "We're already working on doing the things that will make the agency better and stronger."

Audit finds missing receipts, documents

Deloitte's audit found the organization allegedly violated the terms of its grant agreement with the government and its internal policies in numerous ways.

The auditors found provincial funding was mixed up in bank accounts with other money, which violated the grant agreement and made it difficult to track how public funding was used.

About $13,000 of interest from a bank account that held provincial funding was used to pay for car rental and hotel rooms in Portugal, along with travel expenses in Vancouver and Calgary.

The organization's credit card was used to pay for a $2,200 television that auditors couldn't find, $1,060 for "supplies" from a dealer of smoking accessories and $2,100 worth of gift cards at a Lethbridge oil change business. The report noted the owner of the oil change business was in a relationship an ARCHES senior executive.

The report said a senior executive told auditors some of the charges were put on the corporate credit card in error. The senior executive reimbursed ARCHES for about $2,000 worth of expenses.

The organization also purchased $1,129 worth of gift cards for Boston Pizza, iTunes, Shell, Cineplex, The Keg and other companies that employees later said were Christmas gifts for workers and board members.

The auditors said the unnamed senior executive was authorized to receive $80,000 a year in salary from the SCS grant. They found the executive was paid nearly $275,000 in 2018-19, which included $70,000 of overtime pay, not all of which was properly authorized.

The auditors were unsuccessful in figuring out how many people ARCHES employed. Auditors said between 32 and 126 more people were employed by the organization than the grant stipulated.

Organization leaders violated ARCHES policies and procedures by improperly dealing with conflicts of interest when hiring and choosing vendors who were relatives, hiring people for unposted jobs, hiring a worker without an interview and hiring someone unqualified for a role, the report said.

Missing paperwork was endemic, they said.

"We were generally unable to locate any supporting documentation relating to the expenditures for the 2017-18 fiscal year," the report said.

Stacey Bourque has been ARCHES' executive director since 2014.

Last week, board chair Fitchett wouldn't say if she is still working in the role. He said two unnamed directors are currently managing operations of the organization.

Concern echoed by independent consultant

In May, the board hired business consultant Mandy DeCecco-Kolebaba to improve the structure and culture of ARCHES.

CBC News obtained a five-page update she provided to the provincial government upon request. It is not a final report, and her work is ongoing, she said in an interview last week.

The organization laid off two workers who were being overpaid for their experience and roles, her letter said.

After interviewing ARCHES employees, DeCocco-Kolebaba wrote that people described the agency as "unhealthy" and "toxic." Workers were concerned about the misuse of funds, unqualified managers and poor transparency and community partnerships.

"Not one person has been hired appropriately," DeCocco-Kolebaba wrote. "There is a grooming culture here that is alarming …"

Both Fitchett and DeCocco-Kolebaba said they were hopeful that ongoing changes would strengthen ARCHES.

After conducting a provincial review that focused on the negative community effects of supervised consumption sites, rather than lives saved or overdoses reversed, critics have accused the government of ideological opposition to harm reduction for people with addictions.

The government has focused funding on expanding the number of inpatient treatment spaces across Alberta.

Luan said ideology isn't driving the ARCHES funding cut. He said the organization has lost his trust.

"My utmost responsibility is to make sure that people who depend on our services get the service they need, particularly in this one, when their life is at risk, when life and death is at question," he said.