Departing financial controller latest to flag concerns around Charlottetown finances, review process

A senior finance official who just left his job with the City of Charlottetown is the latest to raise concerns around the city's financial administration — and in particular about the process the city has launched to review similar concerns from other high-level staff as they left over the past three years.

Stephen Wedlock was Charlottetown's controller for three different periods of time starting in August 2016, with the most recent stint beginning in July 2019. He resigned last week, and is moving to a new position with the Mi'kmaq Confederacy of P.E.I.

In a written statement, he told CBC News that significant employee turnover in the last few years "resulted in a severe thinning of qualified staff" within the city's finance department.

He also said the ensuing demands on his position led to an "unsustainable working environment" that affected his mental and physical health.

Wedlock said he was the last designated certified professional accountant (CPA) to be working for the city before he left. He believes his departure will make it impossible for the city to complete preparatory work on its audited financial statements before auditors arrive in mid-August to go over the books.

Wedlock also made it clear he feels the city should not use those same auditors, from the firm MRSB, as part of a separate review of Charlottetown's finances. He said the city is taking the wrong approach if it truly wants to put to rest financial concerns raised by two previous deputy CAOs, both of whom were fired by the city's previous CAO Peter Kelly.

Wedlock said those concerns have never been properly addressed or investigated by the city.

Council fired Kelly without cause in May of this year, shortly after CBC News reported on the concerns of former deputy CAOs Scott Messervey and Tina Lococo. 

Before his departure, Kelly issued a statement saying in part: "There is an obvious need for a review of practices, policies and procedures … It is of utmost importance that these issues are addressed, and full accountabilities are upheld." 

In his statement to CBC Wednesday, Wedlock said a particular type of audit called a specialized assurance engagement, carried out using standards set out by CPA Canada, is required "to quell the concerns of the residents of Charlottetown with respect to issues raised" by Messervey and Lococo.

He said that type of audit would go beyond the scope of a regular financial audit. It could examine whether spending policies and bylaws were adhered to, and it would require the firm conducting the review to provide a written opinion on the results.

There is an obvious public perception of lack of independence or conflict of interest with the arrangement.— Stephen Wedlock

It's not clear, even to the city's departing controller, what type of audit or review the city is currently engaged in. 

Acting CAO Donna Waddell has told councillors that city staff are working with auditors at MRSB on the review, and that an outside consultant will eventually be hired to provide oversight.

But Wedlock said he had not seen any terms of reference for the review by the time he left his position. When CBC News asked the city to provide those terms, a spokesperson referred to a different document — a recommendation for the financial review Waddell provided to members of council.

CBC sought comment for this story from MRSB and the auditor handling the city's file on Wednesday morning, but has not heard back. 

This is the same firm that in 2017 said it couldn't confirm the value of the surplus reported by the City of Charlottetown or its cash flow position. In an unusual move, the MRSB accountants provided a "qualified opinion" on the city's financial documents, essentially placing caveats on their endorsement that those documents provide a fair representation of the city's financial position.

The firm gave the city another qualified audit opinion the following year.

'Kind of like auditing the audit'

At a meeting on Monday, Mayor Philip Brown and various council members said the financial review is an issue they're hearing about on the doorstep leading up to November's election. Some expressed ongoing concerns or confusion around whether the process will be independent of city hall.

"When we talk about an external review — I'm not sure. Either I'm not understanding or residents aren't understanding," said councillor Julie McCabe. 

"The materials will be prepared by myself with the assistance of the auditors [at MRSB]," explained Waddell. 

When that work is eventually handed off to an as-yet-unnamed external auditor, Waddell said that will be "kind of like auditing the audit."

But Wedlock said asking an accounting firm the city already works with to be involved in the review could put that firm in a perceived conflict of interest.

"There is an obvious public perception of lack of independence or conflict of interest with the arrangement," he said.

"To avoid any potential factual or perceived lack of independence or conflict of interest," Wedlock said the review should be conducted by an accountant or firm "that has no previous association with the City of Charlottetown."

Question of maintaining independence

Another accountant, Martin Ruben, shared a similar opinion. He is an Island-based CPA who previously worked in the office of the Auditor General of Canada and in the Cayman Islands.

Ruben told CBC News that using the city's existing auditing firm "would raise a number of questions about the ability to maintain independence for the purpose of conducting the financial audit in the future.  

Recent events have shaken the public's confidence in the city's administration.— Martin Ruben

"In effect, they would be auditing policies, systems and practices that they had a hand in developing."

Ruben has been advocating for Charlottetown to create a position for a city auditor — who would function much like P.E.I.'s auditor general does for the province — as a way to improve governance and accountability.

"Recent events have shaken the public's confidence in the city's administration," he said.