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Government pulls grant funding from Lethbridge safe consumption site citing fund mismanagement

Click to play video 'Lethbridge supervised consumption site ‘seriously mismanaged taxpayer funds’: provincial audit' Lethbridge supervised consumption site ‘seriously mismanaged taxpayer funds’: provincial audit
WATCH ABOVE: All government funding for Lethbridge’s supervised consumption site – managed by ARCHES - has been pulled after an audit revealed $1.6 million in missing funds, among other things. Eloise Therien has the details on the “funding misappropriation” and the mayor’s response. – Jul 16, 2020

The provincial government will no longer be providing grant funding to a Lethbridge supervised consumption site — and is looking into whether criminal charges are warranted — after an audit showed gross mismanagement of the funds.

The audit findings into the ARCHES supervised consumption site were released by the province on Thursday. (Read the full report at the bottom of this story.)

The report — completed by accounting firm Deloitte — found over $1.6 million was unaccounted for due to missing documentation for expenses between 2017 and 2018 and that a senior executive’s compensation totalled $342,943 in one year, despite the grant agreement allowing for a salary of $80,000.

Read more: Board-initiated review of Lethbridge supervised consumption site released, provincial audit still to come

The interest of ARCHES’ bank accounts — which the news release said was $13,000 — was used to fund parties, staff retreats, entertainment and gift cards.

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Click to play video 'Government looking into allegations of ‘financial irregularities’ at Lethbridge supervised consumption site' Government looking into allegations of ‘financial irregularities’ at Lethbridge supervised consumption site
Government looking into allegations of ‘financial irregularities’ at Lethbridge supervised consumption site – Mar 5, 2020

A full list of all the allegations of misspending is at the bottom of this story.

“It is disturbing and extremely disappointing to me that taxpayer funds allocated to this organization in order to serve the most vulnerable in Lethbridge would be used for European conferences, expenses for retreats, entertainment and gift cards,” Associate Minister of Mental Health and Addictions Jason Luan said in a news release.

“Our government will not stand idly by while millions in taxpayer funds are missing or misappropriated.”

Global News has spoken with ARCHES over the phone. The organization The organization said it would not be commenting on this matter at this time but the board of directors issued a press release later Thursday morning.

“Considering the media information that has been reported in connection to the forensic audit, the ARCHES board of directors understands that clients, staff, and community members will have a lot of questions and very real concerns. We have concerns, too,” the statement read.

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“We woke up to this news just like the rest of our community and at this time the full report findings have not been given to the ARCHES board of directors.”

Read more: Alberta government audits Arches-run Supervised Consumption Site in Lethbridge

According to the statement, the board is waiting until it has all of the information before commenting publicly.

The board said it plans to hold a news conference soon and will notify the media in advance.

Over the past two years, the government says ARCHES has received more than $14.4 million in government grants.

According to the news release, the auditors couldn’t even review all allegations made or provide a complete financial value for each allegation because of the state of the site’s records and related outstanding documents.

“The picture that was discovered was so awful,” Luan said in an interview with Global News Radio 770 CHQR Thursday.

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“This is at the expense of when the most vulnerable people’s lives are at risk.”

Luan noted the province’s findings show a “gross oversight” of governance, conflicts of interest and managing of public funds.

He added that during a time of such economic hardship amid the ongoing COVID-19 pandemic, the mismanagement of government funding cannot be tolerated.

“In a time of Alberta’s hard economic times, every dime that we use must be used for the right purposes,” he said.

“This is awful. I cannot believe this has happened.”

Click to play video 'ARCHES releases early results of organizational review with provincial audit still looming' ARCHES releases early results of organizational review with provincial audit still looming
ARCHES releases early results of organizational review with provincial audit still looming – Jul 8, 2020

Lethbridge Mayor Chris Spearman, a vocal supporter of the site, said he’s angry at the situation, as the city’s drug crisis is still very much an issue.

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“It’s going to be a challenge going forward.”

“We will work with the provincial government, we want them to be a partner and make sure that Lethbridge receives the services that it needs to deal with this,” he said.

Alberta Health Services has been asked to set up a temporary mobile site in Lethbridge to allow those who need this service to continue to get help.

Three recovery coaches will also be added to the region to assist with getting people into treatment.

“This is just the beginning of the cleanup of a big mess,” Luan said.

He added a more detailed plan for the future of the site and opioid recovery in Lethbridge will be released soon.

Read more: Lethbridge city council and ARCHES respond to premier’s supervised consumption comments

The government announced on March 4 it would be performing an audit of the organization. A board-initiated review of the site was completed in early July.

A summary of the allegations against ARCHES, as provided by the government, is as follows:

  • $1,617,094 unaccounted for due to missing documentation for expenditures from 2017 to 2018.
  • $13,000 of interest off ARCHES bank accounts was used to fund parties, staff retreats, entertainment and gift cards.
  • A senior executive’s compensation totalled $342,943 for calendar year 2019. This includes $70,672 in overtime for fiscal year 2019-20. The grant agreement allows for a salary of $80,000.
  • The Everyone Comes Together (ECT) program staff salaries and benefits also exceeded the amount allocated by the grant agreement by $16,000. The number of ARCHES employees is greater than allowed by the grant agreement. ARCHES maintained up to 126 employees. However, the exact number could not be verified.
  • $4,301 spent on European travel for management to attend a conference in Portugal.
  • Thousands of dollars in unverifiable travel expenses, including trips charged to company credit cards but not recorded in the ledger.
  • A senior executive’s family member was hired, earning $9,900. The auditors could not locate a resume or personnel file to verify any qualifications.
  • $7,557 for management retreats, including meals and mileage where documentation for spending was unclear.
  • The grant agreement requires the organization to maintain the funding received from Alberta Health within a separate bank account; however, the audit revealed that it was comingled with other funding sources. As a result of ARCHES co-mingling their accounts, the auditors could not verify thousands of dollars of expenses.
  • Proper personal conflict of interest declarations were not recorded when related individuals or vendors were hired or utilized.
  • Vendors were repeatedly secured in secrecy with a lack of transparency and accountability.
  • No petty cash reconciliations have been completed.
  • $1,129 was used to buy gift cards for board members for The Keg, iTunes, Boston Pizza, Earls, Gap, Shell, Chapters, Cineplex, Amazon, Starbucks, Tim Hortons, MasterCard, and Bath and Bodyworks. The expense was recorded as “Gift cards – Board Members.”
  • $2,100 was spent on gift cards to The Oil Changer – a business owned by a senior executive’s spouse.
  • $2,205 was spent on a television with no receipt documentation to support the purchase.
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