VICTORIA – Top managers at a Vancouver charity that’s supposed to help the poor in the Downtown Eastside have racked up hundreds of thousands of dollars in limos, overseas trips, meals, parties and other perks because of lax financial oversight, government auditors announced Thursday. The two audits, conducted by Vancouver Coastal Health Authority and BC Housing, paint a picture of lavish expenses for Portland Hotel Society managers and directors at a time when the society — charged with operating many services for the Downtown Eastside’s at-risk population — is teetering on the verge of financial trouble and potentially unable to pay its debts. Auditors also outlined the oversight of almost $29 million in government funds paid to PHS annually, which are supposed to be used to run low-income supportive housing and addiction services, but which were also spent for a variety of other expenses without proper approval or documentation by the society board of directors. Health Minister Terry Lake said he did not believe the problem to be systemic, but could not say for sure whether audits would show similar misuse of spending at any of the other services contracted out by the province. “There are a lot of service providers out there. BC Housing works with over 700 projects throughout the province and I can tell you the vast majority do excellent work and are highly accountable and this just has not been a problem across the system,” he said. “This is an exception that we feel compelled to correct.” The leadership team of the Portland Hotel Society — Mark Townsend, his wife Liz Evans, Dan Small and Kersten Stuerzbecher — chose to resign after the government gave the team an ultimatum earlier this week. Townsend said they were given a “stark choice” to either step down or fight a legal battle that would put the society into receivership. The board of directors, which auditors say was not keeping proper oversight on expenses by employees, was also dismissed. Managers and directors expensed more than $69,000 over three years on restaurants, and more than $300,000 on travel to Vienna, Paris, Istanbul, New York City, Los Angeles, Banff and Ottawa, among other locations. Hotel rooms of up to $880 per night were charged for trips to the United Kingdom and Austria, including flowers, alcohol and spa services. There were also more than $8,658 in limo fees in 2013, a trip to Disneyland in Anaheim, a $5,832 cruise for a PHS manager, a $917 baby shower and a $7,025 “celebration of life” for a deceased employee. “The nature of expenditures incurred by PHS are a serious concern as they are not reasonably in line with providing programs and services,” read a Vancouver Coastal Health audit from Internal Audit Services released Thursday. “There is a significant lack of supporting documentation for expenses, particularly on credit card expenses.” Overall, the PHS is in a “weak financial condition” and could have trouble paying its obligations if they came due, auditors found. Lake said an interim board has been put in place made up of senior staff from Vancouver Coastal Health, including Dr. Patricia Daly. The board will oversee restructuring and recruit a new management team “as soon as possible,” he said.

A second audit, completed by BC Housing and KPMG in July 2013, also flagged a number of spending and governance problems, but was only released Thursday. BC Housing said in a statement that it was “unable to obtain satisfactory answers” to the concerns raised in its 2013 audit so it hired consulting firm Deloitte Canada to help Portland Housing Society change its practices. “While PHS cooperated to some extent, we did not believe they were addressing the most serious concerns so we sought legal advice earlier this year to explore options to ensure that public funds were spent appropriately,” BC Housing said in a statement. The government housing branch said it “moved as quickly as possible” to addressing the spending irregularities. Lake said the government was aware of spending concerns among management at PHS over many years but it took time before the government could act. Lake did not know whether a criminal investigation would be launched by RCMP into any of the “questionable” misuse of public funds and said the government has no immediate plans to recoup the financial loss. The RCMP refused to comment on whether it is investigating. “Our main concern is to make sure we can provide services to the vulnerable sector of our society, and in terms of recovering money that would be secondary at this point,” said Lake. “We want to put all our efforts into this transition.” Among the expenses listed in the audit, the $1,600 a month for office space inside Townsend’s home is particularly concerning, given that someone is spending money on something that is not required, said Lake. He characterized that spending as “inappropriate” and “unethical,” adding that the money should have been used to help people. Townsend said he had been working with government auditors for more than a year to try to address concerns. But he rejected many of the conclusions. “Auditors just don’t understand the context of the work we’re doing,” he said in an interview. “When the auditors first arrived they had to be escorted through the Downtown Eastside. When we gave them a tour, they seemed to be uncomfortable and not want to look at the projects … not that they are bad people.” There is one line in the audit that points out the society is providing adequate services for its clients, which Townsend said is the most important issue to him. He said many of the international trips were to promote the fight to keep the supervised injection site open, and that the “majority” of other travel costs were paid for using private and non-government funding. Townsend also said some of the expenses were to help staff, who have difficult jobs, in lieu of benefits that the society does not provide. “It’s a very tough job to do and we don’t have an employer assistance program, we don’t have municipal pensions, we don’t have long-term disability,” said Townsend. Although the society’s books show a $3.9-million surplus in the last fiscal year, that was only possible because of a one-time $6 million sell-off of an investment, said auditors.