Fudging the figures and playing the expenses

Are the financial improprieties of the IWK Children’s Hospital’s former president and CEO the first shoe to drop on fiscal mismanagement of the health care system?

Those in charge of public institutions always imply that thanks to their extreme due diligence, vetting and measured inquiry into people, ideas and treatments that we hire the best people, have the best system and can be proud of the results. Really?

How is it someone can be judged competent to run a $250-million-a-year budget, yet can’t distinguish between her personal and corporate credit cards? With a salary of $296,000 a year, the CEO should qualify for a sufficiently high credit limit to cover her many flights, car hires, hotel stays, shopping and entertainment. She shouldn’t have to slap it on the public’s card.

Was putting $47,000 in personal expenses on the IWK’s credit card greed, incompetence or carelessness? Given the duration of the expenses – charged over 27 months – this wasn’t some one-off impetuous, indulgent weekend that got away from her. It was systematic spending using public money. Any one reason would be grounds for dismissal.

It raises the question: Is there such a sense of entitlement among the upper echelons of public servants and heads of organizations that they feel “entitled to their entitlements”?

Among the questionable expenses, were two airfares that originally appeared as much smaller charges. A Halifax-Toronto flight initially listed for $517.54 was later upgraded to $1,035.08. A flight to Ottawa was originally recorded as costing $345.89, then charged at $778.17. Looking at these costs where they last-minute, bought-at-the-gate purchases or upgrades to business class? Government regulations stipulate that only flights longer than five hours can be upgraded. Flying time between Halifax and Toronto varies by plane, but averages 1 hour and 50 minutes so wouldn’t allow for business class tickets.

The IWK CEO also expensed $5,876 for a table at the Women’s Executive Network gala. The IWK said this was “consistent with the leadership mandate of the CEO.” Okay, what’s the ROI (return on investment) for that purchase? It reminds me that to celebrate the 25th anniversary of Progress magazine, one of the hospitals – I forget now whether it was the IWK or Capital Health – hosted the bar for the 500 invited guests at the World Trade and Convention Centre. I didn’t understand the benefit to health care for providing such largesse.

Equally troubling is the IWK attitude towards this mismanagement. When the CBC originally broke this story on June 22nd, the IWK’s chief financial officer Stephen D’Arcy said he was “absolutely confident” the hospital now has a good system in place and “We have a very robust control structure.”

Obviously the IWK’s structure wasn’t as good as D’Arcy and the Board would have us believe. If not for the CBC filing a freedom of information request these expenses might never have been questioned by IWK staff, who worked for the president, and thus would be ignored by the board. On June 27, then board chairman Robert Hanf, who had previously been president of Nova Scotia Power, said the board has absolute faith in the health centre’s leadership team and the systems in place to keep track of financial dealings. “Let me assure you — there has not been any financial improprieties whatsoever.”

Ah yes, nothing to see here, move along, everything’s fine. It’s being handled. Well, now we know there was, it wasn’t and wasn’t. Those readers who are shareholders in Nova Scotia Power via Emera might be concerned about this casual attitude over expenses and right and wrong. If Hanf felt that about the IWK, what is happening to shareholders’ money at Emera?

This everything-is-fine-attitude is what happens when you have weak, ineffectual, drop-in boards who meet for lunch to breeze through an agenda and act as cheerleaders giving legal cover to the actions of executives. When has any health board ever said no to the executive?

Right now we’re looking at the IWK. But what about the Nova Scotia Health Authority (NSHA)? How clean are their operations and how lean are administrative costs?

In the final days of the election, as if hoping to edge the government out of office, we learned the NSHA had spent $500,000 on furniture for the executive offices. Was this necessary? Where’s the complete inventory of what was purchased? Did it go to tender?

We shouldn’t be surprised by such expense. NSHA President and CEO Janet Knox is not known for frugality. When she was president of the Annapolis Valley District Health Authority administrative costs averaged one-to-two-percent above the national average. That doesn’t sound like a much until you consider the scale. And the perks are plentiful. For example, every Monday-to-Friday, except holidays, morning and afternoon snacks and a choice of two lunch entrees for 160 white collar workers was and is trucked 5kms across Kentville from the Valley Regional Hospital kitchens to the executive bunker in the town’s industrial park. Unlike every other public employee, Knox felt it acceptable to provide a subsidized lunch for the executives and their support team. (Is this a taxable perk? Should it be?) And, given her history in Kentville, do NSHA head office staff have access to subsidized lunches?

And to make things cheery for the holidays, the Valley Health executives authorize staff from Middleton to drive to Kentville to decorate the executive offices. Valley Regional Hospital staff are expected to decorate the hospital themselves.

Looking at the NSHA vice presidents there is at least one instance of, at best, a highly questionable action by someone accepting a six-figure public salary, and which might also fall into the same category of what the IWK CEO was just caught in. Whether a poor personal choice or a diddle with expenses, this should exclude at least one of the current NSHA VPs from dreaming of assuming Knox’s position when she retires (Knox qualifies for retirement in the next four years).

Back at the IWK, the board spent $60,000 on accountants to sort through the CEO’s expenses. Current board chair Karen Hutt, also with a Nova Scotia Power background, told The Chronicle Herald she isn’t bothered that the fix to the accounting problem cost more than the expenses.

Hutt’s attitude is extremely generous for an organization that in 2012 was so stretched for money it asked parents to supply diapers for their hospitalized children as a way to save $10-20,000 a year.

The IWK is one organization with an expense problem. What about the much larger NSHA and all the other government boards, agencies and commissions? What happens to one happens to others.

This is a prime example of why we need activist boards and not more groups of back-slapping insiders.

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4 Responses to Fudging the figures and playing the expenses

  1. Bubbie says:

    It is no wonder I do not give to charities.

    I once served on a board of directors for the GCWCC, Government of Canada Workplace Charitable Campaign and it was a real eye opener for me. The GCWCC is a federal fund raising foundation that raises money for the United Way Campaign and solicits government employees for donations.

    I followed the flow of money and found the GCWCC has a very low overhead for administration costs although employees are given time off from regular duties to volunteer to serve as directors and committee members. Money is collected and employees have a say what charity they want their donation to benefit.

    So, after administration costs are figured into what the other charities charge, the financial benefit is reduced up to 50% depending on the “non-profit” organization receiving the benefits. Administrative costs involved everything from buying stationery, office equipment to a volunteer ” thank you” event that could involve a dinner or luncheon at a fancy restaurant involving consumption of liquor.

    One cancer charity I read about was organized by a California company that took 50% of the proceeds of the funds raised and after the administration costs were factored in by the charity that was supposed to benefit only about 12 cents of every dollar raised actually went to the beneficiaries the charity was supporting.

    Other media reports suggest that “charities,” now known as “not-for-profits” are the fastest growing businesses in Canada. According to the CRA website, there are over 75,000 registered charities in Canada, 5,000 private foundations, and 5,000 public foundations. As far as I am concerned there is very little return, after all the billions that are donated, for the people these institutions are supposed to support and seeing how not only IWK CEO Tracey Kitch, but other charitable CEOs have been caught with their fingers in the cookie jar causes me to not want to donate to anything. For me, charity begins at home and family members are my priority, not some CEO that makes 300K a year caught dipping into funds that my grand-daughter’s grade three elementary class raised for sick children.

  2. Mary McDaid says:

    This is simply scandalous. That being said, until ordinary citizens realize their hard earned tax dollars are being used to subsidize open bars and catered lunches, it will continue. For most people, the link between the payment of provincial taxes, municipal taxes and fees and public sector spending is vague at best. There needs to be a very transparent and open access to all such spending, How can we discuss improved health outcomes, better working environments for healthcare workers and also assure the best possible utilization of precious funding if this kind of flagrant waste is allowed to continue?

    • The way for change is to constantly ask elected representatives why this is allowed and what, specifically, will they do about it. And when? We have to continue to talk about it throughout the year and not just when there’s an election call. In the last election we saw the traditional political promises being made: more money, more money, more money. Those who promised more money didn’t speak about accountability for how they money is spent or the decisions made by health executives. Only when politicians realize that we, the people, are watching and upset ALL THE TIME, not just during an election campaign, can we start to see movement.

  3. Someone has offered another comment about expenses. Unfortunately, they didn’t provide a real email address. I appreciate people reading this site and am honoured that people take time to share their ideas, insights and experiences.

    However, I won’t run comments from people I can’t confirm. If there are questions, as there is with the current comment, I can’t ask for clarification. I am fine with keeping identifies private, but I need to know who the writer is.

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