Health authority report indicates fraud of $170,000 at B.C. drug treatment centre

By Stanley Tromp

Globe and Mail, November 18, 2022

An accountant at a treatment facility in Abbotsford, BC is under investigation and the charity was forced to conduct an in-depth review of its books after about $1 million went unaccounted for over a nine-month period, an internal investigation by the Fraser Health Authority has discovered.

The “investigation memorandum” dated May 21, 2021, obtained through a request for information, describes a period between April 2020 and December 2020. The investigation concludes that $170,000 was fraudulently taken and the remainder “is suspect.” stands,” the document said.

A firm conclusion about the total could not be made because the facility’s books were so jumbled, the document adds.

Established in 1971, the Kinghaven Treatment Center is a 70-day intensive inpatient treatment program for patients with drug problems. It is commissioned by the Agency, and the Agency and other levels of government provided nearly the entire $5 million budget during the audited period.

“While some of FHA [Fraser Health Authority] The funding would likely have been part of the scam funds, Kinghaven was unaware and fell victim to this scam,” the investigation found.

“Given the lack of records and documentation and since by Kinghaven, no verification of prior years’ transactions has been conducted [has] hired an outside auditor to conduct a forensic audit from 2017 to December 2020,” the report said.

In addition to the $171,000 missing due to fraud, another $130,000 is in question, says the Fraser Health investigation, adding, “There are over $700,000 of transactions without adequate documentation that remain in question.”

The accountant’s name was not apparent in the memorandum as intended.

Abbotsford Police Sergeant Paul Walker said in an email interview that police had been investigating fraud for the past two years after being alerted by Kinghaven but the case is still ongoing.

“Kinghaven is fully cooperating with our investigation and has worked with us to provide us with the necessary documentation,” he said.

Sergeant Walker said he could provide no further information and no charges had been filed. Search warrants related to the case were filed in the fall of 2020 but sealed because of the investigation.

Kinghaven chief executive Daniel Marks said the charity is working to ensure fraud “never happens again” but he only took up the job a little over a year ago and was unfamiliar with the case.

He acknowledged that mistakes had been made, but added that the accounting revision had already begun before he arrived.

“I did a thorough review myself. Our entire policy has been revised so that we now have double authentication – that is, two pairs of eyes when paying bills.”

Mr Marks said the organization was subsequently under closer scrutiny by KPMG and no evidence of theft beyond the $171,000 identified by the Fraser Health Authority was confirmed.

His predecessor Tsitsi Watt only said: “The investigations with the authorities are still ongoing, so I cannot comment further at this point.”

All levels of government have granted Kinghaven a total of $6.1 million in 2020-21, representing about 95 percent of its funding. In that nine-month study period alone, the charity had received $2.9 million from the Fraser Health Authority, $1.1 million from the BC government, $520,310 from Ottawa and $238,277 from BC Housing.

A Fraser Health spokesman said Kinghaven and its affiliate Peardonville House Society have been hired by the agency to operate 102 convalescent beds across four programs. Customers will be referred to the facility by Fraser Health.

Dixon Tam said the agency’s contracts with its providers require organizations to submit audited financial statements to Fraser Health. The agency has the ability to trigger a deeper scrutiny, and recently Fraser Health expanded its reporting requirements to its contractors “to expand the scope of financial information required to be submitted to Fraser Health each year.”

The health authority said in a further statement that Kinghaven was responsible for further testing.

“Fraser Health’s role was limited to conducting its own review to ensure Kinghaven’s continued ability to meet its contractual obligations to Fraser Health,” the statement said.

The agency said further changes to reporting requirements for its contractors in 2021 were ongoing and were not prompted by the situation in Kinghaven.

The investigation memorandum listed 10 vulnerabilities that enabled fraud such as “no formal system of record and many missing files/documents/invoices”.

According to the report, Kinghaven was unable to prevent or detect fraud “due to inadequate governance, including a lack of internal controls, segregation of duties and review/approval of financial transactions and records, operational bank deposit accounts, credit cards and spending.”

In another internal Fraser Health report dated August 2021, the authors identified a “high priority” issue as the charity, contrary to its contract requirements, “currently has no formal business [a] Business Continuity Plan and Community Contingency Plan” and does not have disaster recovery procedures in place to continue functioning in the event of a contingency.

Patients admitted to the facility sometimes had to wait for treatment, with delays ranging from one to 29 days. The average was six days. The facility did not have clear requirements for when treatment cycles needed to be extended, and the audit highlighted concerns about privacy.

Since fall 2020, the report said the charity has taken some corrective action. These included hiring a new finance manager and hiring an outside auditor to conduct a forensic review of its 2017 records. It also held monthly meetings with service providers to discuss the audit’s recommendations.

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