Spending by major non-profit helping Vancouver’s homeless, addicts under scrutiny

The Portland Hotel Society, the biggest non-profit player in Vancouver's drug- and poverty-stricken Downtown Eastside, has come under a microscope over its spending.

The organization behind harm-reduction initiatives such as the Insite supervised drug-injection site, a crack-pipe vending machine and home-brew booze for alcoholics has been under scrutiny by the B.C. government since last fall.

It receives millions of dollars in federal and provincial government money to fund an array of programs on the Downtown Eastside and run hundreds of social housing units in the neighbourhood.

Now the National Post, citing government sources, said the government will make announcement in the next few days regarding the PHS Community Services Society, the society's operating organization.

The Post said the possibilities include purging the society's board and executive staff and installing new managers, appointing a receiver to run PHS or filing a civil suit to recover public funds.

There are no allegations of criminal wrongdoing, the Post said, discounting earlier reports the police had been brought in to investigate the society. The problems apparently don't relate directly to Insite, which is run in conjunction with the Vancouver Coastal Health Authority.

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CBC News reported in November that BC Housing, the government agency that oversees PHS, had commissioned an audit of PHS by an outside accounting firm after discovering irregularities in its spending practices.

PHS executive director Mark Townsend conceded at the time the society could do a better job of bookkeeping.

"Purchase order forms, you know . . . we're not necessarily against it," he told CBC News. "We haven't used it in the past because we're not really a giant bureaucracy."

Since its founding in 1993 to run a renovated single-room occupancy hotel on the Downtown Eastside, the society has grown into a major social services provider in the neighbourhood. Besides operating housing facilities for about 1,200 residents, it administers assistance programs that include helping those with mental health issues and drug addictions. It has some 300 full-time staff and a budget in 2012 of more than $28 million, most of it from the government.

The Post reported that tax records show six PHS staff members were paid between $120,000 and $159,000 for the fiscal year ending March 31, 2013, and that more than $15 million – more than half its total revenues that year – went to salaries and compensation.

Townsend said last fall he was concerned the audit stemmed from philosophical differences between the society and BC Housing. PHS in the past has clashed with the agency over the closure of homeless shelters and other service cuts, CBC News said.

"We're happy to work on those things and improve things as long as they're not matters of principle," Townsend said, but added, "just because you get paid by the government doesn't mean that you're not going to say 'Hey,' when you try to close a shelter or when you try and do this . . . We're going to speak. You don't buy us off by giving us an admin fee."

About a week ago, Rich Coleman, the minister responsible for BC Housing, telegraphed the government would act on the audit results in a week to 10 days, The Tyee reported.

Coleman said auditors found issues similar to ones that surfaced at the Downtown Eastside Residents' Association (DERA) a few years ago.

[ Related: Portland Hotel Society teaching alcoholics to make booze ]

The Globe and Mail reported in 2010 that BC Housing had gone to court to have a receiver appointed to administer the 300 government-owned housing units managed by DERA.

The government alleged DERA had not paid $500,000 in property taxes on three buildings it ran, had failed to keep accurate waiting lists of prospective tenants and had given units to tenants without completing the necessary income tests. It was also accused of paying unauthorized administrative and management fees between 2005 and 2009, the Globe said.

The Post said a receiver was appointed to manage DERA properties and the association reached a confidential out-of-court settlement with the government. DERA, once a fixture on the Downtown Eastside landscape, was disbanded.

Will the same fate await the Portland Hotel Society?

Townsend told the Post in an email Wednesday he had not spoken with Coleman and was “not aware of any allegation of anyone here benefiting at the expense of our clients.”

He said all of the society's projects and programs were fully audited by external auditors each year.

"What we do know is that our lack of administrative systems have left us vulnerable to being misunderstood," Townsend wrote. "We’re doing our best to work through those issues with our funders.”