BRIAN HUTCHINSON:  National Post, March 13/14 – A controversial social services provider that operates Canada’s only supervised drug injection centre and runs dozens more projects in Vancouver’s poverty-stricken Downtown Eastside appears headed for involuntary receivership and a possible court battle with the B.C. government, because of concerns over its “spending practices” and financial “irregularities.”

Colin Askey

Colin AskeyLiz Evans, executive director of the Portland Hotel Society with one of the group’s crack pipe vending machines.

Steps are being taken to “protect provincial assets” including hundreds of social housing units owned by B.C. Crown corporations and managed by the PHS Community Services Society, a registered charity that grew from a single residential facility in 1993 to a $28-million-a-year, taxpayer-funded operation with more than 300 full-time employees.

The province will make an announcement regarding the PHS and its future sometime in the next few days, several government sources confirmed. One possible outcome is the removal of the society’s executive staff and board, with its operations placed under the direction of new management.

Also known as the Portland Hotel Society, the PHS serves thousands of Downtown Eastside (DTES) and area residents suffering from mental illness, drug addiction, infectious disease and other problems. Its activities have expanded in recent years to crack-pipe vending, food sales and catering, even beekeeping. But the society is best known for operating Insite, the intravenous drug facility it opened for temporary “scientific and research purposes” in 2003.

Insite became a permanent DTES fixture after the PHS and several drug users won a series of legal battles with the federal government, which wanted the tax-funded shooting gallery shut down.

Tristin Hopper/National Post

Tristin Hopper/National PostTyler Bigchild, right, who oversees the alcohol making co-op at Vancouver’s Drug Users Resource Centre, directs co-op participant Tim, left, in sanitizing and sorting bottles to hold home-brewed beer.

The PHS also operates mobile needle exchanges and recently began offering alcoholics the opportunity to make their own booze.

Problems surfaced publicly in November, following a routine audit conducted by B.C. Housing, the province’s Crown corporation responsible for subsidized housing. The corporation announced it had “discovered some irregularities in the Portland Hotel Society’s spending practices,” and had hired accounting giant Deloitte LLP to conduct an independent financial review. A separate review was conducted by Vancouver Coastal Health, the public agency that oversees delivery of health services in the DTES.


Last week, B.C.’s deputy premier and minister responsible for housing, Rich Coleman, told reporters his government had examined the two reviews. They raised “significant concerns that we’re going to work through in the next week or 10 days, and [the government will] make some final decisions on how we’ll manage it going forward.”

Mr. Coleman said that forcing the PHS into receivership was “one of the options.”

Speaking on condition of anonymity, a well-placed government source says the province is looking at two scenarios: removing the society’s upper management and appointing a receiver to run its affairs, and filing a lawsuit against the PHS in an attempt to recover public funds. The province will decide on one option or both, the source indicated.

Tristin Hopper/National Post

Tristin Hopper/National PostThe crack pipe vending machine at Vancouver’s Drug Users Resource Centre.

Contrary to earlier media reports, police have not been asked to investigate the PHS. There is no suggestion of criminal activities. Insite is not a “core” area of concern, according to a government source.

Rumours of questionable spending by PHS insiders on non-essential services such as limousine rides and entertainment have circulated for years in the DTES. The society successfully fought off attempts by one local newspaper to have its financial accounting made public, claiming that while most of its annual funding comes from taxpayers, opening its books to the taxpayers would jeopardize its competitive position in the DTES.

The PHS is the largest non-profit service provider in the neighbourhood, and its senior managers are among the industry’s highest paid. According to financial information it filed with the Canada Revenue Agency for the fiscal year ending March 31, 2013, the PHS paid six staff members between $120,000 and $159,000 each. Total “expenditure on all compensation” was $15,289,078, more than half the society’s total revenues (not including $6-million from a disposition of assets) in fiscal 2013.

The PHS reported it spent another $358,724 on travel expenses that year, and $398,794 on professional and consulting fees.

The province gave the PHS $18.7-million and the federal government contributed $2.27-million in 2013.

Wayne Leidenfrost/ / Postmedia

Wayne Leidenfrost/ / PostmediaMark Townsend displays a package of NARCAN in Vancouver. It is used to treat heroin overdoses.

In an email sent Wednesday to the National Post, PHS co-executive director Mark Townsend said he had not spoken to Mr. Coleman, and was “not aware of any allegation of anyone here benefiting at the expense of our clients.” He said he is proud of the society’s work, adding that “all projects and programs are fully audited by our external auditors each year. What we do know is that our lack of administrative systems have left us vulnerable to being misunderstood. We’re doing our best to work through those issues with our funders.”

Jack Bibby, president of the PSA’s board of directors, is away from his workplace for “the next several days,” said his colleague. He did not reply to a message left on his voice mail. Asked if the PHS was being forced into receivership, the board’s secretary-treasurer, Cordell Draayer, said he wanted to comment, but could not.

The case is not without precedent. In 2010, B.C. Housing and the Provincial Rental Housing Corporation filed suit against a smaller non-profit housing society operating in the DTES, accusing it of negligence, financial mismanagement, conflicts of interest, misrepresentations and breaches of fiduciary duty.

The Downtown Eastside Residents Association (DERA) controlled almost 300 publicly owned apartment units in the neighbourhood until a court-appointed receiver manager took charge of the properties. The province and DERA negotiated a confidential out-of-court settlement that ended the lawsuit, and the 37-year-old society was disbanded.

The PHS is much larger and more firmly entrenched, with assets of almost $60-million. According to its public filings to Canada Revenue Agency, the society’s ambitions now reach overseas, with employees spending $90,000 in the last fiscal year on activities abroad. The precise nature of those activities are not described in the filings.

National Post