10/29/2012 04:01 EDT | Updated 12/29/2012 05:12 EST

Manitoba care home broke rules, abused public money: ombudsman

WINNIPEG - Management at a Manitoba seniors' home targeted capital contracts, hired family members and disobeyed a wage-freeze order in what amounted to a "gross mismanagement" of public funds, the provincial ombudsman's office said in a report Monday.

"I think what you have here is a situation where there was a lack of due diligence on the part of people who were charged with the stewardship of public money," Mel Holley said following the release of his report into the Middlechurch Home of Winnipeg, a 197-bed facility in the bedroom community of West St. Paul.

Holley's 70-page report outlines a raft of cases at the home in which he says no laws were broken, but financial rules were ignored or wilfully violated.

The centre's executive director was awarded $40,000 in salary bonuses between 2009 and 2011 — on top of her $117,000-salary — at a time when the Winnipeg Regional Health Authority had imposed a wage freeze on senior managers.

"The current board chair acknowledged that the signing bonus was a way to get around the salary freeze," Holley wrote in his report.

The executive director also had questionable business dealings with family members, the report said. The home awarded more than $435,000 in work to a company owned by the executive director's husband — a company in which the executive director was also a shareholder.

The executive director "wilfully concealed" the fact she was a shareholder, Holley wrote, and the contracts were frequently awarded without giving other companies a chance to bid.

Other contracts, also not opened to competition, were given to a company owned by the executive director's brother-in-law.

The executive director was also "inappropriately involved" in the hiring of her daughter-in-law as a volunteer co-ordinator, Holley wrote.

Holley's report also levels criticism at the home's board of directors, which he said allowed public money to be used for thousands of dollars in staff meals and failed to oversee credit card purchases.

Holley's investigation was prompted by an unidentified whistleblower, who approached the Winnipeg Regional Health Authority.

Middlechurch Home officials rejected many of the accusations in Holley's report, and said Holley was not being balanced in his investigation.

"MCH has asserted that my investigation was not conducted in accordance with the rules of natural justice nor was MCH afforded procedural fairness," Holley noted.

The home's managers said there was no intent to deceive or be dishonest in their money management, Holley said, and because of that, the term "gross mismanagement" does not apply.

The managers also said Holley did not get his facts right.

"MCH asserted that the draft report contained significant errors of fact and provided 16 examples," Holley wrote.

"I am satisfied that MCH's assertions of factual errors and their recitations of events are not supported by the evidence."

The Manitoba government said Monday it is replacing the board and the executive director with Ernst and Young as interim managers of the seniors home. It is also passing Holley's report to police and looking to see whether similar problems might be occurring at other care homes.

"The ombudsman has recommended that we go forward and examine more closely other personal care homes in the province, and ... we'll be doing just that," Health Minister Theresa Oswald said.

Note to readers: This is a corrected story. A previous version had the ombudsman's name as Peter Holle