03/20/2014 01:36 EDT | Updated 05/20/2014 05:59 EDT

Portland Hotel Society Audits Reveal Lavish Expenses

Registered nurse Sammy Mullally holds a tray of supplies to be used by a drug addict at the Insite safe injection clinic in Vancouver, B.C., on Wednesday May 11, 2011. Insite, North America's first and only legal injection site, promoted by its founders as a safe, humane facility for drug abusers, is now facing a court challenge from the Conservative government that sees it as a facilitator of drug abuse. The case opens before the Supreme Court of Canada in Ottawa on Thursday, May 12, 2011 and has drawn international attention. (AP Photo/The Canadian Press, Darryl Dyck)

VANCOUVER - A New Democrat who represents a Vancouver riding has admitted she and her family took two trips cited in scathing government audits that revealed lavish spending by a non-profit group funded to look after some of Canada's poorest people.

Jenny Kwan said Thursday that she was concerned when she heard previous directors of the Portland Hotel Society claimed for trips.

In a statement, issued hours after the audits were released, Kwan said she and her two children joined her husband on two vacations in 2012.

"I was assured at the time by my former partner that he paid out of his pocket for the family portion of the travel expenses," said Kwan, who has championed herself as an anti-poverty advocate.

"I would never have gone had I known that the family portion of the travel would appear to have been paid for by PHS," she said.

Her ex-husband, Robert Dan Small, is among the executives of the society and is listed in the independent audit as the director of policy, research and fund development for the society since 1998.

A $2,600 trip for two adults and two children to the Disney resort in Anaheim, Calif., was singled out in the audit, along with several other trips to destinations including Paris and Vienna.

Kwan did not return calls requesting an interview but New Democrat caucus chairman Shane Simpson confirmed she went to Disneyland and Europe in 2012.

"I believe the European one was her ex-husband was going to participate in a conference around drug policy and the family accompanied him," he said, adding he didn't think Kwan would resign over the scandal.

The audits detailed more than $8,600 spent on limousine rides last year, a stay in a United Kingdom hotel that cost almost $900 a night.

It also found that society credit-card expenses for 764 restaurant meals amounted to $69,000. One bill came to $1,636 for a staff appreciation event. Travel costs expensed for trips to Vienna, Paris, Istanbul, New York City, Banff and Jasper and Ottawa amounted to $300,000.

The Portland Hotel Society provides social housing and other services, including North America's only safe-injection site where addicts shoot up their own drugs to prevent overdoses and infectious diseases such as HIV.

Health Minister Terry Lake said Thursday that four society executives had been fired and an interim board has taken over operations of the largest social service provider in Vancouver's Downtown Eastside to ensure people who need services will continue getting them.

The audits spearheaded by BC Housing and Vancouver Coastal Health also showed the non-profit society is in weak financial shape, is more than $113,000 into its bank overdraft and drew $1.2 million from lines of credit and a business loan.

"The findings speak for themselves and they include unsupported expenses including out-of-country travel, entertainment and catering, misuse of corporate credit cards, missing receipts, inadequate approval of expenses and unusual payments to companies set up and owned by Portland Hotel Society personnel," Lake told a news conference.

Questions over spending by the society that received $28.5 million for the current fiscal year prompted an internal review and audit that led to an external audit covering three fiscal years, from March 2010 to March 2013.

Most of the funding for the Portland Hotel Society comes from the Crown agency BC Housing and Vancouver Coastal Health. The society also received Health Canada grants and $100,000 in donations in 2013.

Mark Townsend was co-executive director of the society along with his wife Liz Evans for more than 20 years. The management team has agreed to resign so there would be no interruption in services for people in the impoverished area, and Townsend will remain in his position until the end of the month.

Townsend said in an interview on Thursday that funding the Disneyland trip was the organization's way of helping out an ill staff member who doesn't have benefits such as employee assistance, long-term disability or a pension plan.

"Obviously that's kind of a bit loosey goosey and clearly we could do better paperwork on that…but the spirit of it is we're trying to help people who do a good job, and we're trying to help them in the lack of those kinds of programs that every other group in the sector has," he said.

Townsend said 100 per cent of government funding for programs and housing goes directly towards those services.

However, he admitted "administrative fees" that come from both government and non-government sources get lumped into one pot. Sometime, some of that money is used to fund expenses like trips abroad to educate others about the society's various projects or engage in lobbying, he said.

Lake said the government had negotiated an agreement with the society for its four managers to step aside by the end of the month and that the new board had taken over on Thursday.

"While we were prepared to ask the court to appoint a receiver the solution we have arrived at will let us avoid costs involved with court action and also help us to move quickly to address the financial and operational issues that threaten programs and services delivered by the society," Lake said.

The society managers will get severance pay, though Lake could not provide a dollar amount.

It's up to police to pursue any criminal charges over finances, Lake said. Sgt. Randy Fincham of the Vancouver Police Department said he was not aware of a criminal investigation involving the society.

Besides its contract for Insite, the supervised-injection site, the Portland Hotel Society handles 17 contracts, including rental of at least 12 buildings to low-income tenants.

The federal government has been criticized for wanting Insite to be shut down over concerns it promotes drug use, but the Portland Hotel Society and several drug users have won a series of legal battles against Ottawa.

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