"Serious ethical issues" swept under carpet by mayor and former CAO, but dust monster rears its ugly head
A recently declassified letter from the city auditor supports Laurie Charlton’s sleuthing that fingered former building inspector Jason Ward for awarding more than $185,000 in arena upgrades to his own company—violating his contract with the city—without putting the projects out to tender—violating the city’s purchasing policy.
Back in June, we reported that the city’s annual audit could not locate certain tender documents for the arena project, a problem discovered due to a complaint made by Coun. Kathy Moore to the auditor. We now know Moore also raised a series of related questions to city staff and the auditor for which no responses were forthcoming, at least not publicly.
At the time, we were granted access to a number of documents from the city, such as tender documents and invoices related to the work done on all aspects of the arena project. But, until now, we were denied our requests for Moore’s letter to the auditor and for the auditor’s response.
The letters reveal that council was never informed about what Moore calls a “serious ethical issue” until she pressed the issue very hard. Furthermore, despite her repeated attempts through the fall and winter of 2011 to engage the mayor and CAO on the topic, “I was stunned by their lack of interest in conducting a thorough investigation,” she wrote.
“I repeatedly asked for an in camera session. When one was finally forthcoming I was only informed it was to be added to the agenda moments before the meeting, so I was unable to have all my material organized for council. [Five censored lines.] I do not believe council was well served by the explanations provided and I do not believe our community is well served by ignoring this issue. I would like to believe there is an easy and plausible explanation, but I have not heard it yet.”
The auditor’s reply, examined in more detail below, confirmed Moore and Charlton’s concerns to the extent the auditor was able to take his very limited investigation.
“We agree with Ms. Moore that there may be concerns over the process by which ADA Co. was awarded the work on the arena project,” the auditor wrote.
Nevertheless, he added, “while we agree that Ms. Moore presented some valid concerns over policies and processes, we were able to obtain sufficient audit evidence to support that the capital expenditures for the arena project were not materially misstated.”
In other words, the auditor was satisfied the transactions were “classified correctly at the correct amounts in the correct period.” But, he clarified, “we do not include an opinion as to whether those transactions ‘should’ have happened in the manner that they occurred.”
Laurie Charlton’s sleuthing
This summer and fall, Charlton followed up thoroughly on the invoices and tender documents—or lack thereof—to tell the tale of ADA Co. Inc., a company whose address was a vacant building in Trail (855 Spokane St.), whose GST number was invalid, that lacks clearance on record from WorkSafe BC, and whose telephone number reached people who knew nothing of ADA Co. Inc. or its owners.
The projects ADA undertook at the arena amounted to more than $185,000, but city files are absent of any tender documentation—required for projects over $25,000—or requests for quotations, which are required for all projects over $10,000. City files are also absent of design drawings, building permits, and building inspection reports for ADA’s work.
ADA’s intermunicipal business license was issued in Trail after most of the arena projects were completed. It gives Ward’s Fruitvale home address, but lists Brad King (said to be a relation of Ward’s) as the contact person.
Ward, however, is the sole director of a company with a remarkably similar acronym in Port Alberni: Alberni Design Associates Company Inc. Rossland has one invoice from Alberni Design Associates on record, and it also lists Ward’s Fruitvale address.
One contract to ADA for the curling rink electrical was signed by Jason Ward on behalf of the city—Ward was not only the building inspector, but also the project manager for the arena upgrades.
Together, these revelations led Charlton to a series of pointed questions, among them: were the mayor and former CAO aware of this issue? If so, what action was taken? And was council informed?
Indeed, the sudden departure of Ward from the city towards the end of 2011 “for personal reasons” as Mayor Greg Granstrom explained it to the Telegraph, raised eyebrows at the time. Up until then, Ward had showed no hint of leaving the city; on the contrary, he had been a rising star holding down a number of roles well beyond building inspection.
This has led to widespread speculation that these issues were discovered internally and dealt with internally. Coun. Moore’s letter confirms at least that council was not informed, but we cannot say to what extent the mayor and CAO were aware.
Coun. Kathy Moore’s stand
Moore wrote to the city auditor Amed Naqvi on Mar. 6 about the very issues Charlton exposed later in November.
“I feel compelled to request a forensic audit or at least an in-depth investigation of [the situation],” she wrote. “I have tried to get our CAO and mayor to investigate this matter in detail, but I was surprised and disappointed in their lack of interest.”
Moore clarified, “It is not my intention to make trouble for the municipality or for any individual, and it is with regret that I feel I must request further investigation…[but] I feel very strongly that my first duty is to the taxpayers of Rossland.”
Moore detailed her concerns about serious mismanagement, potential fraud, and potential financial losses, among them:
- “Was work awarded without tendering or proper adherence to our purchasing policy…How did this situation come to pass?”
- “Since the building inspector potentially inspected the work done by his own company (or perhaps himself), how do we know it was properly done or done at all?”
- “Did an engineer sign off on work that was above the building inspector’s ticket level or did the building inspector exceed his authority?…What is the city’s liability?”
- “If staff was unaware of this situation, then our checks and balances systems failed and we need to take corrective action…If they were aware, why was this not brought forward to council?”
- “Why wasn’t a thorough investigation undertaken to ensure that the citizens of Rossland were not bilked by these contractors?”
By and large, these questions remain unanswered, but the auditor did go as far as his mandate permitted him to answer some of the questions.
The auditor’s response on June 16
Amed Naqvi notes that his firm was not engaged to complete a forensic audit—although, council could have voted to pursue this, at an additional cost—but only a financial statement audit. Due to Moore’s concerns, however, the auditor increased their focus on “audit risk over capital expenditures.”
This involved audit tests of “substantially all of the payments to ADA Co.” Tracing the payments revealed “no signature on the back of the cheques” to assist the investigation, and cheques were deposited in a company account, not an individual’s. The auditor confirmed that ADA Co. cheques were paid to ADA Co., but “due to privacy laws, we were not able to determine the shareholders or directors of ADA Co.”
Nevertheless, the auditor wrote, “discussions with the CFO [former CFO Deb Timm] identified that she had determined that the City’s former building inspector [Jason Ward] was associated with ADA Co. We are uncertain as to what exact date this information became known to her, but she indicated that she was not aware of the association when the payments were made.”
Cheques exceeding $10,000 were “manually signed by two authorized signatures including one management staff and one mayor or council member supporting that the payments were viewed and authorized prior to release.” Amounts under $10,000 were “signature stamped” for the mayor, and the auditor said tests found the system “to be effective.”
Naqvi confirmed that, “while documentation was available supporting other tendered bids, no documentation was presented for the work award to ADA Co.” He added, “Payments made to ADA Co. were within the planned budgeted amounts…It was outside the scope of the audit to attempt to determine…whether the effective hourly rates were reasonable.”
Naqvi noted, “We are not qualified to comment on the quality of [ADA’s] work.”
He concluded, “At a minimum, the procedures to ensure retention of documentation supporting compliance with the tendering process need to be reviewed.”
He added that the former building inspector’s actions were an “apparent conflict of interest” and recommended that “it may be prudent” for the city to set standards and develop a process to identify related parties, “including companies of employees, council, and their related immediate family members.”
An invasion of privacy, or not?
Until now, the city has guarded Moore’s request and the auditor’s response under the guise of “protecting privacy.” But whose privacy was protected?
On July 23, Corporate Officer Tracey Butler wrote to me, “In response to your requests [for Moore’s and the auditor’s correspondence], the city is denying your requests under Section 22 and Section 12(3)(b) of the Freedom of Information and Protection of Privacy Act” (FIPPA).
Section 22 is invoked when “disclosure would be an unreasonable invasion of a third party’s personal privacy.” Section 22, however, also suggests that disclosure is desirable to subject the activities of a public body to “public scrutiny,” if it does not “unfairly damage the reputation of any person,” or expose the third party “unfairly to financial or other harm.”
Section 12(3)(b) protects the substance of in camera meetings.
I replied to Butler, “I will be appealing to the FOI commissioner under sections 52 and 53 of the FIPPA as I am not satisfied that I have been provided with a reasonable argument for why the request for an investigation made by a politician should be private information, nor should the reply to the politician’s request be private information as it was prepared by an auditor hired with taxpayer dollars to search publicly available records. Before I make this appeal, however, I ask that you please reconsider your response and release these documents to the public as well.”
The city “stood by its original decision” and I appealed to the Information and Privacy Commissioner who commenced an investigation.
At the Dec. 10 regular meeting, however, council voted publicly to declassify the two letters. The next morning I wrote Butler to request the documents again, and received them.
Butler wrote on Dec. 11, “At the Nov. 26 2012 In-Camera Meeting of Council, the requested information was declassified from confidential to non-confidential, therefore releasing the requested documents in severed form.”
The letters are attached below.