Okay, we all needed a break from the heavy stuff of the week. Here it is, the saga of the horse-and-carriage terminal at Stanley Park. Please excuse the terrible pun in the headline, but it was irresistible. (Thank you, Stan Dellarocca at the Globe’s editing desk, for the suggestion.)

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A lot of different octopus legs to follow on this PHS story. Here’s mine for today, a look at what got the province interested in examining the PHS books more closely — deficits caused, in part, by subsidies to the organization’s many social enterprises and its real-estate ventures, which were aimed at acquiring bits of land in order to build future social housing.

Housing Minister Rich Coleman reminded me (as did Mark Townsend of PHS), by the way, that many non-profit housing organizations look like real-estate barons on paper, because the way the province organizes social housing is that it gets the non-profits to take out mortgages on the properties they are running and then it provides them with the money to make the mortgage payments.

So PHS has mortgages on the Portland Hotel building, Tellier Place, the Pennsylvania Hotel and Woodwards on its financial statement. But those are social-housing operations it runs on behalf of the province. (It doesn’t have mortgages for many of the other operations it also runs, like the Regal, the Sunrise, the Washington, and Station Street.)

In addition, it had bought The Only at 20 East Hastings on its own and was paying a mortgage of $10,877 a month — a heavy load for a place generating no income. As my story notes, Mark Townsend had bought the building with a plan to redevelop it and the New Stanley together with social housing, offices and perhaps market condos. But the city froze all development applications in the area, forcing PHS to pay holding costs for that property for the last two years while waiting for the thaw.

Also, I had the information on this Sunday but there wasn’t room in today’s story for it:

The four managers who left PHS will be getting eight weeks’ severance — far less than the 18 months that would be more the norm for people with 20 years’ experience, but likely more than some people think they should get.

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Apparently people don’t have all the names yet. Here they are. Interesting to see there Ida Goodreau, the former president of Vancouver Coastal Health, who was very supportive of PHS in her time there, and Jim O’Dea, a PHS board member in the early days who was appointed by the NDP to be head of the BC Housing board, the agency that then went on to give PHS many contracts.

PHSBOARD

There’s so much to ponder in the audit reports on PHS Community Services, but one paragraph that stood out for me was the response from board members when asked if they knew and approved of the fact that the top five managers were making far more than their contracts stipulated.

The salaries for those five (Mark Townsend, Liz Evans, Dan Small, Kerstin Steuzbecher, and Tom Laviolette) were so high because they not only got their salaries as stipulated in their employment agreements, but some of them would get paid a “vacation payout” of up to $20,000 since they were always on call during their regular vacations, along with extra pay for working statutory holidays. As well, they had extra money thrown in for RRSPs, childcare, and other benefits. As a result, actual T4s from 2010 to 2012 for those top managers ranged from $104,000 to $186,000 a year.

The responses of board members when asked about that were, from chair Jack Bibby:  “I’ve never met 5 people who work harder in my entire life. No doesn’t cause me concern. I know how hard they work.” And from another board member, Cordell Drayers: “I knew they had the potential for these things but not the actual amount. I’m with Jack — no concerns.”

Those comments are at the heart of what is going on here. The people working at PHS and the board members all felt like they were doing a hard, hard job. And they were. I’d listened to stories about PHS over the years and you couldn’t have paid me any money to do that work. Staff were sometimes jabbed with needles and had to wait for a few weeks to find out if they’d been infected with AIDS or Hep C. Liz once had a psychotic patient grab her neck chain and try to strangle her. They felt like they were doing battle against the world. And so they deserved perks, after lots of long years in the trenches where they didn’t get many. (And, to be fair, they didn’t restrict the perks to themselves. Staff got spa treats; residents got presents of clothing and tickets; etc etc etc)

But a lot of what we see here came from the mentality of, “We’re doing a really tough job. We deserve the pay.” And they were surrounded by others who agreed with them. Not that different from how a lot of people in top government and corporate jobs think. But it’s not what people expect of those who do the kind of work they were doing.

I would think, as a new board takes over at PHS Community Services, that one of the first of the organization’s unusual ventures they’ll be looking at are the many social enterprises that operated under the PHS umbrella.

Both the VCH and BC Housing audits raise a lot of questions about all these affiliated companies, and I can’t tell which ones are just staff entities created to handle certain types of jobs and which are social enterprises that PHS used to create employment for residents. Whatever the case, there are vintage-clothing stores, the chocolate-making shop, the beekeeping and honey-making, the store selling arts and crafts, and a few other operations with a big question mark beside them now.

Mark Townsend, when I did a story about PHS social enterprises, said they didn’t make money and I believe him. So there has to be a question about how a new board will feel about continuing these money-losing ventures, which were paid for by ??? PHS administration fees? Private donations that won’t be coming in any more? Can’t figure out the finances, but doesn’t look good.

This is what one set of auditors specifically noted.

PHS provides accounting, operational support, payroll and other services to eight incorporated entities.  These entities were set up and provide service to primarily PHSThe shares of these entities are owned by PHS employees and external acquaintances.  Some of these entities provide support for various programs such as pest control or laundry services; however, some are unrelated to direct provision of health services (e.g. thrift clothing store, café).Per PHS, two key reasons for this structure are to provide employment for individuals in downtown eastside and to benefit from potential profits generated. The existence of these entities creates potential transparency issues as to use of funding received by PHS.
Five of the eight corporations generated losses in the year; however, all eight corporations have negative retained earnings, which indicate a history of losses.   Furthermore, as of Oct 31, 2013, PHS had outstanding cash advances to these corporations of approximately $481 K.
As these organizations have a history of losses, it is not clear that the benefits of running these companies outweigh the cost.  There is no clear documentation or process to continuously assess the cost/benefit of continuing these operations versus acquiring them elsewhere (such as through tendering processes).  Use of funds to cover losses by these organizations are questionable.  VCH management should converse with PHS whether the above services can be acquired at lower rates through tendering.  PHS management indicated they are working towards moving these entities under a Community Contribution Company structure where PHS would own the shares of these entities.The use of a Community Contribution Company should also be discussed further.Detailed Report Finding # 9.

Here they are.

http://www.vch.ca/about_us/accountability/audit-reports/audit-reports

http://www.bchousing.org/resources/Media_Centre/PHS/PHS_Financial_Review.pdf

Mark Townsend and Liz Evans of PHS Community Services tried one last time to make the case to the provincial government that there were no problems at their organization that couldn’t be fixed with some good will. But they acknowledged, in the end, that the province had simply lost faith in them.

Last Thursday, they agreed to step aside. They told all their staff Saturday what was happening. And the province is on the verge of installing a new board for the non-profit, one that includes former Vancouver Coastal Health leader Ida Goodreau and former PHS board member Jim O’Dea.

It’s been a long, incredible journey for this group. My story here has many more details.

Everyone’s waiting for the axe to fall any day now on PHS Community Services Society, the DTES non-profit started by Mark Townsend and his wife, psychiatric nurse Liz Evans, 20 years ago.

Housing Minister Rich Coleman has given more than one news conference saying “documents will be coming” and making references to financial irregularities at PHS.

Obviously leaks are sprouting elsewhere, as various other news media have done stories the last couple of days, here, here and here. PHS has responded here.

My story for the week goes back to the bitter fight that sprang up between PHS and one of its major funders, Vancouver Coastal Health, in the winter of 2012 as PHS was fighting a very public, aggressive effort to get Coastal Health to maintain funding for the women’s program at the Rainier Hotel after the federal money ended. Here’s the story and below is the letter that VCH president David Ostrow wrote, warning PHS that it was walking on thin ice. (The letter was through FOI)

OSTROW-PHS

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It was heartbreaking, for those who were listening to the council delegations Friday and Saturday, to hear some of the stories of people from the Downtown Eastside who came to argue for more from the city’s plan for the area.

They recounted horrific things that had happened to them, as they asked for a red-light district, a native wellness centre, hundreds of units of social housing immediately, a protected bike lane on Hastings so they wouldn’t get hit by cars, and more.

On the other side were people like Michael Geller, arguing that the city was going too far by insisting on so much rental and social housing for the central 12 blocks of the Downtown Eastside, or others who said the plan was simply unrealistic. (I’ve heard people say the city’s estimates for building social housing are considerably too low.)

In the end, a plan got passed — not perfect by any means. Now what everyone’s waiting for is — will anything actually happen?

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