When Richard Nixon told David Frost than an illegal activity is not illegal “when the president does it” he confirmed what we’d all suspected: the “tone at the top” as far as the 37th President of the United States was concerned was hopelessly corrupt.
Most breaches of good governance are not as dramatic as Watergate, but the consequences of poor governance, even on a small scale, can be devastating.
Bearing that in mind, let’s turn our attention to the governance of Alberta Health Services (AHS).
The “tone at the top” at AHS struck a sour note last week when Albertans opened their newspapers and saw two contradictory headlines: “AHS in forefront of health-care achievements”—a puff piece by the Chairman of the AHS Board rebutting allegations that AHS executives and managers were wasteful and inefficient and “Control expense gaps, auditor tells AHS”—a story about the Auditor General’s report on AHS’s sloppy governance practices.*
The Auditor General’s report focused on expense claims, travel claims and AHS corporate credit card expenses (P-cards).** The AHS ran up a whopping $100 million in the space of 17 months. Even the Auditor General was “taken aback at how large the sum was.”* To be fair just a small percentage of this amount, not the entire $100 million, was improperly claimed or improperly recorded and paid out.
I don’t know what it is about auditors, but the Report is a dry slog (yes that was sarcasm). It does however lead to some interesting conclusions.
High tolerance for a lack of controls and non-compliance
The AHS, a $12.6 billion corporation, has serious gaps in its financial controls process and doesn’t appear to be concerned about it. These include:
- ridiculously high limits on P-cards. What could possibly justify a spending limit of $900,000 a year? Is the executive buying an MRI facility?
- approving expenses without any business justification. In 2011 and 2012 Carewest, a long term care facility, expensed 2 Calgary Flames season tickets and 275 Calgary Stampede admission tickets. In 2012 it expensed 40 grandstand show passes and 10 rodeo tickets. Carewest says the tickets were resold to staff and residents. There is no supporting documentation. The Auditor is investigating. (I should hope so!)
- the misuse of P-cards to purchase capital assets like computers (so much for cost savings generated by centralized purchasing).
The consolidation of the regional health regions into the AHS brought $3 billion in purchasing power under one roof. This gave the AHS tremendous bargaining power.***
Too bad they don’t know how to use it.
AHS has yet to centralize travel to save costs on hotels, airlines and ground transportation. It’s failed to set up a competitive bid process to find the most efficient way to transport patients. And when it does use its bargaining power, AHS blunders into bad deals. Here’s an example.
The AHS signed contracts with two large service providers that allowed them to charge $6.1 million in travel expenses without producing a single receipt to substantiate the cost. Travel costs are paid as a percentage of the contract fee and there’s no mechanism to cap travel costs if they are excessive. Anyone see an opportunity to pad the bill here?
$3 billion in purchasing power means nothing if you lack the skills to apply it properly.
Country Club Mentality
The senior executives at AHS are showered with perks—club memberships, allowances for personal, financial and tax advice, professional development and vehicle allowances. These perks are unauditable because the financial audit group has no way to check whether the allowance limits have been exceeded. Why?
Where is the Chairman of the Board of Directors?
So how did Mr Lockwood respond to the Auditor General’s report? He didn’t. Instead he popped up in the press with a two pronged message.
He defended the need for 81 senior executives at AHS. They “put in long hours, days and nights keeping a complex health system on track”. Join the club! The rest of us also put in long hours, days and nights doing our jobs. And we do it in environments that demand a higher degree of rigor, accountability and dare I say it, integrity, than the AHS.
He pointed to an “improved rate for patient satisfaction”… without mentioning that it had only gone up by 2% (it’s now 64%) and is described as “relatively unchanged from 2010” by the Health Quality Council of Alberta who conducted the survey.****
This is a disappointing response. The AHS has staggered from scandal to scandal since it was created in 2008. Instead of being defensive or glossing over problems, it’s time to call the Board of Directors and Chairman Lockwood to account. They govern the AHS. It’s up to them to set the “tone at the top”.
The “tone” must ring with accountability and integrity. The health and well being of all Albertans depends on it.
*Calgary Herald, Feb 13, 2013, A3 and A15
**Report of the Auditor General of Alberta Feb 2013
***Speech by Ken Hughes, then Chairman of the AHS Board, to Calgary Chamber of Commerce, March 2011
****Satisfaction and Experience with Health Care Services. A Survey of Albertans 2012