A forensic audit into spending practices at the Thompson Nicola Regional District found an “inappropriate culture of spending” under former CAO Sukh Gill.
The audit revealed Gill spent more than he was allotted, that he had many questionable expenses, and in many cases his receipts from 2015 to 2019 were not itemized.
As part of the audit, Simon Padgett, the director of forensic disputes and investigations with BDO Canada, says they interviewed over 20 people and reviewed 45,000 emails and 12,000 documents at the regional district. They also investigated hundreds of expense and remuneration reports while Sukh Gill was in the top job.
“What is more concerning to me that the CAO’s position is one of tone at the top that everybody should be following and he did very little to correct these gaps in these internal controls,” Padgett said. “We see very little improvements to policies and procedures during his tenure.”
“We did see all over the place inconsistencies and incomplete information in terms of invoices submitted, whether names have been listed on receipts. There was just no standard pattern of events, and of course policies and procedures are designed to bring about a standard process for everybody to follow.”
The audit found a lack of control measures in the finance department and a lack of oversight and governance by the regional district’s board.
It came about after a vote by the board in March, 2021. That was almost a year after Gill’s sudden retirement in Feb. 2020 with a severance package in excess of $500,000 and a subsequent investigation by Kamloops This Week which showed more than $517,000 of taxpayers money expensed by the former CAO between 2015 and 2020.
“The way he drew in and involved many employees, for example with the meals, involving them with the payment process, listing them on the receipts,” Padgett added. “This was one of the reasons why this became a culture because several people, more than one, were drawn into these activities.”
According to the audit, Sukh Gill was also paid significantly more than other CAO’s in regional districts across B.C. He also spent a lot more that his peers, particularly at restaurants and coffee shops.
Some of his favourite spots, the audit revealed, was the former Hotel 540, where he spent more than $10,000 over five years, Dorian Greek Restaurant (over $14,000), and Nandi’s Flavours of India where Gill spent more than $27,000 during the five-year period.
“I think the fact that stands out to me is that Nandi’s is the biggest spend on the left-hand side, but on the right-hand side it’s not the larger number of visits,” Padgett added. “The implication there is smaller number of visits but larger values at each visit.”
In all, investigators say they reviewed over $750,000 in spending that was reimbursed, though nearly $200,000 of that did not have itemized receipts.
Another example Padgett used was an $8,602.41 bill at Bearfoot Bistro in Whistler. It was split into two transactions for reasons that were not explained.
There were also times when different corporate credit cards were used at events instead of Gill’s, with Padgett noting that regional district staff whose cards were used said they were not at the event.
“We saw several examples of bills being split for dining and at restaurants, food and beverage outlets whereby several people would be attending and directed by the former CAO [Gill] to use their individual credit cards this time,” he said. “Next time it would be somebody else.”
BDO Canada made several recommendations to improve corporate governance and oversight, policy and bylaws, human resources, internal auditing and finance department operations at the TNRD.
“There are shortcomings at the board level,” Padgett said, adding the recommendations are meant to be constructive.
‘Unique Opportunity’ to Move Forward, BDO says
Jervis Rodrigues, a partner with BDO Canada, says he feels there is a unique opportunity for the TNRD to move forward in a positive light.
“You’ve got new leadership at the top, new in-house counsel and I believe you’ve got a unique opportunity to seize some of these recommendations, and both as senior management but also the board, the board need to grab a hold of these recommendations and start to systematically implement change,” he said.
Rodrigues says the forensic audit took more than 1,500 hours of work, and noted it was “not a very fun exercise” for his team.
He also noted the TNRD has already started to make some progress under its new leadership, though he called on senior management to ensure that all of the recommendations are acted upon.
“I think you’d really need to take an inventory of all of these recommendations and say to yourselves, what can we put into action over the next three months, over the next six months,” Rodrigues said.
“There’s a lot here. Simon summarized them in terms of five or six different themes but there’s probably 15 or 20 recommendations that need to be addressed by the TNRD.”
Audit Won’t Be Made Public Just Yet
While the TNRD has said that all of the findings of the forensic audit will be made public, that will not be the case just yet.
CAO Scott Hildebrand says he is “frustrated” by that, but explained why
“Our lawyers have advised that a full copy of the auditors report cannot be made public at this time as a legal review is needed to ensure that we are not releasing any information that we are legally prohibited from disclosing,” he said Thursday, noting a copy of the BDO summary will be released today.
Rodrigues also said he was disappointed that the full report cannot be released publicly yet, but noted that the summary includes all of the salient information.
“I am confident it will eventually be released once all the lawyers have reviewed all the content and the form of the report,” Rodrigues said.
Hildebrand also noted the TNRD is “committed” to changing the practices of the past, noting residents and taxpayers deserve better.
“We are determined to prioritize delivery of the forensic audit findings. We are committed to the public accountability and transparency and we will work as quickly as possible to ensure that the findings of the report are released to the extent that we are able to, bearing in mind our legal obligations under the Freedom of Information and Protection of Privacy Act,” Hildebrand added.
“Our staff deserve better and our staff deserve to be heard.”
He also said the regional district “fully accepts” the conclusion of the audit and the mistakes that were made in the past, adding the TNRD should accept and own all recommendations made by BDO Canada.
Hildebrand also said that BDO Canada declared a conflict of interest with one business that it did not investigate as part of the audit. Those allegations were relayed to the regional district in the interest of transparency, though Hildebrand says they are “not in a position to make findings of fact” like a forensic audit would.
“Concerns were raised about the amount of money spent at this establishment as opposed to other suppliers. Allegations also included preferential business being awarded, personal relationships and other concerns,” Hildebrand said.
The results of those findings will be released at the same time as the forensic audit final report.
A separate RCMP criminal investigation into potential financial irregularities at the Thompson-Nicola Regional District, is still ongoing.
A full list of where money was spent by the TNRD between 2015 and 2020 can be found here, courtesy Kamloops This Week.
Recommendations to the TNRD Board include:
- the board taking government ethics and financial skills training, at least annually;
- the board should delegate more to audit committee;
- internal audit looks at rotation of all department
- zero tolerance from the top down for any breaches of rules;
- a total review of the organization about is vulnerabilities and have a plan to manage risks. An annual fraud-risk review be implemented.
- enhance and create a formal whistleblower policy, one that is external and confidential (Padgett noted whistleblowing is the No. 1 method for uncovering wrongdoing);
- review TNRD’s code of conduct (for example, family members are not included in conflict of interest rules);
- compensation benchmarking be implemented;
- improve exit interview process as such dialogue may have revealed problems sooner.
- ethics governance and fraud training for human resources department so it can roll them out for all other departments;
- implement internal audits as such an audit would have found this issue and saved the TNRD money in the long run;
- review duties and responsibilities of the chief financial officer position and beef up internal audit role.