The IWK Board Needs to Do Better

Posted September 29, 2017

The troubles at the IWK Health Centre have prompted a feeding frenzy by commentators and opposition politicians. The fundamental issue is not the small amount of money involved but rather the performance of the board.

There is strong evidence that it provided lax oversight on the expense account of former CEO Tracy Kitch, and there are indications that CFO Stephen D’Arcy helped to conceal the problem. He was placed on paid leave two weeks ago and has now resigned.

It is entirely appropriate that the board has invited Auditor-General Michael Pickup to perform a broader investigation into the hospital’s financial management and controls, and to become the regular auditor starting next year.

That may turn up more issues, but as of now, the financial impact of the Kitch affair is $47,000, all but $10,000 of which has already been recovered. This in an operation with a budget approaching $300 million per year.

Yet there are calls for new Health Minister Delorey to immediately fire the board and seize control of the hospital. That is neither necessary nor appropriate.

The Minister is already able to exercise a great deal of control.

Among his authorities are the ability to dismiss some or all of the directors; determine the organization and internal management structure; audit any program, facility, service or action; amend, revoke or replace by-laws respecting management, and medical and dental staff; approve business plans and budgets; and many more.

And with what would the Minister replace the current board?

The Department of Health is not equipped to fulfill the board’s function, particularly at a time when a CEO search needs to be commenced.

The Nova Scotia Health Authority (NSHA) is already fully challenged with its mandate and could hardly find time to provide oversight to the IWK. Apart from that, there is an understanding with PEI and New Brunswick, who send many patients to the IWK, that they will have representation in the governance.

The province benefits greatly from the distinctive identity and operation of the IWK. It has not been subject to the kind of labour disruptions that have troubled the QEII Health Sciences Centre.

The associated IWK Foundation has been enormously successful in fund-raising. most recently attracting donations of $51.2 million for new space in the areas of mental health, women’s health, rehabilitation services and intensive care, as well as for research. That is harder to do when a hospital is part of a government department.

The independent Board members are well-qualified volunteers, for whom this has been a devastating and trying experience. Beyond dealing with the immediate matter, they need to take a hard look at the way they are organized and do business.

There are too many board members. The bylaws call for twenty individuals fulfilling a variety of requirements—three from New Brunswick, one from PEI, three medical leaders, a representative of the Foundation, the CEO, and one from the NSHA Board (non-voting).

More is not better. In 2001, the Toronto Symphony Orchestra’s 60 member board included many of the city’s most prominent CEO’s. It very nearly went bankrupt, and only survived when the musicians agreed to make concessions and the provincial government helped.

Twenty is too many. It leads to a diffused sense of responsibility in which the chair and a handful of others do most of the work while the rest are mostly passive. Twelve is a much better size and anything above fourteen is too large. It is hard to be disengaged on a small board.

It is bad governance to have more than one employee on a board (typically the CEO) and it is perfectly fine to have none. Medical and other leaders should be fully engaged by the CEO in determining recommendations to the board, and should lead presentations to the board on areas where they are responsible, as well as participating in other discussions affecting patient care.

But it is not good governance for them to vote on their own, and it is not a good use of their valuable time for them to be present on a host of other issues.

It is evident that there have been inadequate controls and oversight of executive expenses. It will not be surprising if other weaknesses are identified by the Auditor General. The Finance, Audit and Risk Committee owns the current issue and needs to fulfill a stronger mandate.

The IWK is a very valuable and very public organization. It depends hugely on the goodwill of its patients and their families, and of the broader communities that it serves.

The present matter is financially trivial, but represents a threat to that trust.

Health Minister Delorey has been wise to let the matter play out. The Board must use the opportunity to up its game.

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  • The expense scandal at IWK HAS affected my impression about the organization and I won’t be making any contributions soon.

    What slays me about all these expense scandals is that there IS NO oversight and executives are given carte-blanche to do whatever they want.

    When I was working as a field technician for an engineering company out West, I was given an expense account, not only for my own personal expenses (gas, food, hotels, etc) but also for entertaining customers. I would pick up one to 2 dozen Tim Horton’s donuts every day for the companies I was going to visit. But this did not come without rules.

    I had to document, in writing, my expense: for what, when, and cost. Sometimes I had to justify the purchase, eg a new tool, or a guide book and always had to supply receipts. At the end of the month, I submitted my completed sheet to my immediate supervisor who scanned it for any large or unusual expenses. He would then authorize it with his signature. Then it went to the Finance department where the receipts and the dollar totals were matched to the entries on the expense sheet. Any errors were reported back to me for discussion, no changes were made to the total until I could justify/verify the error.

    A couple days later, I would get a cheque, signed by the VP of Finance.

    There was a process, and everyone had to follow it. No one abused the process because they COULD NOT, because of the scrutiny.

    Bob | October 2, 2017

  • The Board has failed the organization and the donors who support the organization. Hopefully the donors/ public will not turn their back on the organization and it will not be costly in terms of the funds raised.
    There must be consequences for a Board that is “lax” in the performance of its oversight and governance responsibilities. Some Board members must resign! I suggest the Chair and all the members of the Finance and Audit Committee must resign as a minimum. The dollars misspent are small compared to the possible financial ramifications if the donors lose faith. That cannot be risked and everything must be done to reflect that all responsible, acknowledge their failures and suffer the consequences.
    Bill you comment that all the independent Board members, are well qualified volunteers. So if they were qualified, but this still happened, what were they negligent??
    Boards must trust those they empower to manage but they must verify that the ongoing trust is warranted. Qualified Board members know that. Trusting is easy, verification requires more engagement and effort. This Board did the easy stuff and walked away from its responsibility. There must be consequences, there must be accountability, and therefore there must be Board resignations.

    barry h | October 1, 2017

  • The one thing that has never been addressed by the IWK Board is that there clearly was a flaw in “process” such that all these personal expenses were being authorized for payment by someone . The use of credit cards by any business is always a tricky process to manage . The cardholder gets to cause an expense based on an honour system . In this case , the IWK doesn’t know about the expense until the credit card invoice appears . Knowing that is the process, the IWK should have had safeguards in place to recoup any expense deemed personal . The easy way is to deduct from the employees pay . In terms of a timeline , if a personal expense showed up on a January credit card invoice , then within 30 days it should have been repaid . Simple . The Board Chair tried damage control at an ATV interview , but it was not very well done . The Minister shouldn’t fire the Board but certainly should audit all BOARD expenses for travel , meetings , etc and audit their whole paper process that either commits money or expenses money . There is a smell here and it affects the whole IWK reputation until the smell is gone .

    Peter S | October 1, 2017

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