November 26, 2022

Donalds Hobby

World Finance Reviews

Provincial officials flagged Charlottetown financial concerns in 2019

A senior official with P.E.I.’s Department of Fisheries and Communities confirmed there were concerns with the City of Charlottetown’s financial records, according to an email from November 2019 obtained by CBC News through a freedom of information request. 

At that point, the department was responding to concerns brought forward by Charlottetown councillor Bob Doiron — concerns that had initially been flagged by city deputy CAO Scott Messervey before he was fired.

Danny Jenkins, a senior financial officer with the department, said in the email that documents from the city’s accountants provided “specific details of poor internal control systems and poor internal financial reporting practices.”

He also noted there was “generally poor financial management relating to purchasing and accounting procedures.”

The email from Jenkins said the city’s response to the auditors who raised the issues fell “well short of fully accepting of the recommendations of the auditors.”

Those comments contrast with statements P.E.I. Minister of Communities Jamie Fox made when he was asked about the topic during the 2022 spring sitting of the provincial legislature.

Jamie Fox, P.E.I.’s Minister of Fisheries and Communities, said this spring that the province would not get involved in a controversy about City of Charlottetown finances because it amounted to ‘an HR matter.’ (Jessica Doria-Brown/CBC )

Fox initially said his department had not received a complaint regarding the city. He repeatedly insisted that the city was dealing with a human resources matter in which the province would not interfere.

Controller did not receive information

The documents Jenkins was discussing — management letters from the city’s accountants outlining areas of concern in the city’s financial statements, along with the city’s responses to those letters — were not provided as part of the provincial response to CBC’s information request.

According to the province, those documents were withheld from CBC at the city’s request.

Charlottetown’s acting CAO Donna Waddell has said an outside accountant will oversee a review of the city’s finances that began this month, conducted by city staff and the city’s accounting firm MRSB. (Rick Gibbs/CBC)

Earlier this week, Charlottetown’s former controller Stephen Wedlock, who recently resigned, said he was never given copies of the management letters either. They would have been sent from accounting firm MRSB to former chief administrative officer Peter Kelly and councillor Terry Bernard, who was the chair of the city’s finance committee at the time.

“A controller would normally have access to all reports from the external auditors, as it is normally a controller’s responsibility to oversee internal control systems and any process issues,” said Wedlock. “These are usually the primary topics of a management letter.”

As controller, Wedlock was the city’s senior accountant for a large part of the time between 2016 and his resignation last week.

A man with short brown hair wearing a brown suit jacket with tie, smiling.
Stephen Wedlock says that at the time of his recent departure from the controller’s job, he was the last designated certified professional accountant to be working for the city of Charlottetown. (Submitted by Stephen Wedlock)

For two straight years during that time, the city received only qualified audit opinions from its auditors — essentially, a warning that they could not vouch for the accuracy of the city’s bottom line as outlined in its financial statements.

Meeting with Kelly, Bernard requested

The documents given to CBC also show that in January 2020, provincial officials requested a meeting with Kelly and Bernard, to discuss “measures being put in place to ensure compliance with the financial provisions of the Municipal Government Act.”

Peter Kelly (left), the former chief administrative officer for the City of Charlottetown, filed a workplace harassment complaint in 2019 against councillor Bob Doiron (right). That was the same year Doiron went to the provincial government with concerns about city finances. (Cody MacKay/CBC)

From the information CBC News received in response to its access to information request, it is not clear whether that meeting took place.

But the documents confirm the province had been presented with concerns regarding the city’s finances, and provincial officials shared those concerns.

Bylaw in conflict with provincial law

In the documents, provincial officials also expressed the opinion that the City of Charlottetown’s code of conduct bylaw was in conflict with the Municipal Government Act — though the province itself may have played a role in that.

Charlottetown Mayor Philip Brown has told CBC News he was never informed about an outside legal opinion provincial officials sought regarding whether the city he leads was breaching the Municipal Government Act. (Shane Hennessey/CBC)

Kevin McCarville, a municipal consultant with the province, cited a section of the bylaw requiring members of council “to direct any inquiries to the CAO” rather than communicate directly with city staff.

This was despite the fact that the Municipal Government Act “clearly allows council members to contact staff directly.”

McCarville said a sample code of conduct the province had provided to municipalities was also incorrect in this regard, writing: “The city may have simply followed our lead.”

That section of Charlottetown’s bylaw was amended in September 2020.

Province withholds legal opinion

After concerns around the city’s finances were raised this spring in the legislature, Fox told CBC News that his department had conducted a review and found the city had not been in breach of the province’s Municipal Government Act. He later clarified that, saying the “review” was actually an outside legal opinion.

Both Doiron, who had brought the concerns forward to the province, and Charlottetown Mayor Philip Brown said they were not made aware of such a legal opinion.

It appears that legal opinion was also withheld from CBC under a section of the Freedom of Information and Protection of Privacy Act that provides government the option of withholding information of a privileged nature. 

A spokesperson with the province’s access and privacy services office told CBC the department’s deputy minister “did exercise their discretion and protected the withheld pages in question … as they contain information subject to solicitor-client privilege.”

‘This was not an HR issue’

The Opposition critic for communities, MLA Steve Howard, has been calling on Fox to request his department conduct a review of the city under the Municipal Government Act.

“It’s pretty clear from this email … that this was not an HR issue, and the department and the minister should be very aware that there were some serious financial concerns with the policies and procedures at Charlottetown city hall,” said Howard.

Green MLA Steve Howard repeatedly raised questions about the controversy at Charlottetown City Hall during the spring session of the provincial legislature. (Jane Robertson/CBC)

With the resignation last week of the city’s controller, Howard said, “There’s no one left that is capable of producing the kind of financial due diligence required” to conduct a review of the concerns the city has now pledged to delve into.

“It’s pretty clear that the province should be stepping in and providing that kind of expertise and help to the city. And yet — crickets.”

CBC News asked for comment from Fox and his department, but no information was received in response.