Top IWK finance official on leave in wake of CEO expense scandal

The IWK Health Centre's chief financial officer is taking a paid leave from his job and the hospital's board has contacted Nova Scotia's auditor general, the latest in the fallout from the expense scandal at the Halifax children's hospital.

The information is included in an internal staff email from board chairperson Karen Hutt, obtained by CBC News on Monday, that said the hospital's CFO, Stephen D'Arcy, is taking a break from his duties.

"This has been arrived at by mutual agreement," reads the email. "He fully understands the importance of an external review and we appreciate that he wants to ensure that the integrity of this process is not compromised."

Reaching out to the AG

The message to staff also said Hutt has reached out to Auditor General Michael Pickup's office "to outline our concerns in terms of questions related to the effectiveness of corporate practices related to financial management and control."

The email adds: "Our goal is to ensure he understands our concerns so that the [auditor general] can independently assess whether his office should conduct a performance audit of any of our practices."

Hutt said the board will undertake a fraud risk assessment and has also engaged the provincial government's internal audit centre to help create an internal audit program at the hospital.

The moves are the latest in a series of developments since CBC News first reported in June on inconsistencies and unanswered questions related to the expenses of the IWK's then-CEO.

Work already underway

Pickup said during an interview he's had two meetings with Hutt so far and members of his team have more meetings planned for later this week.

His office has already had contact with the IWK as part of its own work, said Pickup. His scheduled report for October, a financial audit looking at various government agencies, will include the IWK.

"All of this was well in the works four months ago before any of these issues came up," said Pickup.

CEO resigned last month

Tracy Kitch resigned in August, a week before the hospital's board released an independent report by Grant Thornton showing Kitch billed the IWK $47,000 for expenses believed to be personal during her nearly three-year tenure. At the time, Kitch had repaid some of the money but still owes $22,000. (A hospital spokesperson said Monday the board expects all outstanding debts to be repaid by the end of the month and an update would be provided then.)

When the Grant Thornton report was released Aug. 31, Hutt said all aspects of the hospital's financial system, including staffing, would be examined. The board has been requiring weekly written updates from hospital management about progress on implementing the report's recommendations.

"We have begun to implement the review's recommendations," Hutt wrote in the email, "and I want to reaffirm a pledge I made a few weeks ago; that we will go beyond this report and take whatever steps are needed to ensure all policies and procedures regarding the IWK's financial systems and management oversight are both effective and in full compliance."

Personal travel billed to IWK

In June, when CBC News first reported on Kitch's expenses, D'Arcy was put forward to answer questions. He said Kitch's expenses were "incurred in the normal course of business" or they were inadvertent errors, all of which had been refunded to the hospital. This was later found not to be the case.

The charges made "in error" ranged from a handful of dollars for iTunes and Netflix fees up to thousands of dollars for air travel and car service.

D'Arcy was unable to answer questions at the time related to thousands of dollars in flight-pass purchases, blocks of tickets that allowed for large amounts of travel within a defined time period. The Grant Thornton report would later show Kitch billed the hospital for more than $30,000 in travel deemed to be personal or which did not have sufficient documentation to show were work-related.

Hutt later confirmed Kitch was travelling back and forth to visit family in Ontario on the hospital's dime, despite assurances from Kitch in June that such was not the case.

D'Arcy took responsibility

During the June interview, D'Arcy took responsibility for any mistakes in the expense reporting, saying it was his duty to give the numbers a last look before they went to Kitch and former board chairperson Bob Hanf for signoff.

Emails obtained by CBC News through a freedom of information request showed D'Arcy was provided the numbers multiple times before they were posted online. CBC News later reported those numbers were not accurate.

D'Arcy started at the IWK in September 2015 and was previously the CFO at Public Health Ontario.

Province stands by board actions

Meanwhile, a spokesperson for Nova Scotia's health minister said he has confidence in the way the board is handling the situation.

"The process was transparent and involved an independent audit," Tracy Barron said on behalf of Randy Delorey.

Barron confirmed the province's two seats on the IWK board have been vacant since April 1, 2015. She noted, however, the board has 19 active members and the quorum was not affected by the vacancies.

Decision by AG soon

Pickup said he hopes to be in a position by the release of his October report to say whether he'll do a performance audit on anything requested by the IWK or anything else his office might determine is appropriate.

He said his October report would also look at board vacancies, and he's reached out to financial auditors to identify any deficiencies with internal reporting controls.