Liberals failed to sufficiently monitor Ornge: Auditor general
March 21, 2012, Toronto - Ontario's governing Liberals failed to sufficiently monitor the province's air ambulance service, despite giving Ornge hundreds of millions of dollars that it used to make questionable
business deals, auditor general Jim McCarter said Wednesday.
March 21, 2012 By The Canadian Press
His long-awaited report shed some light on the troubled agency, which has been mired in controversy over high salaries, questionable business practices and allegations that public dollars may have been used for personal gain.
It's also under a criminal probe for "financial irregularities.''
"Ornge is a textbook example of what happens when the government doesn't get the information it needs to properly do its job,'' McCarter said.
On top of the $730 million Ornge received from the government over five years, it also borrowed almost $300 million to buy more airplanes and helicopters than it needed and used taxpayer dollars to repay the debt, McCarter's long-awaited report found. The agency is selling some of the used helicopters it bought with the money at a loss.
Government funding to Ornge rose 20 per cent in its first four years of operation, even though the number of patients transported by air fell during that period, it said.
The health ministry was told in a letter early last year that Ornge planned to create a "complicated network'' of for-profit and not-for-profit subsidiaries, McCarter said. But it didn't look into the arrangements, even though it knew some of the companies would be directly involved in delivering services but would be outside of ministry oversight, the report found.
"Avoiding potential conflicts would be especially important given that the January 2011 letter indicated that some members of Ornge's management and board were shareholders of certain of these entities,'' it said.
Ornge's former management refused to give McCarter records related to subsidiaries that weren't directly funded by the province, not even saying who the shareholders were, how much senior management was being paid, nor providing details on the millions of dollars it paid to a law firm that provided advice on its business deals.
Many of these for-profit and not-for-profit subsidiaries provided most of Ornge's air ambulance and administrative services, then billed Ornge for the cost, the report found. But under the performance agreement with the government, the ministry had no right to access any of those records.
In 2010, Ornge's top five senior executives received $2.5 million, which wasn't disclosed to the public. One board member received over $200,000, excluding expenses. Some of the money came from the borrowed funds, the report said.
One of Ornge's for-profit subsidiaries purchased a building for $15 million to serve as Ornge's headquarters, then leased it back to the publicly funded agency at a rate that was 40 per cent higher than fair-market rent. That allowed the subsidiary to obtain $24 million in financing for the building, $9 million of which was intended to flow back to a related for-profit company that was owned by a senior Ornge manager.
His report also found that even though Ornge received $65 million from the government to create a land ambulance service to transport 20,000 patients a year starting in 2008, it transported only 15 per cent of the projected number at a per-patient cost that was nearly as high as the cost to transport them by air.
Ornge's former management and board of directors, who were replaced in January, also refused to provide the agreement relating to a $4.8-million payment that a European company — which sold aircraft to Ornge for $148 million — made to one of the subsidiaries to provide marketing services.
It's been reported that a Ornge subsidiary controlled by then-chief executive Chris Mazza received $6.7 million from helicopter firm AgustaWestland after Ornge used provincial funds to buy 12 helicopters from the company. Mazza's replacement, Ron McKerlie, has acknowledged that the marketing work performed by the
Ornge subsidiary didn't reflect the amount of money that was paid.
AgustaWestland has denied any wrongdoing, saying the propriety of its actions "cannot be questioned'' and that it would co-operate fully with any inquiries from a "competent authority.''
Before the report was even released, Health Minister Deb Matthews said she would act on all of McCarter's recommendations.
The minister, who has refused to resign over the scandal, said she'll introduce new legislation Wednesday to tighten the leash on Ornge. The government has also signed a new performance agreement with the agency.
Matthews has acknowledged that the 2005 performance agreement that led to Ornge's ill-fated foray into the for-profit sector wasn't adequate to prevent the apparent "abuse'' of taxpayer dollars.
The new rules would stop Ornge from selling assets or taking on more debt without ministry approval, strengthen conflict of interest provisions and give the ministry more audit and inspection powers. It will also create a new patient advocate and complaint process to ensure patient safety.
The NDP and Conservatives combined Tuesday to out-vote the minority Liberals and demand a special legislative committee be set up to investigate Ornge. It's not known if the Liberals will agree to the committee.
In addition to the criminal probe and McCarter's report, the Ministry of Health's emergency health services branch is also investigating 13 incidents related to air ambulance transports, three of which involved deaths of patients.