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Audit finds VCH/UBC research funds at high risk for fraud

Report cites lack of oversight on nearly $100 million of research accounts

A lack of oversight over nearly $100 million worth of health research funds at the Vancouver Coastal Health Authority and the University of British Columbia could bring a risk of fraud and losses.

Those were the results of an October 2012 report by the VCH's internal audit branch, obtained by the Courier under the freedom of information law.

"There is a lack of financial management framework surrounding research accounts at VCH," states the report. "This situation presents a high-risk exposure to the VCH Board and Management. The risks include financial loss due to misuse of research funds, fraud, unclear ownership of funds or liabilities for legal purposes and negative publicity."

These problems were assigned to the High Priority red category, that is, "an issue that could have a significant impact and should be corrected immediately."

Two concerns noted are that the VCH-UBC research agreement has not been updated since 2003, and that there is "increased risk of research staff double dipping and being paid by UBC and VCH." As well, financial management of research accounts is decentralized with little or no reporting to the chief financial officer, and accountability to the VCH board is also unclear.

In response, Dr. Patrick O'Connor, VCH vice-president of medicine quality and safety, told the Courier that VCH's Research Institute has hired a full-time financial officer who is working to resolve the problems. The audit set a target date for July 2013.

The VCHRI - which partners with the University of B.C.'s medicine faculty - received $98.6 million in research funding in 2011/12. About 80 per cent of the funds are managed by UBC and 20 per cent by VCH, which enables over 600 investigators and trainees to conduct health research in many fields ranging from cancer and brain research to asthma and diabetes. About 60 per cent of the funds come from government, 28 per cent from non-profit entities, and 12 per cent from industry.

The authors also found that the Vancouver Prostrate Centre (which reports to VCH and UBC) charged $260,000 in CIBC credit card expenses in 2011/12 - including restaurant and alcohol bills - but some with no documentation, contrary to VCH policy. UBC will sometimes cover the cost of entertaining professors, speakers and donors with meals that can include alcohol but the sums must be reasonable and cannot be charged by staffers.

The audit reported "inadequate controls over cheque requisitions and accounts." In one recent event, John Mwotassubi, the former financial manager of UBC's pediatrics department, was sentenced in 2012 to two years of house arrest for stealing more than $450,000 in a cheque scheme. He was caught in 2010 when UBC installed a new program designed to detect employee fraud. Dr. O'Connor said he is not very familiar with the Mwotassubi case, but generally, "writing fraudulent cheques is a risk that applies to research and can be considered part of the implications identified in the report."

Eight lines of the audit's recommendations were blanked out under the FOI law's exemptions of policy advice (section 13) and financial harm (section 17).