Auditor-General John Doyle's long-anticipated examination into the SD40 Business Company's governance, internal controls and compliance with legislation was released on Wednesday afternoon by the New Westminster school district and Doyle's key finding was that former trustee Brent Atkinson was in a conflict of interest when he served as both a trustee and as a board director and chief executive officer of the business company.
In Doyle's 10-page report, submitted to the New Westminster school district on Jan. 13, 2012, the auditor-general outlines four key observations and recommendations.
While Doyle offers suggestions - all agreed to by the school board - for the first three areas of governance relationship with SD40 Business Company; agency relationship risk; and appointment of SD40 Business Company board members; the fourth area, risk of conflict of interest, provides the most telling of Doyle's observations and recommendations.
Doyle notes that Brent Atkinson, at the time a school trustee, but also the chair of the SD40 Business Company board and chief executive officer of SD40 BC, "may have had an undeclared indirect pecuniary interest" because he was in violation of section 56 (a) (i) of the School Act.
That section notes that "a trustee has an indirect pecuniary interest in any matter in which the board is concerned if the trustee ... is a shareholder in or a director or senior officer of a corporation that does not offer its securities to the public."
Doyle notes that Atkinson voted on SD40 Business Company related matters at school board meetings, "including resolutions to clarify the original terms of the loan (from the district to the business company) and to advance funds to SD40 BC."
Doyle also noted that Atkinson voted against tabling a motion related to deferring an advance of funds to the business company until after legal advice on whether he was in a conflict of interest was obtained.
Further on in Doyle's observations, he points out that current school board vice-chair Michael Ewen, a former director of the business company, also voted in the same manner as Atkinson.
But Doyle stops short of declaring Ewen in the same conflict of interest as Atkinson, noting that: "It is important for senior management and board members to be cognizant of what a conflict of interest is and to declare annually, in writing, their independence and their interests in any other businesses so that any actual or perceived conflicts can be noted."
Atkinson, who didn't seek re-election last November after 31 years as a trustee, told The Record on Wednesday afternoon that he had seen the report and he respectfully disagrees with Doyle's conclusions.
"We had a fairly lengthy conversation," Atkinson said of his talks with Doyle. "In his opinion, I had an indirect pecuniary interest, but that's not how I see it.
"I abided by his direction because he is the auditor-general, but this is no longer applicable because I'm no longer a trustee."
Atkinson doesn't apologize for voting as he did in September 2009 when the business company needed a $95,000 loan from the school district to meet payroll.
The motion passed with all three Voice New Westminster candidates, trustees Lisa Graham, Jim Goring and Casey Cook, voting against it, while trustees Lori Watt, James Janzen, Ewen and Atkinson voted to provide the loan, which was to be paid back within 60 days
"If I hadn't voted, the motion would have failed on a 3-3 tie and the business company probably wouldn't have met payroll," Atkinson said on Wednesday. "The business company may not have survived."
For trustee Lisa Graham, Doyle's report was vindication.
"It felt like Christmas day," said Graham. "It's nice to see in print what so many people had been saying about the operations of the business company for some time.
"Victory isn't the right word, but it reaffirms what so many of us were saying, that there was a conflict-of-interest situation."
Graham said she thinks Doyle's recommendations can be applied to the future.
"What I hope comes of this is the mistakes of the past won't be repeated," said Graham. "This establishes guidelines on what conflict of interest is."
Patrick O'Connor, who served more than five years on the district's finance committee and often brought up the issue of conflict of interest, was also pleased with Doyle's report.
"This confirms what we've been saying for years," said O'Connor. "Conflict of interest hasn't existed just for the business company, it's existed in other board situations. ... I think what we won is clarity for the future."
And O'Connor said that he hopes that the school board will take seriously the concerns of the public at large.
"Maybe when community members come forward with concerns, they shouldn't be stonewalled for six years," said O'Connor.
Ewen accepted Doyle's recommendations even though he doesn't agree with the auditor-general's recommendations on conflict of interest.
"The School Act is very clear," said Ewen. "I don't believe Brent was in a indirect pecuniary interest. ... I would argue that it was an altruistic interest, where the interest was to raise funds for the students of New Westminster. Because of Brent, almost $1 million has come into the district for the benefit of New Westminster students.
"I think he (Doyle) is wrong. ... I don't see where Brent had a direct or indirect pecuniary interest."
The district released Doyle's report with a cover letter, signed by chair James Janzen, noting that the district has "already taken significant steps to implement (Doyle's) recommendations."
Janzen also outlined four key observations, from the board's point of view, including the fact the district has received more than $880,000 in profit from the business company to the district; that the district has provided short-term advances to the business company, with the most recent time being in 2009; that a majority of trustees attended the business company's annual general meeting in 2011 to oversee appointments and approvals; and that the business company's board of directors is now in compliance with the School Act.
As for what he thinks about critics of the business company, Ewen was also clear.
"I get the fact that some people want to live in the past, but the business company has been a great success story," said Ewen. "My advice to those people is 'get over it'. We're in February 2012. The business company has paid off everything, including interest and it has provided almost $1 million in addition funds to the students of New Westminster. That's the story."
Trustee Casey Cook, who has talked about conflict of interest at the board table, is currently on vacation, but a Tweet from his account did capture his thoughts on the report's release.
"The AG's report is out. Have a read. The sanctimonious, duplicetous (sic) acts in the last election and long be4 is now clear 4 all 2 see."
Click here to see John Doyles full report.
Click here to see The New Westminster school districts letter accompanying Doyles report.
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