CALGARY -- The Alberta government has ended an agreement with the organization that runs Lethbridge's supervised consumption site after it said an audit revealed millions in misspent funds.

Officials say a financial audit of ARCHES (AIDS Reduction Community Harm Education & Support Society) was launched by Deloitte after possible irregularities were found in the organization.

The investigation concluded that a number of the allegations of mismanagement at the agency were substantiated, including:

  • Asset and funding misappropriation
  • Non-compliance with grant agreement
  • Inappropriate governance and organizational operations

Deloitte's report found a number of serious issues including $13,000 in interest from ARCHES bank accounts being used for parties, staff retreats, entertainment and gift cards, the annual salary of one senior executive exceeding $300,000 when it should have been capped at $80,000 and more than $1.6 million that is unaccounted for due to missing expense reports from 2017 to 2018.

"It is disturbing and extremely disappointing to me that taxpayer funds allocated to this organization in order to serve the most vulnerable in Lethbridge would be used for European conferences, expenses for retreats, entertainment and gift cards. Our government will not stand idly by while millions in taxpayer funds are missing or misappropriated," said Jason Luan, associate minister of mental health and addictions in a release.


The audit also found:

  • More than $4,000 was used to fund a trip for senior management to attend a conference in Portugal
  • More than $7,500 spent on management retreats including meals and mileage
  • Thousands in unverifiable travel expenses, including trips charged to company credit cards that were not recorded
  • Thousands of dollars' worth of gift cards to multiple businesses, including to a company owned by a senior executive's spouse
  • Other conflict of interest issues such as where a senior executive's family member was hired and earned a salary of $9,900
  • The number of staff members at ARCHES exceeded the 126 allowed as per the agreement; the actual number of employees could not be verified

"Proper personal conflict of interest declarations were not recorded when related individuals or vendors were hired or utilized," the province says. "Vendors were repeatedly secured in secrecy with a lack of transparency and accountability. No petty cash reconciliations have been completed."

Even with all the allegations that were proven against ARCHES, the government says the audit could not be fully completed due to the state of the agency's record-keeping.

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It adds law enforcement has been notified about the situation.

"Due to missing funds and unverifiable transactions, as well as allegations, which could not be investigated in the scope of this audit, government will consult with law enforcement to determine whether further investigation is warranted."

Even though ARCHES' site has been closed as a result, the government says a temporary overdose prevention site has been set up to help those with addictions.

Lethbridge officials say the closure of the supervised consumption site will leave a hole in the support for residents.

"(It's) disappointing to hear that money may have been spent inappropriately," said Lethbridge mayor Chris Spearman. "There needs to be some form of support."


In a press release issued Thursday, ARCHES says the audit was launched on March 4, 2020 and its staff and board of directors have cooperated fully with the government and independent auditor.

The board also began its own organizational review in May that has already resulted in changes at the facility.

When it comes to the forensic audit, the organization says it understands why there are concerns and adds it has concerns of its own.

However, it has decided not to comment further at this time.

"We woke up to this news just like the rest of our community and at this time the full report findings have not been given to the ARCHES’ Board of Directors. Please understand we are waiting to comment until we have all of the information."

ARCHES expects to hold a press conference on the audit "soon" and will notify the media when it plans to do so.

Over the past two years, ARCHES has received more than $14.4 million in government funding.