Charlottetown hires BDO for 'forensic investigation' into 2019 concerns from fired staffer

The City of Charlottetown has hired the accounting firm BDO to conduct a forensic investigation looking into financial and administrative concerns raised in 2019 by the city's former deputy CAO.

Scott Messervey provided council with a letter enumerating 18 concerns in January 2019, alleging, among other things, the city had authorized millions in spending without following its own policies or the Municipal Government Act.

At the time Messervey had just been fired by his boss, the city's former chief administrative officer Peter Kelly.

The hiring of BDO, authorized through a 10-0 council vote on Aug. 22, 2022, is to conduct "a forensic investigation and fraud risk assessment / internal controls assessment" looking into Messervey's specific concerns, more than three years after the fact.

In the 2019 letter, Messervey told council members he had been fired in "retaliation for highlighting the significant number of problems at City Hall and [chief administrative officer Peter] Kelly's incidents where he exceeded his authority."

For his part, Kelly wrote to Messerveyand said he was fired because somestaff felt the deputywas "looking for errors, rather than attempting to work with them to meet city and departmental goals."

Messervey's concerns were never made public until reported by CBC in April 2022.

On May 11council voted to terminate Kelly's employment without cause.

Council's initial vote was to take 'no further action'

The unanimous vote of council to hire BDO stands in contrast to when Messervey's concerns were initially brought forward.

On Feb. 5, 2019, following a discussion in a closed session, a motion was put forward by Coun.Terry MacLeod, seconded by Terry Bernard, to consider the matter closed, "and that no further action is required."

That motion to dismiss the concerns passed 7-3, with councillors Jason Coady, Bob Doiron and Julie McCabe voting against it.

At a meeting the followingmonth, Doiron tried to introduce a motion calling for an external audit of the city's finance department. Council voted to remove the item from the agenda.

According to court submissions from Messervey as part of a small claims suit related to his firing, he also filed a complaint under the city's whistleblower protection policy to which the city did not respond.

Results not likely before vote

It's not clear when BDO's report will be delivered to council, but it seems unlikely it'll be finished before municipal elections on Nov. 7.

It's also not clear how much the investigation will cost the city. In its proposal to the city the accounting firm said itrequired a retainer of $25,000. Services of the two partners at the firm who will have primary responsibility for the investigation were quoted to the city at $600 per hour.

In July the city announced a financial review would be undertaken by city staff working with the city's accounting firm MRSB. That review was to have been overseen by an outside auditor, but the process was criticized by some councillors as lacking independence.

The hiring of BDO to conduct a forensic investigation goes beyond the review process sketched out by the city's interim CAO Donna Waddell in July.

According to the proposal put forward by BDO, the city has asked the firm to conduct "an in-depth analysis of the allegations to determine if there were apparent breaches" of the Municipal Government act, city bylaws and policies.

BDO has also been asked by the city to evaluate its spending controls and procurement processes.

Province had similar concerns

In his letter Messervey said a full review was required to identify weaknesses with internal financial controls with the city.

Those same concerns were brought to the attention of provincial officials in November 2019 in emails obtained by CBC through freedom of information.

Emails from staff in the Department of Fisheries and Communities described "poor internal control systems and poor internal financial reporting practices generally poor financial management relating to purchasing and accounting procedures" at city hall.

Afterthe Opposition began callingin Mayfor the Minister of Communities Jamie Fox to have his department conduct a review, Fox eventually said his department had obtained an outside legal opinion which concluded there had been no breach of the Municipal Government Act relating to the issues raised by Messervey.

But that opinion was never made public, nor was it shared with the city's mayor orDoiron, the councillor who had brought Messervey's concerns forward to the province.

Failed attempt to broaden scope

On Sept. 12, Doiron asked if council could amend the terms of engagement with BDO to require its report to be made public by Oct. 31 a week before the municipal election.

"The public has been pushing councillors to come forward to agree to this type of investigation," Doiron said.

"Give the electorate, the residents of Charlottetown an opportunity to look at it before they mark their 'X' on their vote for the new council."

Waddell said it would be "really difficult" for BDO to complete their review by the end of October.

Doiron and Coun.Mitchell Tweel asked that the scope of the review be expanded beyond the concerns Messervey raised in 2019 to include other issues, including those raised by Messervey's successor Tina Lococco before she was fired in April 2022.

The two councillors also sought assurances that BDO's full report would be made available to the public.

But after a heated exchangebetween Doiron and Mayor Philip Brown, the mayor moved to the next item on the agenda without calling for a vote on Doiron's request.

"We initiated on Aug. 22 a process that has already started," Brown said, before moving on with the meeting.