Eastern Reporter - - Front Page - Sarah Brookes

AN in­de­pen­dent re­view of the fi­nan­cial records of high-pro­file drug re­ha­bil­i­ta­tion cen­tre Shalom House has raised ques­tions about the record­ing of rev­enue the char­ity re­ceives from cash do­na­tions.

The re­view of in­ter­nal fi­nan­cial records by in­de­pen­dent ac­coun­tants has re­sulted in a qual­i­fied audit opin­ion for the WA Shalom Group Inc (WASG) for each of the past three fi­nan­cial years, ac­cord­ing to the group’s an­nual fi­nan­cial re­ports.

The re­ports, filed with the Aus­tralian Char­i­ties and Not-for-prof­its Com­mis­sion (ACNC), show that ac­coun­tants Shreeve and Carslake in 2014-15 and 2015-16 – and ‘Big Four’ ac­count­ing firm Ernst & Young in 2016-17 – is­sued qual­i­fied audit opin­ions partly due to a cash do­na­tion is­sue.

Shalom House, which claims to be the strictest re­hab cen­tre of its kind in Aus­tralia, was es­tab­lished in 2012 by ad­dict-turned-re­hab guru Peter Lyn­don-James and is known for its un­ortho­dox treat­ment of pa­tients.

Mr Lyn­don-James has strug­gled with ad­dic­tion for much of his life, spent time in jail, then stud­ied the­ol­ogy and worked as a vol­un­teer chap­lain at Aca­cia Prison. He was named the 2018 WA Lo­cal Hero in the Aus­tralian of the Year Awards.

He said WASG had vol­un­tar­ily ap­proached Ernst & Young to gain fur­ther in­sight into the char­ity’s ac­count­ing and book­keep­ing prac­tices and the au­di­tors’ find­ings had prompted a re­vi­sion of book­keep­ing and fi­nan­cial con­trols.

“Ernst & Young found no il­le­gal deal­ings or dis­hon­est prac­tices,” he said.

“They sim­ply found ways to strengthen and stream­line our prac­tices so that Shalom House is an above-board or­gan­i­sa­tion in ev­ery­thing we do.”

The WASG fi­nan­cial re­port for 2016-17 filed with the ACNC shows that the group re­ceived nearly $760,000 in cash do­na­tions that fi­nan­cial year, up steeply from $281,117 in 2016 and $99,960 in 2015.

The au­di­tors found that over­all WASG had given a true and fair view of its fi­nan­cial po­si­tion in its state­ments for each of those years.

How­ever, in its audit re­port, Ernst & Young said it was un­able to ver­ify whether this was a “com­plete” ac­count­ing of do­na­tions re­ceived by the group in that fi­nan­cial year.

“(WASG) has not es­tab­lished con­trols over the col­lec­tion of cash do­na­tions prior to en­try in its fi­nan­cial records,” the au­di­tors’ re­port said.

“Ac­cord­ingly, as the ev­i­dence avail­able to us re­gard­ing rev­enue from this source was lim­ited, our audit pro­ce­dures with re­spect to cash do­na­tions had to be re­stricted to the amounts recorded in the fi­nan­cial records.”

Mr Lyn­don-James said that as the or­gan­i­sa­tion had grown sub­stan­tially in the past few years, a thor­ough fi­nan­cial ex­am­i­na­tion was needed for the con­tin­u­a­tion of WASG.

“Our board saw the need for ad­di­tional gov­er­nance and over­sight in our ac­count­ing prac­tices, so we ap­proached the most rep­utable and pro­fes­sional au­di­tors in Aus­tralia,” he said.

“Our hope was that any is­sue in our fi­nan­cial han­dling or record keep­ing would be brought to light so that we can con­tinue to op­er­ate in com­plete hon­esty, in­tegrity and trans­parency.

“The is­sues that were brought to light were in­cred­i­bly help­ful and prac­ti­cal and we were able to im­ple­ment new poli­cies and pro­ce­dures within our fi­nan­cial de­part­ments to make sure that ev­ery dol­lar is ac­counted for.”

The Ernst & Young 201617 audit also looked at the records for a WASG trust ac­count that holds money be­long­ing to pro­gram par­tic­i­pants, many of whom are on Cen­tre­link ben­e­fits.

At June 30, 2017, there was $20,203 in the res­i­dents’ trust ac­count. That year there were as many as 85 men in the pro­gram.

A con­di­tion of en­rol­ment in the re­ha­bil­i­ta­tion pro­gram is that pa­tients sign a power of at­tor­ney giv­ing Mr Lyn­don-James author­ity to have res­i­dents’ Cen­tre­link ben­e­fits and wages paid into the trust ac­count to cover their board and pro­gram costs.

“We have been un­able to ob­tain suf­fi­cient ap­pro­pri­ate audit ev­i­dence to ver­ify whether re­ceipts into this ac­count and pay­ments from this ac­count rep­re­sents (sic) valid res­i­dent re­lated trans­ac­tions,” Ernst & Young said in the audit re­port.

“We are there­fore un­able to ex­press an opin­ion whether the res­i­dents trust bank ac­count and as­so­ci­ated li­a­bil­ity are ap­pro­pri­ately recorded.”

Mr Lyn­don-James said WASG had edited its book­keep­ing and ac­count­ing pro­ce­dural man­ual, in­sti­tuted new con­trol sys­tems, and pro­vided more train­ing for key staff to en­sure all Ernst & Young’s sug­ges­tions were im­ple­mented.

“We have wel­comed Ernst & Young au­di­tors into our of­fices again over the past month where their team have been assessing the changes we have made and re­vis­ing the con­trols put in play,” he said.

“They are also fur­ther go­ing through ev­ery trans­ac­tion to make sure we are 100 per cent above board.”

Mr Lyn­don-James said the ACNC, WA Char­i­ta­ble Col­lec­tions Ad­vi­sory Com­mit­tee and the WA Com­mis­sioner for Con­sumer Pro­tec­tion had not ex­pressed any con­cern to WASG.

Pic­ture: David Baylis d486508

Shalom House founder Peter Lyn­don-James has de­fended the group’s fi­nan­cial op­er­a­tions.

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