Salaries, raises of 8 Health P.E.I. executives didn't get proper approval, report finds

Eight top executives at Health P.E.I. were given salaries or raises without the proper approval, according to a report by the office of P.E.I.'s auditor general tabled in the legislature on Tuesday.

According to the 23-page report, most employees at Health P.E.I. have a classification level based on their skills and duties, but "salaries paid to these employees did not always agree to the salary ranges assigned to the classification level."

The audit covered January 2021 until December 2023. 

The issues flagged in the report would have fallen under the leadership of Dr. Michael Gardam, who was the permanent CEO of Health PEI for the majority of that time.

The eight positions that were audited include:

• Chief administrative officer.
• Chief communications officer.
• Chief financial officer.
• Chief human resources officer.
• Chief medical officer.
• Chief nursing, professional practice and quality officer.
• Chief of performance and innovation.
• Chief operating officer.

The salary for Health P.E.I.'s CEO, who is appointed by the Lieutenant Governor, was not included in the audit.

The top salary of the executives listed is the chief medical officer, at $383,526, while the lowest listed is the chief communications officer, at $158,496.

Auditor general's office releases scathing report on how some Health P.E.I. executives are paid

1 month ago

Duration 2:49

A report released Tuesday gave details about employment contracts awarded to eight members of the Health P.E.I. executive team between 2021 and 2023. As CBC's Tony Davis explains, the provincial auditor general's office says salary increases during that period didn’t go through the proper channels.

Minister unaware of contracts

The report said five of the eight positions had received a salary classification, and therefore had a salary range recommended by the treasury board.

The remaining three positions, established when Health P.E.I.'s new leadership structure took effect in January 2021, were never classified. 

We want to emphasize this should in no way reflect on the executives who signed contracts in good faith.— Melanie Fraser, Health P.E.I. CEO

The auditor general's office found two executives were being paid wages that "did not agree to the salary ranges of the assigned classification level."

Those positions include the chief communications officer, who is paid more than $50,000 more than the recommendation, and the chief of performance and innovation, who is paid nearly $40,000 more than the recommendation.

Those increases are supposed to be approved by the treasury board and the minister of health, which didn't happen. The current minister, Mark McLane, says he wasn't made aware the contracts.

The audit also showed that the 2024-25 provincial budget allocated to Health P.E.I. includes over $2 million in salaries for the listed executives — a 25 per cent increase from two fiscal years ago.

In total, Health P.E.I. pays 66 per cent of its budget, or $560 million, to the salaries of 4,166 full-time equivalent employees, and 252 medical staff.

'I don't for a second feel badly about what I paid people'

Gardam, who was CEO at the time, said if he didn't increase salaries for the positions, he would have risked losing staff to other provinces. 

"I don't for a second feel badly about what I paid people," Gardam told CBC News on Tuesday. "We paid them below the mean and it's really, you know, mostly fair market value for the hard work that that people were were doing."

The report also found that employment contracts for the executives were not authorized in accordance with treasury board policies. This includes contracts with effective dates more than 60 working days prior to the signing date, sometimes up to two years, "resulting in significant amounts of backpay."

These contracts were not approved by the health minister, Health P.E.I's board of directors, or the treasury board, the report said.

The report laid out six recommendations, including that Health P.E.I. should seek the health minister and treasury board's approval for future employment contracts, and that contracts should not be backdated more than 60 days.

Health P.E.I. responds

Health P.E.I. said in a statement Tuesday it has taken "immediate steps" to address the classification and compensation issues raised by the report and will comply with the recommendations before the end of 2024.

"We acknowledge the impact on trust in our organization due to the actions of a few who were responsible for creating and offering executive contracts," said the statement, co-signed by Fraser and Health P.E.I. Board Chair Diane Griffin.

"We want to emphasize this should in no way reflect on the executives who signed contracts in good faith with their employer and the invaluable work being carried out by our dedicated team across the province."

During a press conference Tuesday, Fraser said she doesn't think executives are being overpaid.

She said the issue is with people circumventing the rules.

"I can confirm that the controls are in place. There are three lines of defence within our organization, there are controls at every level," she said. "In fact, it was when we got to the third line of defence, which is when the AG reviews our final state, our financial statements at the end of the fiscal year, that these issues were detected."

Former CEO reacts

Gardam says when he was making changes to executive salaries, he wasn't aware he needed Treasury Board approval.

"So that's on me," said Gardam, who is now a professor at the University of Ottawa.

But Gardam also says he doesn't regret increasing compensation, especially during the pandemic.

"The pandemic was a very hard time on everybody. People were working all crazy hours, and the one thing I felt I had control over, was I could pay them a fair wage," he said. "And so that's what I did."

Gardam said P.E.I.'s salary bands are not competitive, and other Maritime provinces were trying to "poach" members of his team.

He said he wasn't aware any rules were being broken when he offered them contracts, something he said is a common "workaround" in these situations.

The former CEO says the new salaries were still significantly below the average pay for leadership roles, and calls the raises "absolutely justified."

"I don't for a second feel badly about what I paid people," he said.

"The money that I paid them, I'm totally happy with, and I would do it again. I mean, at least I would request to do it again. Whether or not I'd be allowed to or not is another story."