Ontario's governing Liberals failed to sufficiently monitor the province's air ambulance service, despite giving Ornge hundreds of millions of dollars that it used to make questionable business deals, auditor general Jim McCarter said Wednesday.

McCarter's long-awaited report says the Health Ministry did little to oversee the $700 million it handed to Ornge over the past five years. Orgne also borrowed almost $300 million to buy more airplanes and helicopters than it needed and used taxpayer dollars to repay the debt, McCarter found.

The agency has been mired in controversy over high salaries, questionable business practices and allegations that public dollars may have been used for personal gain.

Since the creation of Ornge in 2006, taxpayer funding of the air ambulance service shot up 20 per cent while the number of patients transported dropped six per cent, McCarter found.

"Ornge is a textbook example of what happens when the government doesn't get the information it needs to properly do its job," McCarter said.

The auditor says the government should have paid much closer attention to potential conflicts of interest since the people running Ornge were also shareholders in a web of private companies billing taxpayers for services. 

'Didn't pass the smell test'

McCarter said Ornge, created as a non-profit agency to provide air ambulance service, "soon became a mini-conglomerate" of spinoff companies operating with little or no government oversight.

"Of particular concern to us was the fact that certain of these companies were owned by Ornge's president, senior members of its management team and its board of directors. 

"To the nose of this watchdog, this didn't pass the smell test," said McCarter.

The auditor also found Ornge bought three more helicopters and four more airplanes than its own analysis showed it needed and planned to allow the private companies to use them.

The agency is selling some of those used helicopters it bought with the money at a loss.

Health minister promises action

McCarter said he has not been given access to the paper trail from all the Ornge spinoff companies, meaning he has not been allowed to review details of a $5-million payment from an Italian helicopter maker.

That payment is now the subject of a criminal probe by the Ontario Provincial Police.

Among McCarter's other findings:

  • The number of patients Ornge carried fell while its budget increased.
  • A land-based ambulance service added by Ornge in 2008 carried only 15 per cent of the number of passengers projected at a per-patient cost that was almost as high as air transfers.
  • The way Ornge reports its response times made it difficult to tell how well it was serving patients.
  • There are frequent problems with how Ornge aircraft was dispatched.
  • One of Ornge's for-profit subsidiaries purchased a building for $15 million to serve as Ornge's headquarters, then leased it back to the publicly-funded agency at a rate that was 40 per cent higher than fair-market rent. That allowed the subsidiary to obtain $24 million in financing for the building, $9 million of which was intended to flow back to a related for-profit company that was owned by a senior Ornge manager.

Ontario Health Minister Deb Matthews issued a statement Wednesday saying the province will act on all of McCarter's recommendations.  The minister, who has refused opposition demands she resign over the scandal, said she will introduce new legislation Wednesday to tighten the leash on Ornge.

The NDP and Conservatives combined Tuesday to out-vote the minority Liberals and demand a special legislative committee be set up to investigate Ornge. It's not known if the Liberals will agree to the committee.

In addition to the criminal probe and McCarter's report, the Ministry of Health's emergency health services branch is also investigating 13 incidents related to air ambulance transports, three of which involved the deaths of patients.

With files from The Canadian Press