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Office of the Auditor General
Report on the Fraud and Waste Hotline
Tabled at Audit Committee – June 20, 2016
Report on the Fraud and Waste Hotline
Office of the Auditor General – June 20, 2016
Contents
2015 Fraud and Waste Hotline Report Highlights..................................................... 1
Description of the Hotline.......................................................................................... 2
Hotline Statistics ....................................................................................................... 2
Summary of type of reports ...................................................................................... 4
Issues arising from the Hotline.................................................................................. 5
Theft and related issues ........................................................................................... 6
Manipulation or falsification of data........................................................................... 6
Unauthorized use or misuse of City property or time................................................ 7
Conflict of interest or unethical conduct.................................................................... 9
Violation of Laws, Regulations, Policies, Procedures ............................................... 9
Building Code Violations......................................................................................... 10
Social assistance.................................................................................................... 10
Recommendations and management responses ................................................... 10
Audit resulting from a Fraud and Waste Hotline report........................................... 11
Impact of Change to Fraud and Waste Policy ........................................................ 12
APPENDIX: Fraud and Waste Hotline Reporting Categories ................................. 13
Report on the Fraud and Waste Hotline
Office of the Auditor General - June 20, 2016 Page 1
2015 Fraud and Waste Hotline Report Highlights
Main Points
 319 reports made to the Hotline in 2015
 92% increase in activity over the previous year
 Highest number of annual reports ever received since the Hotline was launched
in 2005.
 57% of reports came from public
 43% of reports came from employees
Top Six Report Categories
Unauthorized use or miscue of
City property, information or time
84
Violation of laws, regulations,
policies, procedures
39
Unethical conduct or conflict of
interest
26
Suggestions for improvement 24
Theft, embezzlement, fraud 21
Health, safety environment 7
Results
 6 City employees terminated
 1 employee resigned
 Other disciplinary action ranging from discussions to suspensions
0
50
100
150
200
250
300
350
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Fraud & Waste Hotline Reports
Report on the Fraud and Waste Hotline
Page 2 Office of the Auditor General - June 20, 2016
Description of the Hotline
The City’s Fraud and Waste Hotline (FWH) was launched on November 1, 2005, first to
facilitate the reporting of suspected fraud or waste by employees. Council later made
the Hotline available to the public in May 2009. The Hotline is a confidential and
anonymous service that allows any employee or member of the public to report
incidents 24 hours a day, 7 days a week. The Hotline is operated independently by a
third party and is accessible either by phone or the Internet.
Based on research of leading ethical practices, including the Institute of Internal
Auditors (IIA) and practices employed in other municipalities, an anonymous reporting
mechanism is a good component of a mature ethics management framework. As such,
the Fraud and Waste Hotline demonstrates sound management practice, and reports
have led to audits and investigative reviews, as well as disciplinary actions. We have
also found that employees and the public are well aware of the Hotline and its purpose.
They view it as an important component in maintaining a strong ethical culture at the
City. The Hotline may also mitigate ethical risks by discouraging potential wrongdoers
and identifying ethical violations when they occur. Although not necessarily the main
objective of the Hotline, it also results in savings by preventing potential fraud and
abuse. However, it is not always possible to quantify the impact of savings realized
through the Hotline. A significant value of the Hotline continues to be improving the
ethical culture at the City and changing attitudes to deter fraud and waste.
Hotline Statistics
In 2015, 319 reports were made to the Hotline. This represented a 92% increase in the
number of reports from 2014. There were 184 reports submitted by members of the
public and 135 reports were submitted by employees of the City of Ottawa.
The reports submitted by employees also include any cases reported by management
as required by the policy. In 2015, 13 cases were reported by management.
Report on the Fraud and Waste Hotline
Office of the Auditor General - June 20, 2016 Page 3
Table 1: Reports by reporter type
Reporter type Number of Reports Percentage
Public 184 58 %
Employee 135 42 %
Total 319 100 %
Table 2: Reports by method of submission
Method of submission Number of reports Percentage
Internet 184 58 %
Phone 135 42 %
Total 319 100 %
The Fraud and Waste Hotline has the functionality to facilitate anonymous two-way
communication that allows reporters to access their report after submitting the original
report. This feature allows the reporter to submit additional information, track the
progress of the case, respond to any follow-up questions and receive the outcome of
their report. In 2015, 150 reporters, representing 47% of all reports, accessed their
report after submission of the original report. This would appear to indicate that
reporters are interested in submitting additional information, tracking the progress of the
report and/or reviewing the outcome of the reports.
Report on the Fraud and Waste Hotline
Page 4 Office of the Auditor General - June 20, 2016
Table 3: Reporters who subsequently accessed their report
Reviewed report Number of Reports Percentage
Yes 150 47%
No 169 53%
Total 319 100%
Summary of type of reports
Table 4 below summarizes the number of reports received to December 2015 by report
category since the inception of the Fraud and Waste Hotline in 2005.
Table 4: Fraud and Waste Hotline reports as at December 31, 2015
Report Category 2005
to
2011
2012 2013 2014 2015 Total
Harm to people or potential harm to
people 2 4 1 1 2 10
Health and safety, environment
24 4 6 1 7 42
Alcohol or drug use or other substance
abuse 12 5 1 1 0 19
Theft, embezzlement, fraud 141 12 25 12 21 211
Unauthorized use or misuse of City
property, information, or time 236 25 50 40 84 435
Manipulation or falsification of any data 22 2 5 1 1 31
Report on the Fraud and Waste Hotline
Office of the Auditor General - June 20, 2016 Page 5
Report Category 2005
to
2011
2012 2013 2014 2015 Total
Unethical conduct or conflict of interest 127 7 5 13 26 178
Violation of laws, regulations, policies,
procedures 119 34 30 31 39 253
Financial reporting and accounting 6 2 4 2 0 14
Management/Supervisor 15 7 1 2 2 27
Suggestions for improvement 174 19 10 8 24 235
Suggested areas for audit 84 12 6 3 3 108
Other * 113 16 26 51 110 316
Total 1,075 149 170 166 319 1,879
* The “Other” category includes reports related to social assistance (42 in 2015), to water bills (17 in
2015) and to organizations outside the Office of the Auditor General’s jurisdiction (13 in 2015) such as
Ottawa Police, Ottawa Public Health, Ottawa Public Library, and Ottawa Community Housing
Corporation. This category also includes reports that were not related to City services (26 in 2015) such
as potential frauds committed by other member of the public.
Issues arising from the Hotline
This section includes summaries of examples of fraud and waste related to City
services where reports were found to be substantiated and investigations concluded in
2015. These include results from five reports from 2014. Where reports are found to be
substantiated, any disciplinary action taken is the responsibility of management. Where
management has taken action, the outcomes are noted below and have been grouped
by typical categories.
Report on the Fraud and Waste Hotline
Page 6 Office of the Auditor General - June 20, 2016
Theft and related issues
In the 2014 Report on the Fraud and Waste Hotline it was reported that an employee
violated cash handling procedures and was terminated. The terminated employee has
since been charged.
There were seven cases of theft and related issues in 2015.
 Two cases involved theft by employees as follows:
o Two employees stole copper and admitted to selling it for money. Both
employees were terminated.
o An employee stole $68 from a City facility. The employee was terminated.
 Five cases involved unsolved theft of property at City facilities as explained below:
o Property worth an estimated value of $13,000 was stolen from parked City
vehicles during a break-in at a City facility. The stolen property was not
recovered. The fence and vehicles were repaired.
o Equipment valued at $2,000 was stolen from a City facility. The results of the
investigation were inconclusive.
o Property worth an estimated value of $600 as well as consumable materials
were stolen during a break-in at a City facility. The stolen property was not
recovered.
o Vehicles were broken into at a City facility and equipment, tools and parts
were removed. All missing equipment and tools were found near the facility,
however the parts were not.
o Chains, keys and fuel operating buttons were stolen from a City of Ottawa
facility.
As a result of these break-ins, enhanced security measures or additional controls were
put in place.
Manipulation or falsification of data
There was one case where an employee falsified data in a provincial database to
conceal the fact that assigned work was not being completed. The employee was
terminated. The City informed the Province of the corrupted data and the errors were
corrected.
Report on the Fraud and Waste Hotline
Office of the Auditor General - June 20, 2016 Page 7
Unauthorized use or misuse of City property or time
There were 17 cases involving 17 employees where there was unauthorized use or
misuse of City property or time. Management found that policies and procedures were
not consistently followed as described below:
 There were eight cases relating to employees who did not use time or leave in
conformance with policies as noted below:
o An employee claimed sick leave to work at a second job. The employee was
terminated.
o When unable to find a replacement for a planned vacation, an employee
called in sick for one day and did not show up for work on another day. The
employee was terminated.
o An employee worked for an external employer and attended a training session
while on medical leave. The employee also did not submit the appropriate
leave forms. The employee resigned.
o An employee took leave without submitting the required leave forms. The
hours were recovered from the employee, and supervisors were reminded to
ensure that time taken off by employees complies with the collective
agreement and organizational policies.
o An employee did not advise their supervisor when taking time off to pursue
personal engagements on two different days. A written warning letter was
issued to the employee.
o Although the work was required and was completed, overtime guidelines were
not followed. Both the employee and supervisor received a written warning
and were instructed on the proper overtime procedures.
o An employee was habitually late for work. The employee received a letter of
expectation regarding absences and hours of work.
o An employee did not provide a medical certificate when claiming sick leave.
The employee was provided with a letter of expectation regarding future
attendance.
 There were the following four cases relating to use of City vehicles that were not
in conformance with policies.
Report on the Fraud and Waste Hotline
Page 8 Office of the Auditor General - June 20, 2016
o An employee drove the company vehicle home during meal breaks when
working in the vicinity. The Code of Conduct was discussed with the employee
who was instructed not to use the City vehicle to drive home for meal breaks,
and the discussion was documented in the employee's file.
o An employee picked up personal exercise equipment using a City vehicle
during a meal break. The employee received an explanation of requirements
under the Personal Use of City Vehicles Policy. Branch managers and
supervisors were also reminded of their responsibilities under this policy.
o An employee did not comply with the Personal Use of City Vehicles Policy and
picked up a family member using a City vehicle after being delayed due to
work. The employee was reminded of their obligations under the Personal Use
of City Vehicles Policy.
o A City vehicle was regularly parked in an unsecured parking lot raising
concern about the security of its contents. The vehicle was moved to a secure
City of Ottawa facility.
 There were five cases related to misuse of City facilities or use of City resources
that was not in conformance to policies.
o An employee parked a personal vehicle at a City facility outside working hours.
The employee moved the car and was reminded of the Code of Conduct which
instructs against the use of City property for personal benefit.
o An employee, who in the opinion of the Information Technology department,
had high internet use during working hours that was not work-related. The
employee was provided with a letter of expectation.
o There were two cases where employees were using the City’s email system
for personal business purposes. In both cases management found that the
use was minimal. Both employees were reminded of their responsibilities
under the Code of Conduct and the Responsible Computing Policy.
o An employee moved City equipment from one facility to another without
authorization. The employee was advised of the policy prohibiting removal of
site specific equipment.
Report on the Fraud and Waste Hotline
Office of the Auditor General - June 20, 2016 Page 9
Conflict of interest or unethical conduct
There were three cases as noted below:
 A supervisor breached a City Code of Conduct principle related to treating
employees with respect. The supervisor received a suspension, was demoted out
of a supervisory position and was provided training.
 An employee interviewed a candidate with a familial relationship without
disclosing the relationship. A letter of expectation was issued to the employee
and the probationary period for the candidate was increased by three months. All
department managers and supervisors responsible for interviewing applicants
were reminded of their responsibilities under the Employment of Family Members
Policy.
 An employee approached another employee for a personal project. The employee
was reminded to refrain from approaching other employees regarding personal
projects during work time.
Violation of Laws, Regulations, Policies, Procedures
There were six cases that involved employee actions that were not in conformance to
various City policies or operating procedures.
 An employee remained in an appointed position without a competition beyond the
12 months allowed by the collective agreement. Management indicated that a
competition would be conducted for the position.
 Cheques totalling $48,537 were stored with inadequate security at a City facility.
No funds were misappropriated. The Cash Handling Policy and Procedures were
reinforced with staff and supervisors.
 Two employees were improperly handling cash containers. Operating
procedures were updated to provide clear direction in order to limit the handling of
cash containers to designated staff.
 A few employees tested emergency vehicles without the proper signage.
Employees were reminded of operating procedures for test driving vehicles.
Management indicated that a policy will be put in place for the test driving of
emergency vehicles.
 An employee wore their uniform outside their working hours at a recreational
event. The Code of Conduct and responsibilities when wearing a City uniform
were discussed with the employee.
Report on the Fraud and Waste Hotline
Page 10 Office of the Auditor General - June 20, 2016
 One employee was seen smoking near the entrance of a City building which is
against the City of Ottawa Smoke-Free By-law. Management reminded the
employee of smoking regulations outlined in the By-law.
Building Code Violations
There were two cases that related to non-compliance with the Ontario Building Code
Act by members of the public.
 A resident constructed a deck without obtaining the required building permit. The
owner was given 30 days to apply to obtain a building permit. Upon issuance of
the permit, staff would inspect the deck for conformance with the Ontario Building
Code.
 A building permit was not posted on a property under renovation as required by
the Ontario Building Code Act. The contractor and owner were instructed to post
the building permit.
Social assistance
Since 2014, the Office of the Auditor General (OAG) has requested that management
review and provide the outcome for social assistance cases received by the Fraud and
Waste Hotline. There were seven cases involving individuals who were receiving social
assistance benefits to which they were not entitled. In all seven cases, overpayment
recoveries were created.
The City’s Fraud and Waste Hotline is not necessarily intended to be used for
allegations regarding social assistance as there is a dedicated social assistance fraud
line at 1-800-394-STOP (7867) for this purpose.
Recommendations and management responses
This section includes issues arising from the review of Hotline reports where the OAG
has made recommendations. These recommendations have been provided to
management for their response including an estimated timeline for implementation. The
status of the implementation will be followed up as part of the OAG’s follow-up
schedule.
Monitoring of City funding provided to organizations
An organization that received City funding in 2013 did not submit the required 2013
audited financial statements prior to the City providing funding in 2014. The
Report on the Fraud and Waste Hotline
Office of the Auditor General - June 20, 2016 Page 11
organization subsequently declared bankruptcy in 2014, and the City did not receive
audited financial statements for either year. This situation resulted in the following
recommendation and management response.
OAG Recommendation:
That the City ensures that audited financial statements and other eligibility requirements
are obtained prior to granting payment of funding as required by policies and
procedures.
Management Response:
Management agrees with this recommendation. Staff will ensure that audited financial
statements and other eligibility requirements are obtained prior to granting full payment
of funding, as required by policies and procedures. Staff will work with organizations
should the withholding of funding jeopardize the event and partial payment options will
be considered.
Cash handling controls for administration of funds for third parties
$100 collected for a third party by a City facility was reported missing. The investigation
was inconclusive. This situation resulted in the following recommendation and
management response.
OAG Recommendation:
Where the City agrees to administrate funds for third parties, that the proper cash
handling controls are in place to avoid misappropriation of any funds.
Management response:
Finance is currently reviewing the Cash Handling Policy and Procedures and will ensure
that the revised policy and procedures provide clearer direction on the collection of non-
City funds and that this is reflected in the Cash Handling training. Full implementation
of the updated policy and procedure is scheduled for the end of 2016.
Audit resulting from a Fraud and Waste Hotline report
In addition to the above, the annual report presented to Audit Committee on November
26, 2015 included the Audit of the Mackenzie King Bridge Rehabilitation conducted in
response to a Hotline report. The audit included 11 recommendations and management
agreed with all the recommendations. The details of this audit can be found in the
annual report.
Report on the Fraud and Waste Hotline
Page 12 Office of the Auditor General - June 20, 2016
Impact of Change to Fraud and Waste Policy
At the June 2015 Audit Committee, direction was provided “that staff inform the
members of the Audit Committee when significant changes are made to the Fraud and
Waste Policy.” In view of this direction, the Office of the Auditor General wishes to
highlight a change in City practice which may or may not have been fully anticipated
when the Fraud and Waste Policy replaced the Fraud and Other Similar Irregularities
Policy in 2015. Among the changes, the scope of the policy was more tightly defined.
By way of example, in December 2015 a report was made to the Fraud and Waste
Hotline which alleged nepotism and unfair job competitions. The Office of the Auditor
General forwarded the pertinent details from the report to the City Manager’s Office to
review and advise on the outcome. City management took the view that “the allegation
appears to relate solely to a labour relations matter that falls outside the scope of the
City’s Fraud and Waste Policy” and that “no further action will be taken”.
The Office of the Auditor General finds that this interpretation of the new policy is
different than how the previous policy had been interpreted. As indicated in table 4, 178
reports of “unethical conduct or conflict of interest” have been received since the
inception of the Hotline and until recently all have been investigated.
Report on the Fraud and Waste Hotline
Office of the Auditor General - June 20, 2016 Page 13
APPENDIX: Fraud and Waste Hotline Reporting Categories
Harm to people or potential harm to people Concerns related to physical or mental harm or
potential harm to employees or others relating to
violence, threat, discrimination, or harassment.
Health and safety, environment Items related to the safety of people and the
protection of the environment in which they work
and live.
Alcohol or drug use or other substance abuse Issues related to alcohol or drug use or other
substance abuse.
Theft, embezzlement, fraud Any act of stealing from an organization or
individual, by whatever means, and attempts to
conceal it.
Unauthorized use or misuse of city property,
information, or time
Items related to the unauthorized use or misuse of
City property, equipment, materials, records,
internet or harm or threat of harm to City property,
equipment, materials, or internet. This would also
include abuse of work time or fraudulent use of
sick leave.
Manipulation or falsification of any data Changes (unauthorized or authorized) made to
any data, information, records, reports, contracts,
or payment documents possibly to cover mistakes
or fraud, improve financial / operating / statistical
results or to gain financial advantage or unfair
advantage in a contract.
Unethical conduct and conflict of interest Unethical or dishonest conduct by any person at
any level of the organization and any situation or
action of an employee that puts them in conflict, or
could be perceived as putting them in conflict, with
the interests of the organization.
Violation of laws, regulations, policies,
procedures
Violation of any law, rule, or policy set down by an
organization, regulatory authority including
securities commissions, or any level of
government.
Financial reporting and accounting Items related to the accuracy and completeness of
financial statements and other financial reporting
to the Board of Directors, Board of Governors, or
other governing body, and to regulatory bodies or
Report on the Fraud and Waste Hotline
Page 14 Office of the Auditor General - June 20, 2016
the public (e.g. securities regulators, tax
authorities, government departments, annual
public reports).
Management/Supervisor Any issues, concerns or comments related to the
level of support received through the actions or
inactions of your direct managers and/or
supervisors.
Suggestions for improvement Suggestions to improve any aspect of the
organization including ideas, concerns, or
comments related to Municipal Services and
Products, Customer Service, and any other
suggestions, to aid the attainment of its objectives,
or to manage its risks.
Suggested areas for audit Any suggestion to audit any area of the
organization.

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Report on fraud and waste hotline - June 20 2016

  • 1. Office of the Auditor General Report on the Fraud and Waste Hotline Tabled at Audit Committee – June 20, 2016
  • 2.
  • 3. Report on the Fraud and Waste Hotline Office of the Auditor General – June 20, 2016 Contents 2015 Fraud and Waste Hotline Report Highlights..................................................... 1 Description of the Hotline.......................................................................................... 2 Hotline Statistics ....................................................................................................... 2 Summary of type of reports ...................................................................................... 4 Issues arising from the Hotline.................................................................................. 5 Theft and related issues ........................................................................................... 6 Manipulation or falsification of data........................................................................... 6 Unauthorized use or misuse of City property or time................................................ 7 Conflict of interest or unethical conduct.................................................................... 9 Violation of Laws, Regulations, Policies, Procedures ............................................... 9 Building Code Violations......................................................................................... 10 Social assistance.................................................................................................... 10 Recommendations and management responses ................................................... 10 Audit resulting from a Fraud and Waste Hotline report........................................... 11 Impact of Change to Fraud and Waste Policy ........................................................ 12 APPENDIX: Fraud and Waste Hotline Reporting Categories ................................. 13
  • 4.
  • 5. Report on the Fraud and Waste Hotline Office of the Auditor General - June 20, 2016 Page 1 2015 Fraud and Waste Hotline Report Highlights Main Points  319 reports made to the Hotline in 2015  92% increase in activity over the previous year  Highest number of annual reports ever received since the Hotline was launched in 2005.  57% of reports came from public  43% of reports came from employees Top Six Report Categories Unauthorized use or miscue of City property, information or time 84 Violation of laws, regulations, policies, procedures 39 Unethical conduct or conflict of interest 26 Suggestions for improvement 24 Theft, embezzlement, fraud 21 Health, safety environment 7 Results  6 City employees terminated  1 employee resigned  Other disciplinary action ranging from discussions to suspensions 0 50 100 150 200 250 300 350 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Fraud & Waste Hotline Reports
  • 6. Report on the Fraud and Waste Hotline Page 2 Office of the Auditor General - June 20, 2016 Description of the Hotline The City’s Fraud and Waste Hotline (FWH) was launched on November 1, 2005, first to facilitate the reporting of suspected fraud or waste by employees. Council later made the Hotline available to the public in May 2009. The Hotline is a confidential and anonymous service that allows any employee or member of the public to report incidents 24 hours a day, 7 days a week. The Hotline is operated independently by a third party and is accessible either by phone or the Internet. Based on research of leading ethical practices, including the Institute of Internal Auditors (IIA) and practices employed in other municipalities, an anonymous reporting mechanism is a good component of a mature ethics management framework. As such, the Fraud and Waste Hotline demonstrates sound management practice, and reports have led to audits and investigative reviews, as well as disciplinary actions. We have also found that employees and the public are well aware of the Hotline and its purpose. They view it as an important component in maintaining a strong ethical culture at the City. The Hotline may also mitigate ethical risks by discouraging potential wrongdoers and identifying ethical violations when they occur. Although not necessarily the main objective of the Hotline, it also results in savings by preventing potential fraud and abuse. However, it is not always possible to quantify the impact of savings realized through the Hotline. A significant value of the Hotline continues to be improving the ethical culture at the City and changing attitudes to deter fraud and waste. Hotline Statistics In 2015, 319 reports were made to the Hotline. This represented a 92% increase in the number of reports from 2014. There were 184 reports submitted by members of the public and 135 reports were submitted by employees of the City of Ottawa. The reports submitted by employees also include any cases reported by management as required by the policy. In 2015, 13 cases were reported by management.
  • 7. Report on the Fraud and Waste Hotline Office of the Auditor General - June 20, 2016 Page 3 Table 1: Reports by reporter type Reporter type Number of Reports Percentage Public 184 58 % Employee 135 42 % Total 319 100 % Table 2: Reports by method of submission Method of submission Number of reports Percentage Internet 184 58 % Phone 135 42 % Total 319 100 % The Fraud and Waste Hotline has the functionality to facilitate anonymous two-way communication that allows reporters to access their report after submitting the original report. This feature allows the reporter to submit additional information, track the progress of the case, respond to any follow-up questions and receive the outcome of their report. In 2015, 150 reporters, representing 47% of all reports, accessed their report after submission of the original report. This would appear to indicate that reporters are interested in submitting additional information, tracking the progress of the report and/or reviewing the outcome of the reports.
  • 8. Report on the Fraud and Waste Hotline Page 4 Office of the Auditor General - June 20, 2016 Table 3: Reporters who subsequently accessed their report Reviewed report Number of Reports Percentage Yes 150 47% No 169 53% Total 319 100% Summary of type of reports Table 4 below summarizes the number of reports received to December 2015 by report category since the inception of the Fraud and Waste Hotline in 2005. Table 4: Fraud and Waste Hotline reports as at December 31, 2015 Report Category 2005 to 2011 2012 2013 2014 2015 Total Harm to people or potential harm to people 2 4 1 1 2 10 Health and safety, environment 24 4 6 1 7 42 Alcohol or drug use or other substance abuse 12 5 1 1 0 19 Theft, embezzlement, fraud 141 12 25 12 21 211 Unauthorized use or misuse of City property, information, or time 236 25 50 40 84 435 Manipulation or falsification of any data 22 2 5 1 1 31
  • 9. Report on the Fraud and Waste Hotline Office of the Auditor General - June 20, 2016 Page 5 Report Category 2005 to 2011 2012 2013 2014 2015 Total Unethical conduct or conflict of interest 127 7 5 13 26 178 Violation of laws, regulations, policies, procedures 119 34 30 31 39 253 Financial reporting and accounting 6 2 4 2 0 14 Management/Supervisor 15 7 1 2 2 27 Suggestions for improvement 174 19 10 8 24 235 Suggested areas for audit 84 12 6 3 3 108 Other * 113 16 26 51 110 316 Total 1,075 149 170 166 319 1,879 * The “Other” category includes reports related to social assistance (42 in 2015), to water bills (17 in 2015) and to organizations outside the Office of the Auditor General’s jurisdiction (13 in 2015) such as Ottawa Police, Ottawa Public Health, Ottawa Public Library, and Ottawa Community Housing Corporation. This category also includes reports that were not related to City services (26 in 2015) such as potential frauds committed by other member of the public. Issues arising from the Hotline This section includes summaries of examples of fraud and waste related to City services where reports were found to be substantiated and investigations concluded in 2015. These include results from five reports from 2014. Where reports are found to be substantiated, any disciplinary action taken is the responsibility of management. Where management has taken action, the outcomes are noted below and have been grouped by typical categories.
  • 10. Report on the Fraud and Waste Hotline Page 6 Office of the Auditor General - June 20, 2016 Theft and related issues In the 2014 Report on the Fraud and Waste Hotline it was reported that an employee violated cash handling procedures and was terminated. The terminated employee has since been charged. There were seven cases of theft and related issues in 2015.  Two cases involved theft by employees as follows: o Two employees stole copper and admitted to selling it for money. Both employees were terminated. o An employee stole $68 from a City facility. The employee was terminated.  Five cases involved unsolved theft of property at City facilities as explained below: o Property worth an estimated value of $13,000 was stolen from parked City vehicles during a break-in at a City facility. The stolen property was not recovered. The fence and vehicles were repaired. o Equipment valued at $2,000 was stolen from a City facility. The results of the investigation were inconclusive. o Property worth an estimated value of $600 as well as consumable materials were stolen during a break-in at a City facility. The stolen property was not recovered. o Vehicles were broken into at a City facility and equipment, tools and parts were removed. All missing equipment and tools were found near the facility, however the parts were not. o Chains, keys and fuel operating buttons were stolen from a City of Ottawa facility. As a result of these break-ins, enhanced security measures or additional controls were put in place. Manipulation or falsification of data There was one case where an employee falsified data in a provincial database to conceal the fact that assigned work was not being completed. The employee was terminated. The City informed the Province of the corrupted data and the errors were corrected.
  • 11. Report on the Fraud and Waste Hotline Office of the Auditor General - June 20, 2016 Page 7 Unauthorized use or misuse of City property or time There were 17 cases involving 17 employees where there was unauthorized use or misuse of City property or time. Management found that policies and procedures were not consistently followed as described below:  There were eight cases relating to employees who did not use time or leave in conformance with policies as noted below: o An employee claimed sick leave to work at a second job. The employee was terminated. o When unable to find a replacement for a planned vacation, an employee called in sick for one day and did not show up for work on another day. The employee was terminated. o An employee worked for an external employer and attended a training session while on medical leave. The employee also did not submit the appropriate leave forms. The employee resigned. o An employee took leave without submitting the required leave forms. The hours were recovered from the employee, and supervisors were reminded to ensure that time taken off by employees complies with the collective agreement and organizational policies. o An employee did not advise their supervisor when taking time off to pursue personal engagements on two different days. A written warning letter was issued to the employee. o Although the work was required and was completed, overtime guidelines were not followed. Both the employee and supervisor received a written warning and were instructed on the proper overtime procedures. o An employee was habitually late for work. The employee received a letter of expectation regarding absences and hours of work. o An employee did not provide a medical certificate when claiming sick leave. The employee was provided with a letter of expectation regarding future attendance.  There were the following four cases relating to use of City vehicles that were not in conformance with policies.
  • 12. Report on the Fraud and Waste Hotline Page 8 Office of the Auditor General - June 20, 2016 o An employee drove the company vehicle home during meal breaks when working in the vicinity. The Code of Conduct was discussed with the employee who was instructed not to use the City vehicle to drive home for meal breaks, and the discussion was documented in the employee's file. o An employee picked up personal exercise equipment using a City vehicle during a meal break. The employee received an explanation of requirements under the Personal Use of City Vehicles Policy. Branch managers and supervisors were also reminded of their responsibilities under this policy. o An employee did not comply with the Personal Use of City Vehicles Policy and picked up a family member using a City vehicle after being delayed due to work. The employee was reminded of their obligations under the Personal Use of City Vehicles Policy. o A City vehicle was regularly parked in an unsecured parking lot raising concern about the security of its contents. The vehicle was moved to a secure City of Ottawa facility.  There were five cases related to misuse of City facilities or use of City resources that was not in conformance to policies. o An employee parked a personal vehicle at a City facility outside working hours. The employee moved the car and was reminded of the Code of Conduct which instructs against the use of City property for personal benefit. o An employee, who in the opinion of the Information Technology department, had high internet use during working hours that was not work-related. The employee was provided with a letter of expectation. o There were two cases where employees were using the City’s email system for personal business purposes. In both cases management found that the use was minimal. Both employees were reminded of their responsibilities under the Code of Conduct and the Responsible Computing Policy. o An employee moved City equipment from one facility to another without authorization. The employee was advised of the policy prohibiting removal of site specific equipment.
  • 13. Report on the Fraud and Waste Hotline Office of the Auditor General - June 20, 2016 Page 9 Conflict of interest or unethical conduct There were three cases as noted below:  A supervisor breached a City Code of Conduct principle related to treating employees with respect. The supervisor received a suspension, was demoted out of a supervisory position and was provided training.  An employee interviewed a candidate with a familial relationship without disclosing the relationship. A letter of expectation was issued to the employee and the probationary period for the candidate was increased by three months. All department managers and supervisors responsible for interviewing applicants were reminded of their responsibilities under the Employment of Family Members Policy.  An employee approached another employee for a personal project. The employee was reminded to refrain from approaching other employees regarding personal projects during work time. Violation of Laws, Regulations, Policies, Procedures There were six cases that involved employee actions that were not in conformance to various City policies or operating procedures.  An employee remained in an appointed position without a competition beyond the 12 months allowed by the collective agreement. Management indicated that a competition would be conducted for the position.  Cheques totalling $48,537 were stored with inadequate security at a City facility. No funds were misappropriated. The Cash Handling Policy and Procedures were reinforced with staff and supervisors.  Two employees were improperly handling cash containers. Operating procedures were updated to provide clear direction in order to limit the handling of cash containers to designated staff.  A few employees tested emergency vehicles without the proper signage. Employees were reminded of operating procedures for test driving vehicles. Management indicated that a policy will be put in place for the test driving of emergency vehicles.  An employee wore their uniform outside their working hours at a recreational event. The Code of Conduct and responsibilities when wearing a City uniform were discussed with the employee.
  • 14. Report on the Fraud and Waste Hotline Page 10 Office of the Auditor General - June 20, 2016  One employee was seen smoking near the entrance of a City building which is against the City of Ottawa Smoke-Free By-law. Management reminded the employee of smoking regulations outlined in the By-law. Building Code Violations There were two cases that related to non-compliance with the Ontario Building Code Act by members of the public.  A resident constructed a deck without obtaining the required building permit. The owner was given 30 days to apply to obtain a building permit. Upon issuance of the permit, staff would inspect the deck for conformance with the Ontario Building Code.  A building permit was not posted on a property under renovation as required by the Ontario Building Code Act. The contractor and owner were instructed to post the building permit. Social assistance Since 2014, the Office of the Auditor General (OAG) has requested that management review and provide the outcome for social assistance cases received by the Fraud and Waste Hotline. There were seven cases involving individuals who were receiving social assistance benefits to which they were not entitled. In all seven cases, overpayment recoveries were created. The City’s Fraud and Waste Hotline is not necessarily intended to be used for allegations regarding social assistance as there is a dedicated social assistance fraud line at 1-800-394-STOP (7867) for this purpose. Recommendations and management responses This section includes issues arising from the review of Hotline reports where the OAG has made recommendations. These recommendations have been provided to management for their response including an estimated timeline for implementation. The status of the implementation will be followed up as part of the OAG’s follow-up schedule. Monitoring of City funding provided to organizations An organization that received City funding in 2013 did not submit the required 2013 audited financial statements prior to the City providing funding in 2014. The
  • 15. Report on the Fraud and Waste Hotline Office of the Auditor General - June 20, 2016 Page 11 organization subsequently declared bankruptcy in 2014, and the City did not receive audited financial statements for either year. This situation resulted in the following recommendation and management response. OAG Recommendation: That the City ensures that audited financial statements and other eligibility requirements are obtained prior to granting payment of funding as required by policies and procedures. Management Response: Management agrees with this recommendation. Staff will ensure that audited financial statements and other eligibility requirements are obtained prior to granting full payment of funding, as required by policies and procedures. Staff will work with organizations should the withholding of funding jeopardize the event and partial payment options will be considered. Cash handling controls for administration of funds for third parties $100 collected for a third party by a City facility was reported missing. The investigation was inconclusive. This situation resulted in the following recommendation and management response. OAG Recommendation: Where the City agrees to administrate funds for third parties, that the proper cash handling controls are in place to avoid misappropriation of any funds. Management response: Finance is currently reviewing the Cash Handling Policy and Procedures and will ensure that the revised policy and procedures provide clearer direction on the collection of non- City funds and that this is reflected in the Cash Handling training. Full implementation of the updated policy and procedure is scheduled for the end of 2016. Audit resulting from a Fraud and Waste Hotline report In addition to the above, the annual report presented to Audit Committee on November 26, 2015 included the Audit of the Mackenzie King Bridge Rehabilitation conducted in response to a Hotline report. The audit included 11 recommendations and management agreed with all the recommendations. The details of this audit can be found in the annual report.
  • 16. Report on the Fraud and Waste Hotline Page 12 Office of the Auditor General - June 20, 2016 Impact of Change to Fraud and Waste Policy At the June 2015 Audit Committee, direction was provided “that staff inform the members of the Audit Committee when significant changes are made to the Fraud and Waste Policy.” In view of this direction, the Office of the Auditor General wishes to highlight a change in City practice which may or may not have been fully anticipated when the Fraud and Waste Policy replaced the Fraud and Other Similar Irregularities Policy in 2015. Among the changes, the scope of the policy was more tightly defined. By way of example, in December 2015 a report was made to the Fraud and Waste Hotline which alleged nepotism and unfair job competitions. The Office of the Auditor General forwarded the pertinent details from the report to the City Manager’s Office to review and advise on the outcome. City management took the view that “the allegation appears to relate solely to a labour relations matter that falls outside the scope of the City’s Fraud and Waste Policy” and that “no further action will be taken”. The Office of the Auditor General finds that this interpretation of the new policy is different than how the previous policy had been interpreted. As indicated in table 4, 178 reports of “unethical conduct or conflict of interest” have been received since the inception of the Hotline and until recently all have been investigated.
  • 17. Report on the Fraud and Waste Hotline Office of the Auditor General - June 20, 2016 Page 13 APPENDIX: Fraud and Waste Hotline Reporting Categories Harm to people or potential harm to people Concerns related to physical or mental harm or potential harm to employees or others relating to violence, threat, discrimination, or harassment. Health and safety, environment Items related to the safety of people and the protection of the environment in which they work and live. Alcohol or drug use or other substance abuse Issues related to alcohol or drug use or other substance abuse. Theft, embezzlement, fraud Any act of stealing from an organization or individual, by whatever means, and attempts to conceal it. Unauthorized use or misuse of city property, information, or time Items related to the unauthorized use or misuse of City property, equipment, materials, records, internet or harm or threat of harm to City property, equipment, materials, or internet. This would also include abuse of work time or fraudulent use of sick leave. Manipulation or falsification of any data Changes (unauthorized or authorized) made to any data, information, records, reports, contracts, or payment documents possibly to cover mistakes or fraud, improve financial / operating / statistical results or to gain financial advantage or unfair advantage in a contract. Unethical conduct and conflict of interest Unethical or dishonest conduct by any person at any level of the organization and any situation or action of an employee that puts them in conflict, or could be perceived as putting them in conflict, with the interests of the organization. Violation of laws, regulations, policies, procedures Violation of any law, rule, or policy set down by an organization, regulatory authority including securities commissions, or any level of government. Financial reporting and accounting Items related to the accuracy and completeness of financial statements and other financial reporting to the Board of Directors, Board of Governors, or other governing body, and to regulatory bodies or
  • 18. Report on the Fraud and Waste Hotline Page 14 Office of the Auditor General - June 20, 2016 the public (e.g. securities regulators, tax authorities, government departments, annual public reports). Management/Supervisor Any issues, concerns or comments related to the level of support received through the actions or inactions of your direct managers and/or supervisors. Suggestions for improvement Suggestions to improve any aspect of the organization including ideas, concerns, or comments related to Municipal Services and Products, Customer Service, and any other suggestions, to aid the attainment of its objectives, or to manage its risks. Suggested areas for audit Any suggestion to audit any area of the organization.