In June 2000, Audit Committee requested that the Auditor General submit an annual report on the status of fraud and related matters. This report represents the 2012 annual report relating to fraud activities at the City that have been communicated to the Auditor General. It does not represent an overall picture of fraud or other wrongdoing at the City as fraud, by its very nature, is concealed and often difficult to detect.
In 2002, the City established a Fraud and Waste Hotline Program with Council’s support to be operated by the Auditor General’s Office. The Hotline Program provides an independent resource for employees or members of the public to report wrongdoing involving City resources, anonymously if preferred. Since that time the activities of the Fraud and Waste Hotline Program have been included in the annual report.
In adopting last year’s 2011 annual report on fraud and hotline activity, the Audit Committee requested that the Auditor General report back on dollar amounts recovered as a result of investigations conducted. This information has also been included in this year’s annual report.
In 2012, 774 complaints were received representing a six per cent decrease in the number of hotline complaints received in 2011. It should be noted however, that a significant number of complaints received included at least two or more allegations. As such, we estimate the actual number of complaints is more than 1,500.
Integrity and accountability remain a top priority for the City of Toronto. The most cost effective way to deal with fraud or other wrongdoing is to prevent it. Devoting resources to prevention and detection measures, such as the Fraud and Waste Hotline Program, is critical to preventing and detecting potential wrongdoing before it occurs.
The City of Toronto’s Fraud Prevention Policy formalized the duty of employees to report allegations of fraud and wrongdoing involving City resources and set out reporting protocols and procedures. The Policy also includes a provision on whistle blower protection.
A separate Whistle Blower Protection Policy has since been adopted by City Council and further enacted as a By-law in the City of Toronto Municipal Code, effective June 15, 2011.
The Fraud Prevention Policy was last revised in March 2007 and has not been updated to specifically address the provisions of the 2011 Whistle Blower Protection Policy, also enacted as a By-law. The By-law has been repealed but is expected to be re-enacted; in the interim, the Whistle Blower Policy remains in effect. In our 2011 Annual Report we recommended that the Fraud Prevention Policy be reviewed in order to ensure that its contents were consistent with the Whistle Blower Protection By-law. As of the date of this report this recommendation has not been addressed.
Further, the review of the Policy should clarify the reporting of incidents of fraud to the Auditor General’s Office, particularly when the policy specifically states that the Auditor General’s Office has primary responsibility for the investigation of all suspected fraud.
In addition, the applicability of the Fraud’s Prevention Policy should be extended to the City’s Agencies and Corporations. Finally, the current Policy makes reference to the process to be followed if a fraud is committed by a member of City Council, the Mayor, the City Manager, the City Clerk, the City Solicitor and the Auditor General. The policy should be updated to include the City’s other Accountability Officers.
While the Auditor General’s Office is responsible for the operation of the City’s Hotline Program, management is responsible for ensuring corporate policies intended to provide guidance to employees on reporting wrongdoing are reviewed and updated on a regular basis.