Public employees of the Newfoundland and Labrador government have spent hundreds of thousands of dollars on personal purchases and cash withdrawals using taxpayer-funded credit cards since 2015.
Internal documents obtained by CBC News go into more detail about the severity and scope of the alleged fraud committed by public officials, which was first revealed in the auditor general’s annual report in January.
“There were potentially fraudulent incidents involving government employees, such as misrepresentation of credentials, personal use of corporate credit cards, or inappropriate use of government resources,” Auditor General Denise Hanrahan wrote.
“In some cases, employees were terminated as a result of investigations. In general, these incidents were not reported to the police but were handled internally through disciplinary processes.”
Hanrahan’s report did not specify the amount of money involved, but said the money had been largely repaid and the province suffered no losses.
However, a briefing note prepared for the executive council and obtained by CBC News through access to information reveals those figures in dollars.
That internal document raises questions about how the alleged fraud could have occurred and what is being done to prevent it from happening again.
A white-collar crime expert says the ability of employees to use so much public money speaks to a weakness in their system. Meanwhile, government officials stress that swift action has been taken to prevent employees from committing fraud in the future.
Over $130K in cash advances to an employee
In October 2020, the executive council reported to the internal audit and personal services division, which conducts fraud investigations, that an employee had taken out $131,631 in personal cash advances over an unspecified period of time.
The employee, the note said, was fired and his money was returned.
The following year, an employee of the same department was reported for having loaded almost $5,000 on a corporate card for personal use. In that case, the person kept his job but was disciplined.
Police were not notified in any of those cases, the note says.
Seven Department of Fish, Forestry and Agriculture employees allegedly racked up more than $170,000 between them, using corporate credit cards for cash advances and fees between January 2015 and October 2020.
The employee with the highest debt had a balance of more than $54,000 on his corporate card. The other employees had balances between $7,878 and $44,962 on their respective cards.
An investigation into nine employees of the Department of Transportation and Infrastructure between 2015 and 2020 revealed that, collectively, they deposited more than $200,000 on their credit cards.
An employee put more than $37,000 on his travel card for personal spending or cash advances.
The balances had been paid at the beginning of the investigation, according to the document.
Four employees of the Department of Industry, Energy and Technology had outstanding balances on their cards. The highest amount owed was $21,236. Collectively, they owed nearly $40,000.
None of these cases were reported to the police either.
Most government departments reported problems
Most departments within the provincial government had reported cases of employees misusing corporate cards for personal purposes, with amounts typically ranging from hundreds to thousands of dollars.
In most cases, the money was returned. Some people had their wages garnished to pay off their debts.
Only one case was cited in the government briefing note in which an employee was fired.
In all, public officials spent more than $600,000.
A media briefing note prepared for Finance Minister Siobhan Coady in February said there were 68 allegations of fraud, 22 suspensions and one termination.
‘There is no adequate control’
The director of Ontario-based Forensic Restitution, an accounting and fraud investigation company that specializes in white-collar crime, says expense fraud is not uncommon in government departments and large corporations.
However, Dave Oswald said adequate security measures should be in place to stop it before it reaches amounts taken within the Newfoundland and Labrador government.
“You get to that point because there’s no proper control,” said Oswald, who reviewed documents obtained by CBC News.
“There will always be some form of fraud. But if you use data analytics, if you review all of your spending, if you have a system to review spending, you will dramatically reduce the amount of fraud.” .”
A fraud management policy introduced by the provincial government in 2019 states that “there would be zero tolerance for fraud in any form, with consequences for fraudulent activity including dismissal and legal action”.
Most disciplinary actions since 2015 range from an “adverse report” to a three-day suspension.
Only one employee who was caught misusing his corporate credit card lost his job.
Oswald said that is the wrong approach and that any case of fraud should be reported to the police, whether or not it has been paid.
“It sends the completely wrong message to the company or to the government department because what you’re saying is that anyone caught doing this kind of [thing] you will not face disciplinary action as long as you return it,” Oswald said.
“When you’re talking thousands of dollars, I would consider firing or severely reprimanding the person.”
In an email responding to questions from CBC News, the finance minister said enhanced control measures have been added to better monitor card usage. Additional documentation requirements have been issued and the government has enhanced its reporting requirements to detect and prevent future cases of fraud.
Since these incidents, Coady said, “additional guidance and revised business practices have been put in place to supplement existing policies on card use to ensure proper checks and balances are maintained and reduce the risk of such events reoccurring.”
All provincial government employees must participate in fraud awareness and management training, it said.
Coady said that each fraud situation is reviewed and evaluated based on individual circumstances.
“We take all instances of fraudulent activity very seriously and will continue to do so,” Coady said.
“With regard to public service employees, we will not go into the details of individual cases.”
She said that every allegation requires a thorough investigation.
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