Hotlines deter fraud, build morale: Auditor

Fraud and waste hotlines give employees, public opportunity to put spotlight on bad behaviour
By Uyen Vu
|Canadian HR Reporter|Last Updated: 05/02/2008

One-half of a cubic yard of compost taken from city property. Excessive overtime, amounting to $200 in a three-month period. A brush-cutter stolen from the back of a city-owned truck. These were the kinds of fraud and waste reports the City of Edmonton hotline received last year.

The city received 60 calls in 2007 via a hotline that costs $20,000 a year to run. The city auditor investigated one-third of those calls and found a dozen were substantiated.

“I’d like to see it in a positive manner. The hotline program conveys to employees and the public that the City of Edmonton is committed to ethical conduct. It opens up another channel for employees to report misconduct when they see it,” said auditor David Wiun.

The fact the losses discovered were relatively small does not bother him. The program is inexpensive to run and the benefit in deterring other instances of fraud or waste is impossible to quantify, he said.

Among the more serious misdeeds, the auditor discovered three days’ worth of parking cash — nearly $14,000 — had gone missing. The employee, working for a third-party contractor that operated the parking lot, later returned the money and lost his job. Another parking-related incident involved a parking attendant who overcharged a customer. This parking attendant was also fired.

One in three complaints pertained to workplace issues that would more appropriately be handled by city management, the auditor’s report noted. With ongoing communication efforts, those types of calls have dropped off, Wiun said.

Edmonton is one of five municipalities in Canada that have a fraud and waste hotline. The others are Toronto, Windsor, Ont., Calgary and Ottawa.

At the City of Toronto, hotline calls in 2007 resulted in disciplinary action in 22 cases. In one case last September, managers received reports that an employee provided positive inspection reports to contractors in exchange for personal favours — such as work done on the employee’s home.

In another case, a member of the public called about a city employee giving out admission receipts that indicated no sale. Turns out the employee had pocketed $1,200 in admission fees by issuing such receipts.

In another case involving false receipts, the whistle-blower was the spouse of someone working for the city’s benefit provider. The caller had learned his spouse was creating false receipts then submitting them for payment. The false claims amounted to $8,300.

Toronto’s hotline received 523 calls in 2007, a four-per-cent increase from 2006. The complaints received alerted the auditor general’s office, which runs the program via its forensic unit, to about $118,400 in quantifiable losses, $37,300 of which has been recovered.

In one case brought to the city’s attention, employees were paid 156 statutory holidays in error, amounting to a $26,000 overpayment. The cause was a misunderstanding of SAP processes and the fact a manual back-up system for attendance management was discontinued.

“The value of the hotline is it sends a message to employees that we take this issue extremely seriously and we’ll deal with it,” said John Griffiths, auditor general at the City of Toronto. “It’s also a deterrent for people who may think that they’ll get away with issues of malfeasance. People see that other people have been caught.”

Morale can only improve as a result of such hotlines because people want to work for ethical organizations, he said. Inevitably, some people will use a hotline to make frivolous or vengeful complaints, but if calls are properly investigated, those people will get nowhere, he said.

Still, the idea of a fraud and waste hotline has its detractors. Several years ago, former privacy commissioner John Grace appeared before the federal public accounts committee to object to the hotline, as had been proposed by the federal auditor general. The hotline would turn the federal public service into an informer society, where faceless accusers would be encouraged, he told the committee. The anonymous fraud and waste hotline did not go ahead.


Fraud Hotline

Numbers from Toronto

The City of Toronto was the first Canadian municipality to set up a fraud and waste hotline in 2002. Since then, the city has received about 2,300 complaints. In 2005, losses related to the complaints amounted to $446,000, of which $293,000 was recovered. In 2006, losses were $90,000, of which $43,000 was recovered.

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