Public employees in 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 spell out further details on the severity and scope of suspected fraud committed by civil servants, which was first revealed in the auditor general’s annual report in January.
“There were potentially fraudulent incidents involving government employees, such as falsely representing credentials, personal use of corporate credit cards, or inappropriate use of government resources,” wrote Auditor General Denise Hanrahan.
“In some cases, employees were terminated as a result of investigations conducted. Generally, these incidents were not reported to the police but handled internally through disciplinary processes.”
Hanrahan’s report did not specify the amount of money involved but she said the money had been largely repaid and that the province did not suffer any losses.
However, a briefing note prepared for the executive council and obtained by CBC News through access-to-information reveals those dollar figures.
That internal document raises questions about how the suspected fraud was able to take place — and what’s being done to stop it from happening again.
An expert in white collar crime says the ability of employees to use that much public money speaks to a weakness in their system. Meanwhile, government officials stress swift action has been taken to stop employees from committing fraud in the future.
Over $130K in cash advances to one employee
In October 2020, the executive council flagged the personal services and internal audit division, which carries out 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 the money has been returned.
The next year, an employee from the same department was reported for having charged nearly $5,000 on a corporate card for personal use. In that case, the person kept their job but was disciplined.
The police were not notified in either of those cases, the note said.
Seven employees of the Department of Fisheries, Forestry and Agriculture allegedly raked up more than $170,000 between them, using corporate credit cards for cash advances and charges between January 2015 and October 2020.
The employee with the highest debt had a balance of over $54,000 on their corporate card. The other employees had balances of 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 they collectively put more than $200,000 on their credit cards.
One employee put over $37,000 on their travel card for personal spending or cash advances.
The balances had been paid at the outset of the investigation, the document said.
Four employees in the Department of Industry, Energy, and Technology had outstanding balances on their cards. The highest amount owing was $21,236. Collectively, they owed nearly $40,000.
None of these cases were reported to the police either.
Most government departments reported issues
Most departments within the provincial government had reported cases of employees improperly using corporate cards for personal means, with amounts typically ranging in the hundreds or thousands of dollars.
In the majority of cases, the money was repaid. Some people had their wages garnished to settle their debts.
There was only one instance cited in the government briefing note where an employee was fired.
In total, more than $600,000 was spent by civil servants.
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 isn’t adequate control’
The director of the Ontario-based Forensic Restitution, an accounting and fraud investigation company specializing in white collar crime, says expense fraud is not uncommon in government departments and big corporations.
However, Dave Oswald said there should be proper security measures in place to stop it before it reaches the amounts taken within the Newfoundland and Labrador government.
“It gets to that point because there isn’t adequate control,” said Oswald, who reviewed the documents obtained by CBC News.
“You’re always going to get some form of fraud going through. But if you use data analytics, if you review all of your expenses, if you have a system for reviewing the expenses, then you’ll curtail the amount of fraud drastically.”
A fraud management policy introduced by the provincial government in 2019 states “there would be zero tolerance for fraud in any form, with consequences for fraudulent activity up to and including termination and legal action.”
The majority of disciplinary actions since 2015 ranged from an “adverse report” to a three-day suspension.
Just one employee who was caught improperly using their corporate credit card lost their job.
Oswald said that is the wrong approach, and that any case of fraud should be reported to the police — whether it was paid back or not.
“It sends completely the wrong message to the company or to the government department because what you’re saying is anybody who is caught doing this type of [thing] will not face disciplinary action so long as you pay it back,” Oswald said.
“When you’re talking about thousands of dollars, I’d look at terminating 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 improve oversight on 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 implemented to supplement the existing policies on card usage to ensure the proper checks and balances are maintained and reduce the risk of such events from occurring again.”
All employees with the provincial government are required to take part in fraud awareness and fraud management training, she said.
Coady said each situation of fraud is reviewed and assessed based on the individual circumstances.
“We take all instances of fraudulent activity very seriously and we will continue to do so,” Coady said.
“With regard to public service employees, we will not get into the details of individual cases.”
She said each allegation requires a thorough investigation.