Top News

Halifax Regional Municipality auditor flags $36,000 in inappropriate credit card purchases by staff


Evangeline Colman-Sadd, auditor general for Halifax Regional Municipality, speaks to the media in January. - Francis Campbell
Evangeline Colman-Sadd, auditor general for Halifax Regional Municipality, said there was no clear indication of fraudulent behaviour in the use of the credit cards. - File

A host of electronic purchases amounting to more than $36,000 were inappropriately charged to Halifax Regional Municipality credit cards over a 37-month period ending in December.

“I don’t think that cellphone cases that are costly, Bose speakers or Fossil (computer) bags are a reasonable use of taxpayer money,” Evangeline Colman-Sadd, the auditor general for Halifax Regional Municipality, said Wednesday after delivering a double audit report on the municipality’s purchasing card program and payroll management.

“I try to apply what a prudent person, a reasonable outsider would think of this. I think a reasonable outsider would probably say that those items are not the greatest use of taxpayer money."

The credit card audit found overall that many purchases did not follow policy and that one particular Transportation and Public Works employee used a card for inappropriate purchases. Colman-Sadd said the employee’s manager either approved the inappropriate purchases or signed off on them without reviewing their practicality.

“There were a number of failures,” Colman-Sadd said. “That individual (employee) should know what the policy is firstly. The individual’s manager is responsible for reviewing and approving those purchasing card statements and we found that in many instances, the manager’s electronic signature was put on there and the manager actually didn’t review and approve them at all. When we spoke to the manager, we did find the manager was aware of the purchases and in fact some of them were for the manager. So it isn’t like the employee was bypassing the manager. I really think it’s an instance where those oversight controls that are in place need to be followed.”

The audit identified 27 computer monitors, 26 prepaid cellphone cards, 335 cables, adapters and chargers, five printers, three tablets, one cellphone and 67 other computer accessories as items purchased by credit card that were not allowed under the purchasing card policy. Further, the audit found that two Bose brand Bluetooth speakers, a set of Apple Airpod headphones, three leather Fossil bags, 23 cellphone cases at more than $100 apiece, an Apple HomePod and one Google Chromecast were items allowed under the card policy but were still inappropriate buys.

“Poor judgment,” Jane Fraser, chief financial officer for the municipality, said of the inappropriate purchases.

Committee goes in camera

The audit was presented to the municipality’s audit and finance committee, which retreated to an in camera session to discuss a personnel matter after Colman-Sadd delivered her report. Regional council members on the committee and Fraser weren’t talking much about what was discussed during the closed-door portion of the meeting or if the unidentified employee who made the inappropriate purchases or the manager were reprimanded, suspended or dismissed.

Both Colman-Sadd and Fraser agreed that there was no clear indication of fraudulent behaviour in the use of the credit cards.

“I came to the conclusion that there was no need to go to police,” Colman-Sadd said. “When you talk to an auditor about fraud, it’s always an interesting conversation. An auditor can’t say definitively there is no fraud here unless you’ve done a fraud investigation or a forensic investigation. We identified some concerns and did additional testing within our audit. After that, if I had felt that there was something that needed to be turned over to the police, I would have. I just can’t say definitively that there is no fraud here because we didn’t set out to do an audit that was designed to find fraud. That’s the case with every audit.”

But Fraser said there is definitely room for improvement.

“The purchases that were deemed to be not best value for taxpayers, those issues have been addressed,” Fraser said. “We have a good plan to go forward. For both audits, we’ve developed implementation plans. We’ll be back in front of the audit and finance committee at the November meeting to update them on the progress that has been made.”

Card policy outdated, unresponsive: CFO

The audit found that there were 585 active cardholders as of September and that nine cards were assigned to former employees no longer working for the municipality, including three who had left in 2016.

But Fraser said the appropriate number of cards have been issued and that the auditor’s report found everything was done properly in issuing the cards. Fraser said the cards account for $5.2 million a year in purchases on some 30,000 transactions with an average use of about $800.

Colman-Sadd said it is up to management to determine whether or not items purchased are required for the job and are being used for the job.

“What we were looking for was were items compliant with policy and is it a reasonable use of taxpayer dollars. If they are not compliant with policy or if there doesn’t appear to be a reasonable use of taxpayer dollars we would have brought those forward and highlighted them in the report and to management.”

Fraser said the biggest problem is that the municipality is operating with a purchasing card policy that is outdated and not responsive to today’s environment.

“We’ve already started to do work on the policy.”

Oversight and monitoring continue to be problematic in HRM audits, Colman-Sadd said.

“We’ve identified management monitoring as something that isn’t done enough or management will tell us that they are doing it but it is very poorly documented,” she said. “From our perspective, if you didn’t document it, you didn’t do it. If there is no evidence of it, we can’t put any reliance on that from an audit perspective.”

The payroll management audit found that payroll activities are effectively managed but formal monitoring of information changes are limited, increasing the risk of fraud and error.

Colman-Sadd made eight recommendations to improve the credit card program and nine more on the payroll management side, all of which were accepted by HRM management.

RELATED:

Recent Stories